Arnold Kling


Arnold Kling, Great Questions of Economics
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PBS frontline revisits the Internet Bubble with dotcon.

Business Week chief economist Michael Mandel takes the "consenting adults" point of view.

If someone offers to sell me a lottery ticket, is that exploitation? No. People wanted a piece of these deals, they begged for a piece of these deals. I would much much rather err on the side of encouraging people to take risks, rather than discouraging them.

John Maynard Keynes argued that speculators play a game in which they try to gull one another as well as the general public. Without citing Keynes, but in that spirit, James Fallows says,

But the more damaging forms of irrationality were, as you suggest, probably practiced by the "rational" people in charge of large pools of other people's money -- including the "investment" sages who put the mutual-fund hoardings of people like you and me into nutty dotcom prospects.

Overall, I think that Steve Johnson has the most interesting comments, including

What the bubble did do, though, is popularize the medium at an unprecedented pace, and explore the possibility space of interesting Net-based models with incredible precision. My 89-year-old grandmother one-click shops on Amazon via her cable modem. Would she even be using email now if it weren't for the bubble? I doubt it.

Discussion Question. Enron officers deliberately sold overvalued stock to the public, and there is talk of putting them in jail. Venture capitalists deliberately sold overvalued stock to the public, and there is no talk of putting them in jail. Why the difference?

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