Stock market bubbles and busts are a natural and essential part of the market process that policymakers should not seek to control, argues author Robert Miller in a new study, railway.com* published by the IEA.
Miller's research involves a comparative analysis of the 19th century railway and late 20th century information and communications technology (ICT) revolutions. He argues that new technological discoveries give rise to great uncertainty when applied in business ventures. Some ventures will fail and some succeed. The stock market boom, leading to the substantial over valuation of some ventures is part of the process of discovering the best business ventures, technologies and applications. Capital will be allocated to ventures that fail but we do not know, until they are tried, which those will be. Without the investment in ventures that ultimately fail, we would not know which technologies and businesses would add most value in the long term. The process of stock market boom and bust is an indication that the period of experimentation is being concentrated into a short time period