I definitely think there is a lot of pump and dump action going on in the software startup world, but then again a huge amount of software engineers are guilty of riding this money wave by association. It might be an artificial economy, which is morally bankrupt, but I can't help but think at times that anything that keeps the blood pumping is good for the overall economy (could very well be wrong there).
Of course, once I go down that rabbit hole I have to start patting government contractors on the back for circulating money at the expense of taxpayers. I guess the overall question is: is an artificial economy better than a stagnant economy?
Some interesting thoughts on that by Steve Randy Waldman [1]. In this snippet, he's asking whether bubbles promote useful innovation:
He went so far as to suggest that agency problems in
the delegated investment process, specifically the inability
of career-minded fund managers to stay away from bubbles
regardless of any personal reservations, make an important
contribution to innovation. Steven Fazzari (whose work on
inequality this blog has featured before) described research
showing that R&D expenditures of young firms are constrained
by external finance and increase in bubblicious periods.
Ramana Nanda investigated whether investments made at the
top of bubbles were poor, and found that they were not. They
were just riskier. Firms funded by venture capitalists in
heat were unusually likely to crash and burn, sure, but they
were also unusually likely to succeed spectacularly.
Of course, once I go down that rabbit hole I have to start patting government contractors on the back for circulating money at the expense of taxpayers. I guess the overall question is: is an artificial economy better than a stagnant economy?