Is There a Better Theory of Asset Price Bubbles and Crashings?

More than 10 years after Great Recession, macroeconomists still do not have a sound understanding the root causes of infrequent but large economic crises. All we know is this is going to happen. We don't know when we don't know how much, but it's clear that it's going to repeat. I somehow have this idea that somehow if you could somehow build a heterogeneous agent, macro model of the type we just discussed earlier, that somehow can generate these asset price swings," he says.