A period of rapid and often unsustainable economic expansion, fueled by investments based on anticipated future gains rather than intrinsic value, characterizes this phenomenon. Such a surge is frequently observed in the United States’ economic history when enthusiasm for new technologies, land acquisition, or financial instruments takes hold. For instance, the Florida land boom of the 1920s exemplifies this, with property values skyrocketing based on expectations of continued growth, only to collapse when those expectations were not met.
The importance of understanding this process lies in its potential impact on the broader economy. While it can generate short-term prosperity and innovation, the inherent instability of speculative bubbles often leads to financial crises and economic downturns. Studying historical examples allows economists and policymakers to identify the warning signs, such as excessive leverage, irrational exuberance, and a detachment from underlying economic realities, enabling them to implement measures to mitigate the associated risks.
