Bubblicious

John Tamny, writing for Forbes.com:

The dictionary definition of the word "bubble" is "a nearly spherical body of gas contained in a liquid." But economists, market commentators and politicians have hijacked the word, using it now to describe any market rising higher than what self-presumed experts deem a correct level....

Since all trades balance, bubbles quite simply don't exist. Indeed, the only real bubble in our midst is the excessive use of "bubble." That dreaded word should be banished so that commentators can get back to actually analyzing market moves instead of writing that which is easy, but which tells us nothing.

I'm not the guy to evaluate Tamny's economic point. But his linguistic point is a little silly. "Bubble" is elegant shorthand for a market based on hopes, dreams and not much else; it's one of the few economic terms that need no explanation to a newcomer. And anyway, its "hijacking" came centuries ago -- its use in economics goes all the way back to the definitive example, the Dutch tulip mania of the 17th century, as Sir Robert Harry Inglis Palgrave wrote in his Dictionary of Political Economy in 1894.*

It's interesting to note that in the South Sea Bubble in the 18th century, "bubble" as a noun extended to the daydream-economy companies themselves (which, again, makes perfect sense -- what were the shakiest Internet start-ups of the '90s if not tiny bubbles waiting to pop?). When that episode was over, Palgrave wrote:

The greatest popular indignation was aroused against the directors, and found expression in parliament. An inquiry was instituted and pushed on rapidly. In the sequel upwards of two millions was taken, in the shape of fines, from the estates of the directors, and they were allowed to retain only a small residue.

And everyone learned their lesson and lived happily ever after.

* EDIT (1/1/10): In fact, it goes back a little further.