New Economic Perspectives has the article Why Minsky Matters.
American economist Hyman Minsky died in 1996, but his theories offer one of the most compelling explanations of the 2008 financial crisis. His key idea is simple enough to be a t-shirt slogan: “Stability is destabilising”.
The link to BBC Radio 4′s Analysis program episode on Minsky is the prize for reading the article.
American economist Hyman Minsky died in 1996, but his theories offer one of the most compelling explanations of the 2008 financial crisis. His key idea is simple enough to be a t-shirt slogan: “Stability is destabilising”. But TUC senior economist Duncan Weldon argues it’s a radical challenge to mainstream economic theory. While the mainstream view has been that markets tend towards equilibrium and the role of banks and finance can largely be ignored, Minsky argued that in the good times the seeds of the next crisis are sown as the financial sector engages in riskier and riskier lending in pursuit of profit. In the aftermath of the financial crisis, this might seem obvious – so why did Minsky die an outsider? What do his ideas say about the response to the 2008 crisis and current policies like Help to Buy? And has mainstream economics done enough to respond to its own failure to predict the crisis and the challenge posed by Minsky’s ideas?
Those of us like myself, who learned our economics in the early 1960s when Keynesian ideas were still being taught, are mystified why Minsky’s insights should be so shocking and outside the mainstream. I guess it helps to have been in a career that had nothing to do with academic economics so that I avoided having been infected by people who thought that they had better ideas than Keynes.
Having listened to this interview, I know better understand the need for the diatribe in the Naked Capitalism article Philip Pilkington: How Krugman’s Addiction to the ISLM Model Has Led to Repeated Bad Forecasts.
Before that article, I was even less sure of the reason for the animus in the article The Government Hack Trying to Squash Discussion of Government Corruption – Cass Sunstein – Doesn’t Understand BASIC Math Or Law.
I might not have had the fawning idolatry for Krugman and Sunstein as some did, but I did have (and still do have) respect for some of their ideas.