Are bubbles good for economic development?

Fools rush in, but should we mind?

...when it comes to transformative technologies, overoptimistic investors are actually working for the common good—even if they don’t know it. We can be glad that investors financed the construction of thousands of miles of track in the middle of the nineteenth century, despite the fact that most of them dropped a bundle doing it. The same goes for overoptimistic investors who poured money into semiconductors thirty years ago, financed undersea fibre-optic cables in the late nineties, and now are poised to lose their shirts in the coming nanobubble. In the dreams of avarice lie the hopes of progress.

The full story concerns the nanotechnology bubble, by the ever-intelligent James Surowiecki, writing for The New Yorker.

My take: The real story of the invisible hand is that many of the rewards offered by the capitalist system are illusory in value. Ayn Rand had a point that the world rests on the shoulders of the talented few. She forgot that those people often aren't very rational.