When illusions of wealth shape the economy: Understanding pseudo-wealth, macroeconomic volatility, and social welfare
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Pseudo-wealth is a perception of wealth that is not backed by real economic resources. When people have widely different beliefs, they create ‘wealth’ through betting. This column describes how this perceived wealth can rapidly inflate or deflate without changing real economic fundamentals, leading to volatility in spending and potential economic instability. It raises the question whether societies should promote markets that enhance the capacity of individuals to trade based on their own
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