Causes: Maybe People Are Just Like That (The Baseline Scenario)
The implication is that if you put people in front of a market that is behaving a certain way, you are going to get a bubble. It’s not simply a question of not understanding the fundamentals, or getting suckered by real estate brokers, or trying to keep up with the Jones’s new McMansion (although all of these can help amplify the bubble); people are just wired to create asset price bubbles. The fact that we have so few of them is probably a reflection of the size of asset markets (it takes longer to get millions of investors bought into a bubble than a few dozen) more than anything else.
