Other things that we do with our money
Since I started talking about opportunity cost, I'll continue a little bit with Dan's responses in mind.
Answering my point about how bubbles could represent a misallocation of resources in the economy, Dan writes: "I would probably have preferred that our society take the billions invested in Worldcom and used it to create endowments for scholarships, or to offer universal health care, or to put a computer in every home. But none of these was on offer." The thing is, there were plenty of other productive investments on offer. You didn't have to put our money into a massive government program to get a higher long-term return than you did with Worldcom. Credit markets were tight in the late 1990's - plenty of people had projects that needed financing, and some of them were probably useful.
Also, I want to address the earlier point about constructing commercial infrastructure. Almost all infrastructure is commercial, right? I mean, the interstate highway system is absolutely essential to commerce in the United States, but it wasn't constructed during or in response to a bubble.
Dan hints in his latest post that bubbles, or at least the productive ones, are more of an American phenomenon than anyone else's. But obviously we don't have a monopoly on high-quality infrastructure; Europe, Japan, Singapore, and the wealthy Gulf states managed to construct a lot of that stuff, too. Now, they may well have done so using a lot of wasteful or collusive government procurement. But I'm not sure our way - if it is truly ours, and it does truly rely on bubbles - is necessarily more efficient.
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