The Fed to study economic bubbles

The Wall Street Journal (5/16, A1, Lahart) reports that the Federal Reserve, the nation's chief bubble watching agency, has hand-picked a "band of young scholars" in Princeton University to study economic bubbles. The journal notes that the importance of understanding bubbles -- how they start, how they evolve, and how they deflate -- has been evident by "the damage done by the housing and credit bubbles."

So far, the study group has concluded "that the Fed can and should try to restrain bubbles, rather than following former Chairman Alan Greenspan's approach" of "watchful waiting while prices rise, and then cleaning up the mess after a bubble bursts.