Consider finally bubbles in the stock market. Suppose that a firm is initially in equilibrium, with a marginal product of capital equal to the interest rate. In the absence of bubble, the value of a title to a unit of capital, a share, is just equal to the replacement cost and the firm has no incentive to increase its capital stock. Suppose that a bubble starts on its shares, increasing the price, say by 10% above market fundamentals. Should the firm invest more or should it disregard the stock valuation? One answer is that it should add to the capital stock until the marginal product has been reduced by 10%. When this is done, the market fundamental is decreased by 10%, the share price is again equal to the replacement cost and initial shareholders have made a profit on the new shares issued