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Housing Bubble Week Epilogue: Not All Bubbles Are Created Equal - Vernon Smith
The Joe Walker Podcast
The Fundamental Asymmetry of Losses and Gains in a Housing Bubble
The asymmetry of losses and gains was discussed by the ancients. Adam Smith said, we suffer more when we fall from a better to a worse situation than we ever enjoy when we rise from a worse to a better. Daniel Kahneman won the Nobel Prize for his work on prospect theory and loss aversion. But it might be worth distinguishing how loss aversion plays out for different participants in a housing bubble. We have momentum traders who will cut their losses when prices start falling because they don't want to bear the loss. They'll sell out and that'll drive prices down further. Then there are owner occupiers who behave very differently during a housing bust and sit on their homes or list them for
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