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Tuesday, February 12, 2008

Bubble Economics

posted by on February 12 at 13:24 PM

After housing, the alternative energy bubble:

‘Alternative energy’ bubble or PR gimmick? We’re told the “next bubble” is already here: “Alternative energy,” says Janszen. In his new “perpetual bubble-blowing machine” theory this means that biofuels, solar, wind, nuclear, hydroelectric and geothermal energies are the new bubble, until it peaks and “creatively destructs” around 2013. 2013? Yes, then Wall Street will replace it with a new bubble. Bubble after bubble, accelerating, increasing in size and frequency ad infinitum. And each time, “we will be left to mop up after yet another devastated industry,” while Wall Street “will already be engineering its next opportunity.”

The Market Watch column from which the above quote is taken concerns Eric Janszen’s essay, “The Next Bubble,” in the present issue of Harpers Magazine.

But bubble-burst (boom-bust) cycles engine the core of capitalism itself. Capitalism is dialectical in exactly this way. The dialectic of bubble-burst is the motor by which it moves through history, by which it builds here and destroys there. Bubble-burst is not the invisible hand but the cunning of history. This is why Macherey describes Spinoza’s philosophy (and ultimately the philosophy of liberation) as “post-dialectic.” It’s liberated from the negative power of the crisis: the crisis of overproduction, the housing crisis, the tech crisis, the oil crisis. The disaster is not new to capital; it is capital. What might be new is not the disaster (or even its size) but the frequency of disasters.

“There will and must be many more such booms, for without them the United States can no longer function. The bubble cycle has replaced the business cycle.”

RSS icon Comments


Yes. No one will ever make money on real estate ever again. Or software.

Posted by Big Sven | February 12, 2008 1:43 PM

The candidates all say that they have "No plans to slow down the economy." Hopefully someone in charge will understand that we've reached the limits to growth and are limited to "Fad Investing" to try to make a quick buck.

Posted by Colton | February 12, 2008 1:48 PM

credit cycles are a part of history.

Posted by Bellevue Ave | February 12, 2008 1:49 PM

You might notice that MArxism kinda of had a bubble there, too, for a few deacades.

But it burst.

USSR-all of Eastern Europe -- they gave up on the socialism thing.

China -- very capitalist now. Same with Vietnam.

That leaves us with North Korea, and Cuba.


All this word play about dialectics and bubbles leads us to the political position that.....gee, maybe we should regulate capitalism a bit more.


Excuse me while I go back to work after receiving this shocking news.

Posted by unPC | February 12, 2008 1:52 PM

An alternative energy bubble and collapse and crisis is the only way capitalism knows to advance from one technology to another.

A stable transition of investment followed smoothly by non-destructive adoption of cleaner energy technologies would be possible in a managed economy, but for capital to de-value it's old investments and re-value their replacements would involve huge losses for today's wealthy class. The cataclysm of a bubble makes it possible for the rich to leap from one to the other in the confusion, and to pretend that their losses are due to natural disaster. Making the capitalists entitled to be restored to their former position as any other disaster victim.

Posted by elenchos | February 12, 2008 2:06 PM

Bubbles are not bad. I would rather have 10,000 tech, real estate, etc. bubbles than even one Stalinist 5 year plan.

Capitalism may yield many mistakes and produce many undesirable outcomes, but it's a whole lot better than having a politburo decide how many paper clips the world needs.

Posted by Westside forever | February 12, 2008 2:10 PM

Actually, right now, coal shipments from Australia to China are still skyrocketing, so it's unlikely there will be an alternative energy bust anytime soon, especially with the oncoming accords.

Posted by Will in Seattle | February 12, 2008 2:16 PM

For bubbles to burst something has to be dramatically overvalued. Are alternative energy technologies overvalued thusly? Show me numbers. Show me analysis. Don't show me handwaving.

Posted by NaFun | February 12, 2008 2:36 PM

Its no different then how things work in nature. A new niche opens up and you have a species boo mas they evolve to fill it. Competition ensues and the most fit survive. Genes that work best in the new environment become more numerous and those that aren't well don't.

Just like technology stocks before, smart people will make money and successful companies will survive and we all we be better of for it.

Posted by Giffy | February 12, 2008 2:45 PM

I agree with 8. Biofuels, I admit are not the panacea that some people think they are. But I've heard a lot of really good things about where solar energy is going. I admit that it is possible for solar energy will eventually be overvalued. But considering it's no where near that now, I'm not sure there's reason to say that it's a bubble that will be bursting anytime soon. Maybe in 15 years.

Posted by arduous | February 12, 2008 2:58 PM

elenchos, you're a capitalist.

Posted by Bellevue Ave | February 12, 2008 3:06 PM

There are some bubbles off Washington's coast too (wind and wave):

Posted by hairyson | February 12, 2008 3:46 PM

@10 - not necessarily all biofuels.

My guess is algae and switchgrass biofuels might have more promise than more oversold corn ethanol biofuels.

There can be mini-bubbles. Not sector-wide but specific sub-tech specific.

Solar is probably reasonably valuated, given high future demand in China, Australia, US, Brazil, EU, etc. Same for wind.

Posted by Will in Seattle | February 12, 2008 4:30 PM

Actually if you take a look at a number of alternative energy funds you'll notice that currently they aren't increasing. It isn't even a boom, so how can it be a bubble?

Posted by apttitle | February 12, 2008 5:31 PM

Charles, this story broke yesterday on the Rachel Maddow show (on AM1090 in Seattle). She did a lengthy interview with the author. Maybe you heard it?

Posted by MyDogBen | February 12, 2008 5:55 PM


Exactly. People keep equating bubbles with booms. Bubbles are an over inflation of something that probably has value on its own. A boom is simply a natural part of the economic cycle. Unless green businesses are promising something they can't deliver, I don't see how investment into green technologies qualifies as a bubble.

Posted by keshmeshi | February 12, 2008 8:23 PM

This story didn't 'break' yesterday, it hasn't 'broken' at all, because it's not a story. It's a piece of standard-fare Harpers speculation, and almost completely unlikely to come to fruition. This means, sadly, that all you protest kids who read the Stranger for its "economic commentary" are likely going to end up scuttling about Pine Street in filthy, ragged corduroys cadging taco remnants and wheedling worthless coins no later than, say, 2012.

Posted by croydonfacelift | February 13, 2008 12:40 AM

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