TY  - JOUR
AU  - Kane,Edward J.
TI  - Charles Kindleberger
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10847
PY  - 2004
Y2  - October 2004
UR  - http://www.nber.org/papers/w10847
L1  - http://www.nber.org/papers/w10847.pdf
N1  - Author contact info:
Edward J. Kane
2325 E Calle Los Altos
Tucson, AZ 85718
Tel: 520-299-5066
E-Mail: edward.kane@bc.edu
AB  - Minimalist economists stubbornly resist Charles Kindleberger's characterization of investor expectations in a financial bubble as "irrational." This paper seeks to resolve the controversy by imbedding Kindleberger's well-researched, impressionistic theory of financial crises into an expanded, but still-minimalist model of rational expectations. Introducing the concepts of malicious disinformation and rational overpromotion creates an informational environment in which it is time-consuming and costly to distinguish fact from fiction. Rationality still requires that expectations and market fundamentals move together over long periods of time, but dishonorable overpromoters can earn substantial profits in the interim.
ER  -