That boom inolved a transformation of people's thinking about their role in the economy. The idea developed that we ought to expect to make a lot of money investing. The transformation went well beyond opinions about particular investment strategies to alter the very self-esteem mechanism that supports our egos. The Protestant work ethic that had underlain the national psyche for so long underwent a makeover. To a substantial extent, we no longer admired those who were merely hard workers. To be truly revered one had to be a smart investor as well.
It is the change in thinking about ourselves that is the deepest cause of the bubble, and maybe the slowest to unravel after the bubble comes to an end. George Akerlof and Rachel Kranton have shown persuasively that economic theorists must take as fundamental that people care more about who they are and how they are viewed than the kind of food they are eating or car they are driving. A life as an investor has become more than a means to an end, it is an end in itself.
The first para in particular rings very true with me, having seen a few people get carried away in the TMT surge. I also agree that speculative booms must have an impact on how we see ouselves and others. I tried to argue previously that I think financialisation has had a cultural impact, but I think Shiller in more accurate in describing it as a psychological one. When everyone else seems to be making money out of shares/houses/tulips there must be a very strong pull to join in.