Elgar original reference
Edited by Jan Toporowski and Jo Michell
Chapter 32: Hyman P. Minsky
Hyman Minsky is best known for his financial instability hypothesis. It is based on a reaction to two strands of theory that were dominant when Minsky was starting his career. The first was that the cyclical behavior of the economy was the result of, and could be modeled as, the reaction of a stable mathematical system to exogenous shocks. The second was that deficient aggregate demand could place the economy in a stagnant underemployment equilibrium, which could be transformed into stable full employment equilibrium with appropriate Keynesian fine-tuning of monetary and fiscal policy. Indeed, the confidence of mainstream economics in the latter position was reflected in a Social Science Research Council Conference with the title ‘Is the Business Cycle Obsolete?’ For Minsky these positions ignored the fact that capitalism was a dynamic, ever-changing system, adapting its methods and employing new innovations in search of the maintenance of the profit required to remunerate capital employed.
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