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Charles Kindleberger: An Impressionist in a Minimalist World

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Abstract

Minimalist economists stubbornly resist Charles Kindleberger’s characterization of investor expectations in a financial bubble as “irrational.” This paper seeks to resolve the controversy by imbedding Kindleberger’s well-researched, impressionistic theory of financial crises into an expanded, but still-minimalist model of rational expectations. Introducing the concepts of malicious disinformation and rational overpromotion creates an informational environment in which it is time-consuming and costly to distinguish fact from fiction. Rationality still requires that expectations and market fundamentals move together over long periods of time, but dishonorable overpromoters can earn substantial profits in the interim. Copyright IAES 2005

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  • Edward Kane, 2005. "Charles Kindleberger: An Impressionist in a Minimalist World," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(1), pages 35-42, March.
    • Handle: RePEc:kap:atlecj:v:33:y:2005:i:1:p:35-42
    DOI: 10.1007/s11293-005-1643-2
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    References listed on IDEAS

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    1. Edward J. Kane, 2004. "Continuing dangers of disinformation in corporate accounting reports," Review of Financial Economics, John Wiley & Sons, vol. 13(1-2), pages 149-164.
    2. Stephen F. Le Roy, 2004. "Rational Exuberance," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 783-804, September.
    3. Garber, Peter M, 1990. "Famous First Bubbles," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 35-54, Spring.
    4. Arrow, Kenneth J, 1982. "Risk Perception in Psychology and Economics," Economic Inquiry, Western Economic Association International, vol. 20(1), pages 1-9, January.
    5. Kane, Edward J, 1996. "De Jure Interstate Banking: Why Only Now?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(2), pages 141-161, May.
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