Charles Kindleberger

Edward Kane

No 10847, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Minimalist economists stubbornly resist Charles Kindleberger's characterization of investor expectations in a financial bubble as "irrational." This paper seeks to resolve the controversy by imbedding Kindleberger's well-researched, impressionistic theory of financial crises into an expanded, but still-minimalist model of rational expectations. Introducing the concepts of malicious disinformation and rational overpromotion creates an informational environment in which it is time-consuming and costly to distinguish fact from fiction. Rationality still requires that expectations and market fundamentals move together over long periods of time, but dishonorable overpromoters can earn substantial profits in the interim.

JEL-codes: G12 N2 (search for similar items in EconPapers)
Date: 2004-10
New Economics Papers: this item is included in nep-ifn and nep-pke
Note: CF
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Published as Kane, Edward J. "Charles Kindleberger: An Impressionist In A Minimalist World," Atlantic Economic Journal, v33(1,Mar), 2005, 35-42.

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