IDEAS home Printed from https://ideas.repec.org/a/mes/jeciss/v46y2012i1p143-172.html
   My bibliography  Save this article

Contributions of Economists to the Housing-Price Bubble

Author

Listed:
  • Martha Starr

Abstract

There has been much discussion of what economists could have done differently to help avert the 2007 financial crisis and "Great Recession" that followed. One issue concerns information supplied by economists to the general public about causes of high appreciation in home prices and their likely future course, as good information could have helped the public hedge their finances against downside risks while bad information may have encouraged them to take on too much risk. This paper analyzes data on views of economists quoted in California newspapers as to whether bubbles were forming in the state's housing markets. We find that the public was fairly decently served by economists offering their views via the media — although with some significant problems of biased forecasts not made in good faith, and of inattention to concerns about "harm avoidance" that ought to apply when economists share their opinions in this way.

Suggested Citation

  • Martha Starr, 2012. "Contributions of Economists to the Housing-Price Bubble," Journal of Economic Issues, Taylor & Francis Journals, vol. 46(1), pages 143-172.
    • Handle: RePEc:mes:jeciss:v:46:y:2012:i:1:p:143-172
    DOI: 10.2753/JEI0021-3624460106
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.2753/JEI0021-3624460106
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.2753/JEI0021-3624460106?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Author-Name: Alan S. Blinder & Alan B. Krueger, 2004. "What Does the Public Know about Economic Policy, and How Does It Know It?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(1), pages 327-397.
    2. Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005. "Assessing High House Prices: Bubbles, Fundamentals and Misperceptions," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 67-92, Fall.
    3. Ernst Fehr & Urs Fischbacher, "undated". "Third Party Punishment and Social Norms," IEW - Working Papers 106, Institute for Empirical Research in Economics - University of Zurich.
    4. Alessandro Calza & Tommaso Monacelli & Livio Stracca, 2013. "Housing Finance And Monetary Policy," Journal of the European Economic Association, European Economic Association, vol. 11, pages 101-122, January.
    5. Michael Mandel, 2004. "Comments on Economic Education and Journalism," The Journal of Economic Education, Taylor & Francis Journals, vol. 35(4), pages 412-414, October.
    6. Engelberg, Joseph & Manski, Charles F. & Williams, Jared, 2009. "Comparing the Point Predictions and Subjective Probability Distributions of Professional Forecasters," Journal of Business & Economic Statistics, American Statistical Association, vol. 27, pages 30-41.
    7. John B. Taylor, 2007. "Housing and monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 463-476.
    8. Margaret Hwang Smith & Gary Smith, 2006. "Bubble, Bubble, Where's the Housing Bubble?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(1), pages 1-68.
    9. Duca, John V. & Muellbauer, John & Murphy, Anthony, 2010. "Housing markets and the financial crisis of 2007-2009: Lessons for the future," Journal of Financial Stability, Elsevier, vol. 6(4), pages 203-217, December.
    10. Atif Mian & Amir Sufi, 2009. "The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1449-1496.
    11. Cynthia Bansak & Martha A. Starr, 2011. "Who Pays the Price When Housing Bubbles Burst? Evidence from the American Community Survey," Perspectives from Social Economics, in: Martha A. Starr (ed.), Consequences of Economic Downturn, chapter 0, pages 139-165, Palgrave Macmillan.
    12. Masahiro Ashiya, 2009. "Strategic bias and professional affiliations of macroeconomic forecasters," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 28(2), pages 120-130.
    13. Daniel S. Hamermesh, 2004. "Maximizing the Substance in the Soundbite: A Media Guide for Economists," The Journal of Economic Education, Taylor & Francis Journals, vol. 35(4), pages 370-382, October.
    14. Clements,Michael & Hendry,David, 1998. "Forecasting Economic Time Series," Cambridge Books, Cambridge University Press, number 9780521632423.
    15. repec:pri:cepsud:99blinderkrueger is not listed on IDEAS
    16. Martha A. Starr, 2011. "Beyond the Usual Economics," Perspectives from Social Economics, in: Martha A. Starr (ed.), Consequences of Economic Downturn, chapter 0, pages 1-21, Palgrave Macmillan.
    17. James Crotty, 2009. "Structural causes of the global financial crisis: a critical assessment of the 'new financial architecture'," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 563-580, July.
    18. Gerald Epstein & Jessica Carrick-Hagenbarth, 2010. "Financial Economists, Financial Interests and Dark Corners of the Meltdown: It’s Time to Set Ethical Standards for the Economics Profession," Working Papers wp239_revised, Political Economy Research Institute, University of Massachusetts at Amherst.
    19. Martha A. Starr (ed.), 2011. "Consequences of Economic Downturn," Perspectives from Social Economics, Palgrave Macmillan, number 978-0-230-11835-5, December.
    20. Tilman Ehrbeck & Robert Waldmann, 1996. "Why Are Professional Forecasters Biased? Agency versus Behavioral Explanations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(1), pages 21-40.
    21. Jan Kregel, 2008. "Using Minsky's Cushions of Safety to Analyze the Crisis in the U. S. Subprime Mortgage Market," International Journal of Political Economy, Taylor & Francis Journals, vol. 37(1), pages 3-23.
    22. Law, Marc T. & Kim, Sukkoo, 2005. "Specialization and Regulation: The Rise of Professionals and the Emergence of Occupational Licensing Regulation," The Journal of Economic History, Cambridge University Press, vol. 65(3), pages 723-756, September.
    23. Christopher D. Carroll, 2003. "Macroeconomic Expectations of Households and Professional Forecasters," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 269-298.
    24. Alan Blinder & Alan Krueger, 2004. "What Does the Public Know about Economic Policy, and How Does It Know It?," Working Papers 875, Princeton University, Department of Economics, Industrial Relations Section..
    25. Christopher L. Foote & Kristopher Gerardi & Paul S. Willen, 2010. "Reasonable people did disagree : optimism and pessimism about the U.S. housing market before the crash," Public Policy Discussion Paper 10-5, Federal Reserve Bank of Boston.
    26. Jordi Pons-Novell, 2003. "Strategic bias, herding behaviour and economic forecasts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 22(1), pages 67-77.
    27. Klaus F. Zimmermann, 2004. "Advising Policymakers through the Media," The Journal of Economic Education, Taylor & Francis Journals, vol. 35(4), pages 395-406, October.
    28. V. Tambovtsev., 2009. "Financial Crisis and Economics," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
    29. Noreen, Eric, 1988. "The economics of ethics: A new perspective on agency theory," Accounting, Organizations and Society, Elsevier, vol. 13(4), pages 359-369, June.
    30. Author-Name: Alan S. Blinder & Alan B. Krueger, 2004. "What Does the Public Know about Economic Policy, and How Does It Know It?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(1), pages 327-397.
    31. Jane K. Dokko & Brian M. Doyle & Skander J. van den Heuvel & Michael T. Kiley & Jinill Kim & Shane M. Sherlund & Jae W. Sim, 2009. "Monetary policy and the housing bubble," Finance and Economics Discussion Series 2009-49, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Economists did see the bubble coming
      by Economic Logician in Economic Logic on 2011-04-27 19:39:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martha A. Starr, 2014. "Qualitative And Mixed-Methods Research In Economics: Surprising Growth, Promising Future," Journal of Economic Surveys, Wiley Blackwell, vol. 28(2), pages 238-264, April.
    2. Paolo Ramazzotti, 2013. "Shared economic thought and the neglect of social costs. Why progressive economists often stick to conventional wisdom," Working Papers 71-2013, Macerata University, Department of Finance and Economic Sciences, revised Dec 2015.
    3. Eddison T. Walters, 2020. "Evidence From Data Analysis, Fifteen Developed Countries and the United States Home Prices Increase Between 1990 to 2006 Result of Advancement In Technology, Worldwide Economic Collapse and Great Rece," International Business Research, Canadian Center of Science and Education, vol. 13(11), pages 114-114, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pascal Towbin & Mr. Sebastian Weber, 2015. "Price Expectations and the U.S. Housing Boom," IMF Working Papers 2015/182, International Monetary Fund.
    2. Jane K. Dokko & Brian M. Doyle & Skander J. van den Heuvel & Michael T. Kiley & Jinill Kim & Shane M. Sherlund & Jae W. Sim, 2009. "Monetary policy and the housing bubble," Finance and Economics Discussion Series 2009-49, Board of Governors of the Federal Reserve System (U.S.).
    3. Bennani, Hamza, 2018. "Media coverage and ECB policy-making: Evidence from an augmented Taylor rule," Journal of Macroeconomics, Elsevier, vol. 57(C), pages 26-38.
    4. Michael Ehrmann & Damjan Pfajfar & Emiliano Santoro, 2017. "Consumers' Attitudes and Their Inflation Expectations," International Journal of Central Banking, International Journal of Central Banking, vol. 13(1), pages 225-259, February.
    5. Larsen, Vegard H. & Thorsrud, Leif Anders & Zhulanova, Julia, 2021. "News-driven inflation expectations and information rigidities," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 507-520.
    6. Ehrmann, M. & Pfajfar, D. & Santoro, E., 2014. "Consumer Attitudes and the Epidemiology of Inflation Expectations," Discussion Paper 2014-029, Tilburg University, Center for Economic Research.
    7. Michael J. Lamla & Thomas Maag, 2012. "The Role of Media for Inflation Forecast Disagreement of Households and Professional Forecasters," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(7), pages 1325-1350, October.
    8. Ryan Chahrour & Kristoffer Nimark & Stefan Pitschner, 2021. "Sectoral Media Focus and Aggregate Fluctuations," American Economic Review, American Economic Association, vol. 111(12), pages 3872-3922, December.
    9. Damjan Pfajfar & Emiliano Santoro, 2013. "News on Inflation and the Epidemiology of Inflation Expectations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(6), pages 1045-1067, September.
    10. Juan Camilo Anzoátegui-Zapata & Juan Camilo Galvis-Ciro, 2020. "Disagreements in Consumer Inflation Expectations: Empirical Evidence for a Latin American Economy," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 16(2), pages 99-122, November.
    11. Luca Gambetti & Nicolò Maffei-Faccioli & Sarah Zoi, 2022. "Bad News, Good News: Coverage and Response Asymmetries," Working Paper 2022/8, Norges Bank.
    12. Enrico Giovannini, 2008. "Statistics and Politics in a “Knowledge Society”," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 86(2), pages 177-200, April.
    13. Yingying Xu & Zhixin Liu & Zichao Jia & Chi-Wei Su, 2017. "Is time-variant information stickiness state-dependent?," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 16(3), pages 169-187, December.
    14. Lena Dräger, 2023. "Central Bank Communication with the General Public," CESifo Working Paper Series 10713, CESifo.
    15. Lamla, Michael J. & Lein, Sarah M., 2014. "The role of media for consumers’ inflation expectation formation," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 62-77.
    16. Mark Doms & Norman J. Morin, 2004. "Consumer sentiment, the economy, and the news media," Finance and Economics Discussion Series 2004-51, Board of Governors of the Federal Reserve System (U.S.).
    17. Hamza Bennani, 2016. "Media Coverage and ECB Policy-Making: Evidence from a New Index," Working Papers hal-04141572, HAL.
    18. Vicente Maria R. & López Ana J., 2017. "Figuring Figures: Exploring Europeans’ Knowledge of Official Economic Statistics," Journal of Official Statistics, Sciendo, vol. 33(4), pages 1051-1085, December.
    19. David-Jan Jansen & Matthias Neuenkirch, 2017. "News Consumption, Political Preferences, and Accurate Views on Inflation," Research Papers in Economics 2017-03, University of Trier, Department of Economics.
    20. Graeme O'Meara, 2015. "Housing Bubbles and Monetary Policy: A Reassessment," The Economic and Social Review, Economic and Social Studies, vol. 46(4), pages 521-565.

    More about this item

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:jeciss:v:46:y:2012:i:1:p:143-172. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MJEI20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.