James Surowiecki has a very interesting column arguing that this bubble was different because unlike the earlier banking booms, there was no point to the wild spending.  The bubble didn't bring us railroads and electrification; it brought us . . . houses.  Lots and lots and lots of houses.

I'm of two minds on this.  On the one hand, I think that this is an interesting point.  On the other hand, of course, the bubble in the 1920s was not limited to electric stocks, or even stocks.   Lots of money was wasted on railroads, Florida real estate, mining concerns, and many other unrelated phenomena.  And if you look at the history of the 1920s, you see the same thing we see in the 1998-2008 era:  markets awash in too much money.

So I wonder if there isn't a sort of post-hoc, ergo propter hoc reasoning to these "explanations" of the previous booms and busts.  A market bubbling over wtih too much credit will end up plowing a lot of money into some technology or industry which ends up being really, really important twenty years later.  (The electric revolution continued, surprisingly rapidly, in the 1930s).  We look back and interpret the bubble as having been "about" that technology.  But at the time, when it's not obvious what the big winner is going to be, it just looks like a giant mess.

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