Friday, December 02, 2005

Galbraith on Speculative Episodes

"Recurrent descent into insanity is not a wholly attractive feature of capitalism. The human cost is not negligible, nor is the economic and socail effect. In the aftermath of 1929, the damage was great, and, ass noted, it contributed visibly to the depression that followed."

- John Kenneth Galbraith, A Short History of Financial Euphoria

4 comments:

  1. David--

    Galbraith does his best to explain what economists are generally not very well qualified to explain -- why do participants in a capitalist society keep making the same dumb mistakes over and over again? Some day I will have to talk to an anthropologist about this; repeated irrational descent into stupidity is something they are more likely to be able to explain.

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  2. GetStucco,

    If you read the rest of Galbraith's books like The Affluent Society and the New Industrial State, you know that Galbraith beleives that Markets can be rigged.

    Clearly the Housing and Tech bubbles were rigged markets. Greenspan either failed to act to restore market sanity in time or activity promoted the insanity.

    In The Great Crash Galbraith does a nice job of going over the Real Estate dimensions of The Great Crash. I bet you did not know that IOL were common during the later half of the 1920's.

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  3. Thanks for the insights. :-)

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  4. Getstucco - There is a very highly regarded Harvard Economist who is attempting to quantify the psychological aspects of human behavior as it might (in his mind does) relate to traditional economic theory. He believes equations should be altered to account for this intangible.

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