Madam, - In his perceptive analysis (July 18th), Prof Honohan identifies the Irish property bubble as the key creator of our current economic woes. He mentions that "economists have long foreseen an abrupt end to the. . . boom although the timing of the bust was not clear". Rather than adopting a superior tone, I contend that they, as well as policymakers, have lessons to learn from this experience.
Speculative bubbles have been with us since time immemorial from Tulipmania to the South Sea bubble, from the Wall Street boom of the late 1920s to the Dot com crash at the start of this century. There is no doubting the disruptive effect of this type of financial speculation on the real economy. However, economists need to learn from other classes of experts, such as environmental scientists, to collaborate collectively in order to ensure their expertise is used for the maximum benefit of wider society.
Once a speculative bubble is identified as existing by the vast majority of qualified Irish economists they ought to be lobbying the government en masse to operate in such a manner as to discourage the further speculative inflation of asset prices.
Irish policymakers, for their part, bear the ultimate responsibility for acting prudently and in the long-term interest of the nation rather than for short-term political gain. There are some unfortunate parallels between the late 1980s Japanese property boom/bust cycle and our own. Crony capitalism, that is a special relationship between different elites, was present in both circumstances.
However, Ireland, unlike Japan, has no control over its monetary policy.
Therefore, once the alarm bells are sounded by a significant proportion of economists, the government must be pre-emptive in taking fiscal action to hinder further "irrational exuberance" regardless of the short-term political fall-out this action may entail. - Yours, etc,
EMMET RYAN, MSc, BA,
Ashley Rise,
Portmarnock,
Co Dublin.