Financial Keynesianism and Market Instability

Financial Keynesianism and Market Instability

The Economic Legacy of Hyman Minsky, Volume I

Edited by Riccardo Bellofiore and Piero Ferri

During his lifetime Hyman Minsky made a seminal contribution to the development of financial Keynesianism. In this book, leading academics celebrate his work and explore his economic legacy. Special attention is paid to his work on contemporary economic method, the Great Depression, the European single currency and the global financial system and recent banking and financial crises – in particular the crisis in Asia. An attempt is made to categorise Minsky’s brand of post Keynesianism and to compare his work with the Keynesian and Marxian traditions.

Chapter 5: Hyman Minsky: what kind of (post-) Keynesian?

Anna Maria Variato

Subjects: economics and finance, economic psychology, financial economics and regulation, history of economic thought, post-keynesian economics


Anna Maria Variato* INTRODUCTION Within the first minutes of any conversation with Hyman Minsky one learns that economic theory is hopelessly sterile unless it recognizes the fundamental impact of finance … Another strong impression that one gets … is that theoretical economics and economic policy analysis are inextricably linked. (Fazzari, 1992, pp. 3–4) The sense one gets from conversation with Hyman Minsky is that modern capitalism, in what he calls ‘financially sophisticated economies’, is a complex and dynamic system. Its essential features cannot be captured in a static framework … The endogenous dynamics of the system have the potential to break out into instability. Wise policy intervention is essential to containing instability. Such intervention may lead to acceptable behavior for a time, but the risk remains that the system will overcome any particular structure of institutional containment mechanisms. (Ibid.) When we encounter an economist of great personality and talent, who masters the pieces of economic puzzles at will, we feel both fascinated and embarrassed. On the one hand, we experience a deep intellectual emotion; on the other, we find ourselves short of words to describe such an experience. For the great virtue of true masters is to leave behind them an inspiration, that is at once an object of respect and a challenge. Hyman Minsky was one such economist. His impressive body of work reveals an eclectic nature, capable of appropriating instruments from such different fields as mathematics, economic theory and finance, and empirical analysis, and applying them to understanding the complex...

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