The Human Action Podcast The Importance of Time in Explaining Asset Bubbles
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Oct 6, 2025 Jonathan Newman, academic economist specializing in credit cycles and Austrian capital theory. He critiques Eliezer Yudkowsky’s timing claim about investment bubbles. Discussion covers capital structure and production time, apple-tree and mushroom analogies, why booms feel good while busts hurt, and how sticky prices, reallocation frictions, and depleted capital shape cycles.
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Why Booms Can Feel Good Despite Real Waste
- Investment booms can feel prosperous even while they create real malinvestments.
- Yudkowsky's ladder/apple metaphor: people consume more during the boom, so apparent waste would have been felt earlier if time structure didn't matter.
Time Structure Explains Delayed Pain Of Malinvestment
- The time structure of production explains why malinvestments' pain appears at the bust, not during the boom.
- Longer production processes tie up resources and savings now while consumer goods appear later, creating a delayed shortage when projects fail.
Apple Trees And Collapsing Ladders Example
- Bob uses an apple-and-ladder analogy to show Yudkowsky's point: workers diverted to useless ladders reduce immediate apple picking.
- If ladders collapse, returning workers to hand-picking restores consumption quickly, so waste seems ex-ante not felt.
