https://en.wikipedia.org/wiki/Tulip_mania#Legal_changes
Many bubbles are caused by government actions. Our own housing bubble was fomented by numerous bad policies.
Bitcoin is not a creature of government but is actively opposed by many of them.
Tulip Mania gets referenced because it's ridiculous on its face, but what about the Dot-com Bubble or Railway Mania? [1]
Economic systems are a combination of markets and regulatory frameworks, and you can't always blame regulations when the economics say things you don't want them to. It's flatly impossible to isolate the two: the market is shaped by regulations and visa versa.
Nowhere does OP says that a Bitcoin bubble is impossible. He merely explains that it is interventionism in free markets that has historically been the root cause of many bubbles. Government intervention for which government intervention is required to correct the nefarious effect, in return begging for even more intervention, and so on... ad nauseam. There's a big difference between this thesis and the one you comment.
>Economic systems are a combination of markets and regulatory frameworks
That's a useless definition of an economic system because it grounds itself into a narrow category excluding others when instead it you want it therefore excluding others instead of being as general as possible. A better one would be simply: "an economic system is a configuration in which the five factors of production interact".
> you can't always blame regulations when the economics say things you don't want them to.
Again, that's not what OP says. He never said that free markets are precluded from doing harm. Only that government intervention is even more inefficient and harmful but in ways which are far greater to anticipate until it goes boom. Why? Because artificially changing the parameters of a complex systems creates tons of side effects, including hidden incentive feedback loops which prompts some actors to adopt behavior that are locally optimal but takes us into directions we do not want.
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should be:
That's a useless definition of an economic system because it grounds itself into a narrow category excluding others when instead you would want it to be as general as possible so as to be the common denominator between different economic schools of thoughts, or even eras.
And yet, OP just provided evidence of a case where, previously, we assumed a specific asset bubble was caused by "human nature", but in fact it looks like it was created through the government inadvertently creating risk-free speculation in options contracts for this very asset.
> If the price rose above 100 guilders, the speculator would pocket the difference as profit. If the price remained low, the speculator could void the contract for only 3½ guilders.
The Dutch government enabled risk-free speculation in tulip options contracts (formerly futures contracts). How could the price of such a contract not rise under these circumstances?
Do we know about how much Bitcoin trading is done on leverage? I suspect it's relatively low (as securities go).
This is obviously wrong: even accepting the premise of Thompson's paper, the popping of the bubble is blamed on what you've referred to but the mania (the inflated asset prices) existed for a very long time prior to that. In retrospect, the method of popping the bubble is really the least interesting part of that whole phenomenon (it's a given that those prices were going to crash) although I'm sure the people who experienced it did not feel that way.
http://www.thebubblebubble.com/wp-content/uploads/2012/05/Tu...
(I agree with your more important point that tulip mania and bitcoin are quite different)
If the "government action" in question is deregulation that allows the market to blow itself up, do you want to chalk that event up to market failure or government action?
And even without such special-purpose institutions government can cause market bubbles by nothing more than its "monetary policy" and artificially induced inflation.
I don't.
The same thing has happened with Chinese buyers driving up the price of random short domain names.
https://qz.com/581248/chinas-latest-investment-craze-is-shor...
By the way, this is a really interesting argument. I’m surprised it hasn’t be pointed out before.
Paper link: https://link.springer.com/article/10.1007%2Fs11127-006-9074-...
in these cases, bitcoin could be an example of that