bubbles are good

Another thing i got from Marginal Revolution was a link to the book "Pop" by Daniel Gross. I haven't read it yet but the main argument is that bubbles are good because they encourage huge investment in ideas and technology (e.g. railroad, internet). While the short-term pain can be hard when they crash - the long run increases in growth potential that they engender make this worthwhile. he argues that we now need a "green bubble" to fuel huge innovation in development of sustainable energy and technologies.

I will have a read of the book when i get my hands on it. I would be interested to see how this argument applies to housing booms. I suppose it could be argued (if we accept that we are in a housing bubble in Ireland) that the long-run effect might have been a much-need increase in the housing stock. The counter-argument is that the investment properties that shot up didn't represent progress in any real sense and that people may not even want to live in much of the apartment accomodation in a few years time.

http://www.amazon.com/Pop-Why-Bubbles-Great-Economy/dp/0061151548