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DeLong: Econ 202b April 21, 2009 Lecture: Notes on Bubbles

Let us begin with a very long quote from Chrles Kindleberger, who in turn begins with Hyman Minsky....

[Kindleberger] is, I think, right. And here I have a problem. For it is pretty clear to me that the conventional model of bubbles is not terribly illuminating as a model of this process. The conventional model of bubbles starts with the assumption of a constant required rate of return r. It continues with a one-period equilibrium condition for the price of an asset paying a dividend dt. If there is even one rational, utility-maximizing agent in the economy, than for that agent...

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