Speaking Confidence: Bubble Denial as Market Authoritative Rhetorical Decorum

Abstract

From the early to mid 2000s, economists, pundits, and other commentators engaged in heated debate about the possibility of a bubble in the U.S. housing market. Prognosticating in a variety of public forums, debaters divided along largely ideological lines, with adherents of mainstream neoclassical economics producing a forceful narrative accord that a bubble was unlikely or impossible. Approaching this debate as a case of the powerful discourses that strive to keep markets intervention-free, this essay explores market bubbles as sites of discursive tension and professional stigma, seeking to understand how the allegation of a bubble imbricates expectations of decorum and provokes a constraining rhetorical response. With particular attention to the phenomenon of “bubble denial,” I highlight how rhetorical strategies of definition, insult, and risk dismissal functioned to sustain market confidence, discredit bubble predictors, and habituate decision makers to evolving market risk.

Acknowledgments

The author thanks two anonymous reviewers as well as the RSQ editor for invaluable revision suggestions. She is also indebted to Catherine Chaput, Jane Detweiler, and Sue Hum for feedback and encouragement at various stages.

Notes

¹ In 2010 the “post-autistics” journal Real-World Economics Review (R-WER) took mainstream neoclassical economics to task for failing to predict the event and responding nonchalantly afterward (“Announcing”). Rejecting the “party line” that the crisis was unpredictable, R-WER announced and later awarded two new accolades: in honor of the most iconic American alarm-raiser, the “Revere” award recognized professionals that foresaw the GFC and attempted to warn others, while the “Dynamite” award named those “most responsible for blowing up the global economy” (“Greenspan”).

² As Krugman describes, Bernanke’s 2005 “Face the Nation” appearance saw him acknowledge a “great deal of froth in housing markets” but dismiss the potential for “a large nominal price collapse.”

³ Krugman, Eichengreen, and R-WER are among those who describe mainstream economics’ disregard for the growing bubble as a breakdown of disciplinary expertise.

⁴ In addition to warnings from the same market authorites I discuss here, Žižek reminds us of public protests that attempted to draw attention to the coming crisis.

⁵ In compiling my corpus, I benefited from several lists of those “who were wrong about the bubble,” notably the comprehensive catalogue of economists and other commentators that Economics of Contempt provides here: http://economicsofcontempt.blogspot.com/2008/07/official-list-of-punditsexperts-who.html. The R-WER award nominations also offer a helpful list of bubble predictions and denials from professional economists.

⁶ As an example, Eugene Fama, the “intellectual father of efficient market theory,” has publically expressed doubt that bubbles exist. In a 2007 interview, he explained that past crashes uphold rather than disprove the efficiency of markets, complaining, “The word ‘bubble’ drives me nuts” (Clement).

⁷ Tales abound from the bubble years of market authorities derided or even fired for suggesting that a bubble was imminent; Roberts details several.

⁸ Deirdre (then Donald) McCloskey’s 1983 article on the “The Rhetoric of Economics” was followed by a 1985 monograph of the same name. A discussion of recent directions in this conversation is found in Edward Clift’s essay on “The Rhetoric of Economics,” appearing in Lunsford et al.’s The Sage Handbook of Rhetorical Studies.

⁹ Shiller is not alone in explaining bubbles as episodes of “irrational” behavior. Kevin Hassett’s Bubbleology, for instance, defines a bubble as “a period when the price of an asset … suddenly soars for irrational reasons and then collapses” (21).

¹⁰ There are instances of “late bubble denial” from as late as 2008, as where Alex Tabarrok explains that there there was “some mild overshooting, especially due to the subprime over-expansion, but fundamentally there was no housing bubble” (emphasis in the original).

¹¹ Announcing its “Revere” and “Dynamite” awards, the editors of Real-World Economics Review imply that “empirically responsible economists” could and should have been heeded. Bubble theorists like Kindleberger and Aliber, however, write that in bubbles, efforts to raise warnings habitually go unheard.

Additional information

Notes on contributors

Crystal Broch Colombini

Crystal Broch Colombini is Assistant Professor in the Department of English at the University of Texas at San Antonio, One UTSA Circle, San Antonio, TX 78249, USA.