On the whole, I find it amazing and distressing that fear of new bubbles is playing such a large role in current policy discussion, leading too many prominent economists to recommend raising interest rates in the face of a hugely depressed economy. Even if you believe that excessively low policy rates were a key reason for the housing bubble — which I don’t — the idea that we should be raising rates now brings to mind the old joke about the motorist who runs over a pedestrian, then tries to fix the damage by backing up, and running over the pedestrian a second time.

Beyond that, I think we need to bear in mind that while bubbles are in general a bad thing, just how bad depends a lot on the context — in particular, whether the inflation of the bubble has...