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Policy bubbles: What factors drive their birth, maturity and death?

A policy bubble is a policy overreaction that is reinforced by positive feedback over a relatively long period of time. Policy bubbles impose social costs without producing offsetting benefits. Moshe Maor explores this phenomenon and explains how it may mature as a result of over-optimism and overconfidence among policymakers and the general public, or as a result of human herding and emotional contagion.

Policy scholars and practitioners claim that the Eurozone has been, and still is, a policy bubble akin to similar well-known suspected policy bubbles like privatisation, nuclear deterrence, New Public Management (NPM) success in cutting costs, state-private partnership in the delivery of long term infrastructure projects, and the idea of sustainability. In order to prepare the conceptual ground to address this claim, I have tried to abstract out the most relevant features of a policy bubble by directing attention to the process that leads policymakers and the general public to misassign value to public policies over a relatively long period of time. Which factors drive the emergence of a gap between the (actual or perceived) cost of a policy and its (actual or perceived) contribution to its goals?”

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