Comment by epr | Hacker News Reader

Comment by epr | Hacker News Reader

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> Not all bubbles have negative consequences for the economy

Unless we are using a different definition of "bubble" than it would seem (to me) most people intend when they use that word, this is a factually incorrect statement.

If widespread misallocation of investment capital does not "hurt" the economy, then what does? If capital is invested with a positive outcome for the wrong reasons, then that certainly would not fit the definition.

First applicable definition from a google search:

Bubble: used to refer to a significant, usually rapid, increase in asset prices that is soon followed by a collapse in prices and typically arises from speculation or enthusiasm rather than intrinsic increases in value.

You may find this perspective interesting: https://thehill.com/opinion/finance/356376-black-monday-less...

Defining "bubble" can be surprisingly difficult and in some cases the illusion of a bubble persists after history proves the speculation or enthusiasm to have been correct despite an earlier collapse in prices. So one interpretation of "Not all bubbles have negative consequences for the economy" is that there are events that are widely perceived to have been bubbles that were not, in fact, widespread misallocations of investment capital.

Some economists argued the dot com bubble was a net positive for the economy. While tanking dot coms lost money for their investors the positive externalities like funding broadband networks outweighed that.

Along the lines that Webvan may have tanked but we ended up with Google and Wikipedia. I imagine likewise that most of the present AI startups will tank but we'll end up with useful AI of serious value.

> Some economists argued the dot com bubble was a net positive for the economy.

I am no economist, but virtually any economist I have read would respond to that statement with:

Compared to what?

I guess it would be compared to normal levels of investment and valuations of dot com businesses. Though I'll give you it's a little vague. I read something a while back but can't find it.

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