Episode 166: The Economics of Optimism
Words & Numbers
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The Effect of Repeated Experiments on Price Bubbles
I was fascinated by your reports on those experiments that price bubbles arise for retreatable goods like houses and stocks. Do you have any sense that if people repeat these experiments over and over again, do bubbles ever cease to form? We were first absolutely shocked that these bubbles even occurred. The thing I learned about from there that I didn't expect before we did the experiment is that people don't get there by thinking about it. They got there by actually trying things and find that they don't work and other things they try works too.
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