Daniel Gross wrote a brilliant article (as usual) in this month’s issue of Wired [In Praise of Bubbles: Boom and bust cycles have always driven the US economy](http://www.wired.com/wired/archive/14.02/bubbles.html) fostering innovation.

The premise of the article is that people associate them with sob stories, criminal activity and irrational investment behavior.

>[Bubbles] tend to follow a painful cycle of boom, bust,
>hand-wringing, and abject humiliation. But there’s often
> another step at the end: innovation. Over the past 150
>years, many bursting bubbles have paved the way for
>economic and cultural progress.

>methodless enthusiasm was reborn as
>irrational exuberance

The result of creating too much capacity gives way to other innovations that would have not been possible. One of the exciting aspects of the recent real estate boom has been the redevelopment of urban areas (ie San Diego, New York City, Chicago, Boston. etc.) that would not have been possible during a flat housing period.

Daniel Gross concludes:

“The result has been a real, delayed boom. Put cheap data transmission and storage together with an exploding population of consumers willing to use the Net and you get eBay, Google, and Yahoo! Now come widespread laments that another bursting bubble is anon: real estate, genomics, China stocks, wireless Internet, you name it. Maybe so. But sometimes, a little methodless enthusiasm is precisely what an economy needs.”