Economic Bubbles, Schemes, and Market Failures

Daniele D’Alvia ()
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Daniele D’Alvia: Queen Mary University of London

Chapter Chapter 5 in The Speculator of Financial Markets, 2023, pp 171-236 from Palgrave Macmillan

Abstract: Abstract This chapter critically analyse the role of the speculator on financial markets when speculators are not right and there is a shortage or glutes in supply causing panic such as the South Sea Bubble in London in 1720 and various other market crashes over the centuries. The chapter reminds us that there are two main views on economic bubbles: the ontological vision and the epistemological explanation. From an epistemological point of view, economic bubble can occur, but we cannot predict when it happen, and we can only limit the damage caused by the bubble and try to prevent an economic crisis from happening. On the other hand, in the ontological view economic bubbles do not exist and, therefore, damage limitation can occur only after a crisis has appeared. In both cases, regulatory disasters cannot be totally avoided, because subjective intentions and perceptions cannot be regulated or anticipated.

Keywords: Economic bubbles; Financial crises; Financial innovation; Financial regulation; Speculation (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-031-47901-4_5

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DOI: 10.1007/978-3-031-47901-4_5

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