How Different Bubbles Work

Almost by definition, bubbles are conditions where prices temporarily soar.  A crash is when prices temporarily drop.  The financial "bubble" of 2006-2007 was actually a crash.  The price of money (interest rate) dropped and the mortgage market was awash with so much extra money that they were giving mortgages away to dogs and dead people.  The housing bubble, in turn, was caused by the crash in the cost of borrowing money.  That was a bubble that was caused by an irrational, unsustainable temporary increase in demand for housing fueled by increased borrowing.   This is unsustainable for the same reason that a Ponzi scheme is unsustainable.  Prices can only rise as long as new money keeps flowing in which cannot continue forever.  Current prices are always based on expectations of future prices.  If people think that future prices will go up because of a momentum strategy (what has been going up in the past will likely continue to go up in the future), then that creates an inherent instability in markets. 
Some bubbles are caused by a decrease in supply that are caused by hoarding.  Hoarding creates an unsustainable increase in price unless there really is a permanent decrease in supply.  Amartya Sen argues that this was the main reason for the 1943 famine in the Bangladesh region of British India.

We need better definitions of bubbles.  There are Ponzi-demand bubbles caused by expectations of higher future prices and new money flowing into a market. There are hoarding-supply bubbles caused by suppliers raising their current stocks.  And then there are "bubbles" like the "financial bubble" that are misnamed and are really crashes in price which I will analyze another time and probably have very different causes. 
Krugman dismisses the ability of financial markets to create bubbles if there isn't an increase in stocks, but that only looks at hoarding-supply bubbles and there certainly could be a financial Ponzi bubble that causes a bubble without hoarding.  The problem is in how to measure a financial Ponzi bubble.  The hoarding-supply bubble is easy to measure if we have measures of stocks, but do we have any measures of monetary inflows into markets?  In the short-run supply is very inelastic and too many dollars chasing a nearly fixed supply of anything will raise its price.