Are bubbles good, actually? (Tim Harford, 11th December, 2025)
There is a solid theory behind the idea that investment manias are good for society as a whole: it is that without a mania, nothing gets done for fear that the best ideas will be copied.
Entrepreneurs and inventors who do take a risk will soon find other entrepreneurs and inventors competing with them, and most of the benefits will go not to any of these entrepreneurs, but to their customers.
(The dynamic has the delightful name of the “alchemist’s fallacy”. If someone figures out how to turn lead into gold, pretty soon everyone will know how to turn lead into gold, and how much will gold be worth then?)
The economist and Nobel laureate William Nordhaus once tried to estimate what slice of the value of new ideas went to the corporations who owned them, and how much went to everyone else (mostly consumers). He concluded that the answer — in the US, between 1948 and 2001 — was 3.7 per cent to the innovating companies, and 96.3 per cent to everyone else. Put another way, the spillover benefits were 26 times larger than the private profits.