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Bubble, toil, and trouble

Author

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  • Ben R. Craig

Abstract

When people call the dot-com boom a bubble, they imply that investors based their decisions on something other than a good estimate of the future value of the assets theywere buying. But some economists say that is not likely because episodes like the dot-com bust show future value is not always easy to predict, especially when the asset is a new technology. This Commentary shows how both explanations can describe a famous historical bubble that occurred after the introduction of a technology that was new at the beginning of the eighteenth century?a novel macroeconomic theory.

Suggested Citation

  • Ben R. Craig, 2003. "Bubble, toil, and trouble," Economic Commentary, Federal Reserve Bank of Cleveland, issue Oct.
    • Handle: RePEc:fip:fedcec:y:2003:i:oct15
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    File URL: https://www.clevelandfed.org/-/media/project/clevelandfedtenant/clevelandfedsite/publications/economic-commentary/2003/ec-20031015-boil-toil-and-trouble-pdf.pdf
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    Cited by:

    1. Drobyshevsky Sergey & Narkevich Sergey & E. Pikulina & D. Polevoy, 2009. "Analysis Of a Possible Bubble On the Russian Real Estate Market," Research Paper Series, Gaidar Institute for Economic Policy, issue 128.

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