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Piero Ferri

This chapter relates the so-called Minsky moment, that is, a period of financial turbulence characterized by high debt leverage, falling growth and increasing inequalities, to his financial instability hypothesis that had the Great Depression as its source of inspiration. The financial instability hypothesis has been formalized in different ways that have increased enormously during the Great Recession and its aftermath. In this chapter, its relationship with the economics of Minsky will be developed. In particular, the chapter shows how the financial instability hypothesis can be derived from so-called financial Keynesianism.

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Piero Ferri

This chapter analyzes the analytical consequences of the fact that the question mark present in one of Minsky’s most famous books, Can “It” Happen Again?, which was published in 1982, can be dropped. The fact that the Great Recession did happen has had a great impact on the post-Keynesian world and has challenged the mainstream view which refers to “rare events”, “black swans” and other odd statistical distributions. The crisis was endogenous, it linked monetary to real aspects and it manifested itself in a dynamic setting. Furthermore, it could be countered by thwarting forces that grapple with the endogenous destabilizing market processes.

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Piero Ferri

This chapter illustrates the origin and the nature of the collaboration between the author and Minsky that is at the root of the co-authored papers reproduced in Part II of the book. It also reveals the existence of an unpublished book along with a series of colloquiums that were put on record and that took place over more than a decade.

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Piero Ferri

This chapter reproduces the first article I co-authored with Minsky. The central message of the paper is the necessity of endogenizing profit share and, therefore, cash flow within a dynamic context. In other words, the paper can be seen as an attempt to bridge the analysis of profit determination contained in Minsky’s financial instability hypothesis with his dynamic contributions contained in his book Can “It” Happen Again? The basic analytical approach is that of linking prices, profits and investment in a double feedback relationship so that one of the pillars of the financial instability analysis, that is, cash flow, is made endogenous. Furthermore, the paper includes a methodological contribution regarding the reconciliation between micro aspects and macro results.

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Piero Ferri

This chapter reproduces the second article that I co-authored with Minsky. The article’s aim is to discuss the state of the literature prevailing in the late 1980s, dominated by the IS–LM approach and by its critics. The monetarist and the new classical economics attack routed the IS–LM version of the Keynesian theory and the large-scale econometric models, removing them from the center of macroeconomic research. However, they were more successful as a critique of the IS–LM orthodoxy than as a basis for fruitful research and policy analysis. Post-Keynesian economists also attacked IS–LM orthodoxy, mainly because it mis-specified “the economic society in which we actually live”. It is suggested that a convergence between the new and the post-Keynesian economics might be fruitful.

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Piero Ferri

This chapter reproduces the last paper I co-authored with Minsky. The paper considers two long-standing views on business cycles and economic dynamics in general, one emphasizing endogenous stability plus exogenous disturbances, and the second endogenous instability plus institutional containing or thwarting mechanisms. The argument supports the endogenous instability view and leads to an anti-laissez faire theorem and a limitation upon performance theorem.

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Piero Ferri

This chapter starts deepening Minsky’s contributions and, in particular, it considers the different solutions offered to the methodological problems arising from the presence of heterogeneous agents interacting within a dynamic system. The thesis put forward is that underlying this variety of proposals there are two unifying principles. First, macro dynamics are dominated by a complex set of forces that can generate instability along with a set of policies and institutions that can thwart it. Second, microeconomics tends to be macrofounded. The variety of approaches underlying the micro–macro relationships is a sign of richness in a research field where compromises are inevitable.

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Piero Ferri

This chapter tries to update the discussion on the state of the literature, which in Chapter 6 was centered upon the IS–LM model. At present, the debate on the nature of macroeconomics seems to be dominated by the presence of a substantial methodological similarity between the various paradigms. This similarity is centered around the maximizing role of agents in a dynamic environment, where the driving forces are exogenous shocks while the main mechanisms of transmission are based upon the concept of intertemporal substitution. This methodological monism is critically considered, and the foundations of different dynamics are put forward. They refer to a medium-run period, and are based upon disequilibrium where monetary and real aspects of both demand and supply aspects are taken into consideration.

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Piero Ferri

This chapter has two aims. On the one hand, it tries to generalize the stylized facts it can deal with. In fact, the 1984 paper I co-authored with Minsky was conceived in a period of stagflation, a relatively new phenomenon which challenged the neoclassical synthesis. It is important to stress that in the paper this phenomenon is generated without referring to supply shocks. However, since this was a typical phenomenon of the 1980s, there is a necessity in this chapter to deal with new stylized facts, characterized by moderate inflation or even deflation. On the other hand, the chapter suggests new tools for carrying out endogenous dynamics.

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Piero Ferri

This chapter starts extending Minsky’s analysis by entering his black box of tools. In particular, it analyzes the role that autonomous demand (the driver) may have in stimulating growth when supply (the adapter) is endogenized. In order to study the interaction between these forces, the existence of spare resources and unemployment is assumed. This presence justifies the assumption of given prices and wages and allows the reconciliation process between the so-called Harrodian warranted rate of growth and the natural rate of growth. Furthermore, the presence of autonomous demand and an endogenous natural rate of growth can check, under certain circumstances, the instability of the system without referring to the presence of an exogenous ceiling.