So let's look at some stupid.
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.
No, McArdle is of zero minds on this. She is not thinking this through.
What does she mean by banking booms? A banking boom is not a bubble. According to Ronald R.King, Vernon L. Smith, Mark V. van Boening in "The Robustness of Bubbles and Crashes in Experimental Stock Markets" (via wikipedia), the definition of an economic bubble is “trade in high volumes at prices that are considerably at variance with intrinsic values.” The point of a bubble is that there isn't a valid reason for the price increases.
On the one hand, I think that this is an interesting point.
Why? An explanation would be nice. Also essential for reading comprehension.
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.
Which means that what we have is a credit boom. Credit was too easy to get and everyone got drunk on it, seeing it as the road to quick wealth. The credit to start the dot.coms, the credit to buy houses and malls and office parks.
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.
Which explanations are you talking about? Surowiecki says that there's no upside to our most recent bubble. You say maybe, maybe not. You're not discussing the reasons for booms and busts. This is utterly irrelevant.
A market bubbling over with 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).
And here we have the typical faulty, fairy-tale reasoning of the ideological and self-delusional. Simply stating that something must happen does not mean that it did or will. McArdle doesn't even try to pull something out of her ass as an example. "Some" technology or industry--which? She sounds like the delusional fools who thought that we would win in Iraq because of our "will." Perhaps some new technology or industry will pop up, but anything as sweeping and important as electricity will be funded no matter if we have bubbles or not. In fact it seems the government had a lot to do with the spread of electricity, just like it did with roads and utilities and airplanes. Orville and Wilbur Wright got their first major funding from the US government signal corps, for instance. Even if this new technology is funded, the money stolen by Wall Street is gone forever, the wealth based on debt vanished like the chimera it was, and there is currently absolutely nothing big enough to replace the hole that the housing bubble left when it burst. Which was Surowiecki's point.
All McArdle is trying to do is the same thing she has been doing for a year--try to mitigate and shift blame for the economic disaster from McArdle's fellow ideologues and greedy Wall Street bastards to the powerless. Hey, maybe something good will come out of this disaster after all, like electricity! I can just see the links she'll get from the brain trust at National Review, who use her work to prop up their hatreds and fears in respectable, educated clothing. McArdle's parents paid $38,000 a year for her to grow up into a Jonah Goldberg. Goldberg's parents must be thanking God right now that they never bothered to do anything more expensive than legacy him into journalism school at a girls' college.
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.
Fear not, little libertarians and right-wingers! Sure, everything looks bad now but sometime in the future for reasons unknown and assuming giant, magical gains in technology, we'll be just fine.
Sure, we may all be dead by then, but at least McArdle won't have to listen to dirty hippy socialists complaining about the New Depression.
UPDATE: (crossposted from Fire Megan McArdle comments):Oh, I finally get it... The only explanation is that she's trying to say that this wasn't a housing bubble, it was too much money in the system. (Her stupid Greenspan-derived theory that too much Asian savings created the bubble, not low interest rates and slice and dice mortgages.)