So, again, the short answer is that there is no rule that anti-bubbles have to be worse than bubbles. The data from the U.S. stock market in 2004 are a case in point.
On 11/27/06, Ted Winslow <egwinslow at rogers.com> wrote:
>
> Doug Henwood pointed to Robert Shiller's work on financial market
> bubbles::
>
> > the existence of bubbles has more adherents now than in the heyday
> > of efficient market theory in the 70s and 80s, thanks in no small
> > part to Robert Shiller's work. For a stock market example, see
> > <http://www.econ.yale.edu/~shiller/online/jpmalt.pdf>, exhibit 4.
> >
> > The US stock market bubble of the 1990s reverted to mean, but never
> > really went beyond that. So there's reason to believe the fat lady
> > is still just warming up.
> >
>
> Before Shiller, Kindleberger, basing himself on Hyman Minsky's model
> of financial market instability, had also pointed to irrationality as
> a perennial psychological feature of bubbles (see Kindleberger's
> Manias, Panics and Crashes).
>
> Shiller, Kindleberger and Minsky all fail to notice, however, that
> Keynes had already made irrational psychology the key to
> understanding financial market functioning in general and bubbles in
> particular. Keynes understood this irrationality in terms of
> psychoanalytic (rather than, as in the case of Shiller,
> "behavioural") psychology.
>
> Another key feature of Keynes's approach that differentiates it from
> the approaches of Shiller, Kindleberger and Minsky is the presumed
> inconstancy of the psychology involved. Keynes adopts an 'internal
> relations" view of social phenomena. On this view, the regularities
> observable in human action change with changes in the psychological
> identities of the actors brought about by changes in the customary
> social relations within which they develop and live. Thus Keynes
> points to the cross culturally and historically very different roles
> played by gold in liquidity preference and claims that the equity
> premium can't be relied on to remain a feature of financial market
> functioning simply because it has characterized such functioning in
> the past.
>
> For Keynes, the importance of psychology and internal relations in
> social phenomena makes it a mistake to model social theory on natural
> science, particularly (as has been conventional since Adam Smith) on
> physics. For this reason, mathematical and statistical methods have
> a much more limited applicability in the former than in the latter.
> For example, the form taken by bubbles will vary with variations in
> the psychology expressed in them. Also, as Keynes long ago pointed
> out in criticism of Jan Tinbergen's early work in what became known
> as "econometrics," before valid statistical estimation of such a form
> can be undertaken, it must first be established that such a form
> exists. Statistical estimation itself cannot demonstrate this.
>
> This is another way in which Keynes's (and Alfred Marshall's and
> Marx's) approach to economics differs radically from Milton
> Friedman's. Friedman uncritically accepted physics as the
> appropriate model for "science" in general. Moreover, he convinced
> himself that his statistical investigations of a quantity theory
> approach to the demand for money had uncovered a physics like
> regularity in social phenomena, a "uniformity ... of the same order
> as many of the uniformities that form the basis of the physical
> sciences." Keynes, however, had already pointed out, on the basis of
> a more rational "empiricism" than Friedman's, that the psychological
> nature of liquidity preference made such statistical estimation
> procedures inapplicable. This point is ignored in discussions of the
> subsequent predictive "failure" of Friedman's quantity theory.
>
> Ted
>
>
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