The Economic Legacy of Hyman Minsky, Volume II
Edited by Riccardo Bellofiore and Piero Ferri
: ‘Things fall apart, the centre cannot hold’ Riccardo Belloﬁore and Piero Ferri Hyman P. Minsky’s economic writings are centred around three interrelated topics: 1. An interpretation of Keynes, stressing the most innovative and revolutionary features of his monetary thought: the essential role of ﬁnancial markets, the non-neutrality of money, the systematic uncertainty and bounded rationality surrounding decision-making, the cyclical nature of the capitalist process due to the ﬂuctuation in private investment. Minsky extends Keynes, putting together an investment theory of the business cycle with a ﬁnancial theory of investment. The ‘two-price’ model and Minsky’s reference to Kalecki’s view about the determination of proﬁts belong here. The ﬁnancial instability hypothesis, according to which, after a period of ‘tranquil’ growth and ‘robust’ ﬁnance, ﬁrms’ and banks’ liability structures spontaneously shift towards fragility. The economic system is prone to ﬁnancial crises, which actually break out as a consequence of the normal functioning of a capitalist economy. Minsky’s view is that each state of the economy is transitory: internal ﬁnancial developments compel a transition to the next state. Capitalist cyclical evolution – from expansion to boom, ﬁnancial collapse and the risk of debt deﬂation, possibly leading to great depression – is, once again, the necessary outcome of the monetary nature of the capitalist process at the heart of Keynes’s approach. What is lacking in the General Theory is a clear understanding of why stability is destabilizing: for Minsky, capitalist evolution is endogenous, and is driven by the behaviour of ﬁnancial variables. This is...