Self-study
P1
In economics, the term "speculative bubble" refers to a large upward move in an asset's price driven not by the asset's fundamentals—that is, by the earnings derivable from the asset—but rather by mere speculation that someone else will be willing to pay a higher price for it. ███ █████ ████████ ██ ████ ████████ ██ █ ████████ ███████ ██ ██████ ███ ██ █ ████ ██ ██████████ ████ ███ █████ ████ ████████ ██ █████ ███ ███ ████████ ██ ████ ██ ████ ██████ ███
Intro to Topic ·
Speculative bubble
Speculation is when I buy a machine merely because I speculate that someone else is willing to pay more for the machine. If everyone thought like that, it would drive up the price of the machine. Contrast with buying a machine because I expect that the machine can produce goods that will earn a return on my investment.
Mackay ·
17th century Dutch tulip market is example of speculative bubble
Garber ·
Disagrees; it's not
P2
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Background Facts ·
Netherlands was center of tulip cultivation
One Semper Augustus bulb, a prized variety, sold for $11k (in today's money).
Mackay ·
Rapid price increase attracted speculators which further fueled price increases leading to sudden price collapse
P3
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Garber ·
Price rise and fall can be explained by economic fundamentals
Garber ·
Explanation of price rise
A new and prized variety naturally commands higher prices. This accounts for the initial rise in prices.
Garber ·
Explanation of price fall
Over time, there is more supply of the prized bulbs leading to a fall in prices.
Garber ·
But that's not a speculative bubble
Original high price of the bulb was rationale. The bulbs produced future generations of bulbs and hence produced a return on investment. It was not just speculation that someone else will be willing to pay even more for the bulb.
Passage Style
Critique or debate
Phenomenon-hypothesis (RC)
23.
Given Garber's account of the ███████████████████ █████ █████ ███████ █████ ███ ██ ███ █████████ ██ ████ █████████ ██ ███████ ███ ██████ █ █████ ████ ██ █ ███████ ███████ ██ ████ ██████ ██ █ ████ ████ ██████ ████ ██ ████ █ ████ ██ ████ ███████ ██ █ ████ █████ ██████
a
someone who, after ████████ ████ ████ ██████ ███ █████████ █████ ████████████ ███ █ ██████████ ████ ███████ ███ ███ ███ ██ ███ ██████ ████ █████ █████ ██ ████ ███████████ ███ ██
This doesn’t involve someone who obtains an item at a high price, but sells many copies of the original at a lower price.
b
an art dealer ████ █████ ██████ █ ████ ████ █████ ███ █ ███ █████████ █████ ██ ██ █ ████ ███ █████ ███████ ██ ██ ███ ██████████ ██ ██ ██ ████████ ████
This doesn’t involve someone who obtains an item at a high price, but sells many copies of the original at a lower price. In (B), the art dealer sells the original painting that he bought rather than copies of it. If anything, (B) fits as analogous Mackay’s view, not Garber’s.
c
someone who, after ██████ █ ███ ██ ████ ██████████ █████ ██ █ ████ ████ ██████ ██ ██████ ██ ████ ████ ██ █ ████ █████ █████ ███████ ██ ███ ██████ ████████████ ██ █████ ██████████ █████
This doesn’t involve someone who obtains an item at a high price, but sells many copies of the original at a lower price. Here, the person sells the same box of parts that he once bought. Selling copies is important to the analogy because part of Garber’s argument asserts that someone who buys at a high price might make profits by selling bulbs made through “reproduction” from the original bulb.
d
a publisher who ████ ██ █████████ ████ █████ ███ █ ███ █████ ████ ██ ████ ██████ ██ █ █████ ██████████ ██ ██████ ████████
This is the only answer that involves someone buying something at a high price (”pays an extremely high price for a new novel”) and selling copies of the thing that she bought at a lower price (”sells copies at a price affordable to nearly everyone.
e
an airline that, █████ ███████ ████ ██ ███ ███████ ███ █████ ██ █ █████ ██ █ ████ ████ ██████ ████ ████ ███ █████████ ███████ ██ █ ████ ███ █████
This doesn’t involve someone who obtains an item at a high price, but sells many copies of the original at a lower price. Here, the airline didn’t buy anything; it’s just selling.