Abstract
At the dawn of the 21st century, property and equity ownership are spread more
broadly across the population than they once were. One consequence of this is that
asset price booms and crashes now have a direct impact on general welfare. The fact
that bubbles distort nearly all economic decisions gives policymakers a stronger
interest in asset price stability. In this article I examine the theoretical and
empirical case for the existence of equity and property bubbles, and then summarise
the economic distortions that they create. The evidence suggests increasing our
attention to property prices. I go on to discuss the possible policy responses,
including examining the consequences of changing the way in which housing is
included in standard aggregate price measures.