Charles Kindleberger: An Impressionist in a Minimalist World

12 Pages Posted: 18 Nov 2004

See all articles by Edward J. Kane

Edward J. Kane

Boston College - Department of Finance; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2004

Abstract

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.

JEL Classification: G12, N2

Suggested Citation

Kane, Edward J., Charles Kindleberger: An Impressionist in a Minimalist World (October 2004). Available at SSRN: https://ssrn.com/abstract=620723 or http://dx.doi.org/10.2139/ssrn.620723

Edward J. Kane (Contact Author)

Boston College - Department of Finance ( email )

Fulton Hall
Chestnut Hill, MA 02467
United States
520-299-5066 (Phone)
617-552-0431 (Fax)

National Bureau of Economic Research (NBER)

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