Published by EH.Net (June 2022).

William Quinn and John D. Turner. *Boom and Bust: A Global History of
Financial Bubbles. *Cambridge UK: Cambridge University Press, 2020. viii
+288 pp. $24.95 (hardcover), ISBN 978-1-108-42125-6.

Reviewed for EH.Net by Mary Tone Rodgers, Professor of Finance, State
University of New York at Oswego.



In this easily read book, William Quinn and John D. Turner of Queen’s
University Belfast do not identify new explanatory variables as causes of
bubbles, booms and busts—instead, they find a way to categorize variables
already well established in the literature to make the causes more easily
understood. Indeed, the primary contribution of the work is the creation of
a fire metaphor to understand financial bubbles and the thorough
application of the metaphor to twelve episodes in history of financial
bubbles, booms and busts.

Dozens of metaphors and analogies were used during the 2008 subprime
crisis, as financial adviser Gary Karz (2014) has described. Karz quotes
the following from Tim Geithner’s book *Stress Test*:

“One afternoon that summer, I tried to lighten up the mood at the New York
Fed with an impromptu contest for the best metaphor for what was happening
to the financial system. \”I\’ve heard \’the wheels coming off the bus\’,\”
I said. \”We\’ve talked about the engines falling off the plane.\” The
usual suspects were wildfires and earthquakes, hundred-year storms and
hundred-year floods. We also discussed cancer and contagion, sweaters
unraveling and boulders rolling down a hill. I relayed one I had first
heard from Goldman Sachs CEO Lloyd Blankfein: ‘The rivets are coming off
the submarine.’”

So why do Quinn and Turner select fire as their metaphor? Because, they
argue, unlike natural phenomena such as storms, hurricanes, or floods,
fires can be extinguished by humans, just as financial bubbles, once
underway, can also be extinguished by humans.

Deirdre McCloskey (1995) has written about the importance of the metaphor
as an effective literary device for economists. “Metaphor is often a
serious figure of argument, not an ornament” (p. 215). As she puts it,
metaphors depend upon similarities between knowledge domains. By carrying
knowledge about two different domains, a metaphor is likely to carry more
information than a literal direct equivalent (Noveck, et al., 2000).
Because metaphors can be more convincing than their literal equivalent, the
choice of metaphor is consequential. In the case of Quinn and Turner’s
book, the metaphor powerfully transmits the authors’ intention to say that
just as fires are dangerous, so too are financial bubbles dangerous.

The authors use the fire metaphor to ask and answer analogous questions:
what does it take to start a fire (how do bubbles start), what does it take
to extinguish a fire (how do bubbles burst), and what are the consequences
of a fire (are the net effects of a bubble good or bad, big or small). Just
as oxygen is necessary to support a fire, marketability of securities is a
necessary condition to start a bubble. Just as fuel is necessary to let a
fire burn, money or credit is necessary to let a bubble expand. Just as
heat is necessary for fuel to combust into flame, speculation is needed for
the bubble to enlarge. The authors argue that the catalyst to ignite the
fire is a spark; the catalyst to start a financial bubble is technological
innovation or a change in government policy. They argue that to extinguish
a fire, one must remove one of the three legs of the triangle: oxygen, fuel
or heat. Similarly, to burst a bubble, one removes marketability, money or
credit, or speculation with either policy tools or introduction of new
information to market agents.

To estimate the consequences of a burst bubble, the authors move from
summarization and categorization to data gathering and analysis. For each
of the twelve episodes, they estimate the size of the burst bubble’s effect
on the real economy and suggest ways the bubble may have done both harm as
well as good to the real economy.

The secondary contribution of the book is the systematic coverage of the
twelve bubbles in ten chapters with each chapter formatted using common
sections: history, causes, and consequences of the bubble. The British
bicycle mania of 1896-1898, the Australian land boom of 1888-1893, and the
Chinese stock market bubble of 2015 are likely less well known to the
EH.Net audience, so the coverage by the authors may present suggestions for
further research, whereas for the better-known episodes like the dot-com
bubble of 2000 and the sub-prime bubble of 2008 the metaphor mainly
summarizes a familiar academic literature.

The book clearly appeals to a wide audience; it won a Best Book of 2020
award from the *Financial Times* and by 2021 was already in its fourth
printing. But our unique EH.Net audience might find some sources of
dissatisfaction with it. It\’s hard to neatly categorize all the
explanatory variables developed in the academic literature about bubbles
into each of the three legs of the fire triangle. It’s plausible, for
example, that information asymmetry, a condition associated with bubbles
(Asako, et al., 2017), could fit into any of the three legs of the fire
triangle, not just one leg. It could be understood as a reduction in
marketability, or a reduction in credit to borrowers, or a reason
speculation ends. While the broader public might not think twice about such
issues, our audience might puzzle over them. Additionally, EH.Net readers
would likely miss a review of how banking institutions evolved over the
centuries covered in the book. A chronicle of changing institutional
context might shed light on how the fire metaphor could itself have evolved
over time.

In conclusion, the value of book’s metaphor is its simplicity, the hallmark
of any useful model. While not all the causal variables studied in the
literature necessarily fit into the metaphor, the authors include enough of
them so that readers can make more sense of how bubbles form, expand, and
burst. On the whole, the fire metaphor proves to be a very useful way to
simplify complexities of bubbles.



References

Asako, Yasushi; Funaki, Yukihiko; Ueda, Kozo; and Uto, Noboyuki.
“Asymmetric Information Bubbles: Experimental Evidence.” Federal Reserve
Bank of Dallas, Globalization and Monetary Policy Institute. Working Paper
No. 312, April 2017. Accessed June 5, 2022.
https://www.dallasfed.org/~/media/documents/institute/wpapers/2017/0312.pdf

Karz, Gary, CFA. “Global Financial Crisis Analogies, Metaphors and
Vocabulary.” Investor Home. October 8, 2014. Accessed June 5, 2022.
investorhome.com/crisisanalogies.htm

McCloskey, Deirdre. “Metaphors Economists Live By.” *Social Research* 62(2):
215-237 (Summer 1995).

Noveck, Ira; Bianco, Maryse; and Castry, Alain. “The Costs and Benefits of
Metaphor.” *Metaphor and Symbol* 16(1&2): 79-91.



Mary Tone Rodgers, DPS, CFA, is the Marcia Belmar Willock Professor of
Finance at the State University of New York at Oswego. She is currently
working on a book with Jon R. Moen for Cambridge University Press, working
title *J. P. Morgan: Architect of the Modern American Response to Financial
Crises.*

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