The Dynamics of Bubbles and Golden Ages
Chapter 15: The Implications for Theory and Policy
159 15. The Implications for Theory and Policy A. The Power and the Dangers of an Interpretation Based on Recurrence When reading the accounts of the 1870s and 1880s written by those who lived through them,233 one is inevitably struck by the similarities between the evolution of compound engines and ships and that of chips and computers, between the process of generation of a world economy through transcontinental transport and telegraph and the present process of globalization through telecommunications and the Internet. By making the relevant distinctions between that context and this one, the power of those technologies and of these, the worldviews of that time and our own, we can learn to distinguish the common and the unique in all such processes. The same happens when reading the glowing accounts of economic success in the 1920s234 and the similar writings about the ‘new economy’ in the 1990s. If one is willing to accept recurrence as a frame of reference and the uniqueness of each period as the object of study, then the power of this sort of interpretation comes forth very strongly. In the author’s own experience, not being a historian or a finance economist, the historical record became a laboratory for testing the hypotheses of the model.235 In essence, the job was one of conducting genuine experiments in regularity. After identifying a phenomenon that could be part of the recurrent sequence, it was possible to ‘test’ for its appearance again and again in each similar historical phase,...
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