Bubble

What does Bubble mean in American Law?

The definition of Bubble in the law of the United States, as defined by the lexicographer Arthur Leff in his legal dictionary is:

A recurrent species of financial hysteria in which something (e.g., tulip bulbs, Florida land, shares in the South Sea Company-to pick three well known examples) is subject to wild price escalation, eventually culminating in a total collapse of prices wiping out those unfortunate enough to have bought at, or held to, the end of the game. While pathological, bubbles testify to the fact that whatever the value of something, its price is a function of someone else”s willingness to pay. Hence one can rationally purchase an exotic tulip bulb for the equivalent of $100,000 if one”s judgment is correct that someone will take it up the next day for $110,000. Some bubbles are the result of fraud, e.g., willfully disseminated knowingly false information about the worth of the things being bought, but some seem as mysteriously spontaneous as the medieval dancing sickness or outbreaks of mystical visions in a convent school. Cf chain letter; ponzi.