Contributions of Economists to the Housing-Price Bubble

Martha Starr ()

Journal of Economic Issues, 2012, vol. 46, issue 1, 143-172

Abstract: There has been much discussion of what economists could have done differently to help avert the 2007 financial crisis and "Great Recession" that followed. One issue concerns information supplied by economists to the general public about causes of high appreciation in home prices and their likely future course, as good information could have helped the public hedge their finances against downside risks while bad information may have encouraged them to take on too much risk. This paper analyzes data on views of economists quoted in California newspapers as to whether bubbles were forming in the state's housing markets. We find that the public was fairly decently served by economists offering their views via the media — although with some significant problems of biased forecasts not made in good faith, and of inattention to concerns about "harm avoidance" that ought to apply when economists share their opinions in this way.

Date: 2012
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Working Paper: Contributions of economists to the housing-price bubble (2011)
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DOI: 10.2753/JEI0021-3624460106

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