Yale Economist Talks Investment Bubbles And Farmland Prices, II

Published on: 09:03AM Mar 31, 2011

Mike Walsten

Yale Economist Robert Shiller, who has achieved international recognition for his work on asset bubbles, has identified farmland as the next potential bubble. In his column titled Bubble Spotting on the web site Project Syndicate, Shiller discusses asset bubbles and says in answer to the question of where the next speculative bubble will be: "My favorite dark horse candidate for the next decade or so is farmland."

His column discusses stocks and the housing market as well as the commodity market. He leans to farmland because it is tied to the commodity market which has a "new era" (his term) story attached to it which includes new energy demands due to a colder and snowier winter in the northern hemisphere, global food production impacts due to global warming and food shortages leading to political unrest in the Middle East. He emphasizes bubbles are difficult to predict and can take a long time to develop because they are "social epidemics, fostered by a sort of interpersonal contagion." It seems he's talking about a crowd mentality acting in unison on an idea or set of ideas. It's interesting reading. Check it out here.

New: In a follow-up to his column Shiller appeared on Fox Business TV this week to talk about the housing market. But at the end of the interview, he was asked about his comments that farmland could be the next bubble. Note: he emphasized that his was not a predictition but a guess. He pointed out that farmland rose along with housing prices but farmland corrected only 5% before prices firmed again "because they aren't building any more farmland." He said his theory was that current events area creating a mind set that could lead to a bubble.

His interview on Fox Business is included in this column by Jacob Wolinsky who is writing on the website gurufocus.com about whether the economy is headed toward deflation or inflation. Click here for the full column.

If interested in seeing a copy of LandOwner, just drop me an email at [email protected] or call 800-772-0023.