The Economic Legacy of Hyman Minsky, Volume II
Edited by Riccardo Bellofiore and Piero Ferri
Chapter 1: Minsky, Keynes and the structural instability of a sophisticated monetary economy
Alessandro Vercelli 1 INTRODUCTION Minsky wrote that there is no way for a generation of economists to make obsolete the future generations of economists because the economic reality is evolutionary, so that sooner or later even the most profound theories worked out to understand and control it are made obsolete. We may add that, paradoxically, the sooner a great thinker is fully understood, the sooner he is made obsolete. In this case his name remains that of a founding father whose message is progressively reﬁned and updated rather than serving as a direct inspiration for original work. Cases in point are Newton in physics and Walras in economics. As for Minsky himself, his important message on the ﬁnancial instability of a sophisticated monetary economy, though quite inﬂuential, has not yet been sufﬁciently understood to make him obsolete. On the contrary, now, many decades after he published the ﬁrst versions of his original ‘ﬁnancial instability hypothesis’, his work is more up to date than ever. Recent ﬁnancial crises, including that started in 1998 in Asia, are indeed very Minskyan in their origin and diffusion and could have been avoided, or at least mitigated, if Minsky’s message had been understood and taken into account. There is a famous forecaster in history who has never been made obsolete: Cassandra predicted the war of Troy and suggested how to avoid it, but unfortunately she was not taken seriously. We hope that a similar fate will not befall Minsky himself, to avoid...
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