The Economic Legacy of Hyman Minsky, Volume I
Edited by Riccardo Bellofiore and Piero Ferri
Chapter 1: Economics in the spirit of Minsky
1. Economics in the spirit of Minsky Richard H. Day Hyman Minsky took up his graduate study at Harvard just after the Second World War. It was a felicitous time. Schumpeter was to have four more years of life and the macroeconomics of Keynes was being exposed to the postwar generation of Harvard graduate students by Alvin Hansen. It was fertile ground for Minsky’s own ideas to germinate. Schumpeter’s innovating entrepreneurs were the catalysts of capitalist transformation: banks mediated the reallocation of resources to the new proﬁt opportunities by means of credit creation. Keynes’s investors were driven by expectations about rates of return on real capital formation and their relation to money rates of interest. The demand for money to ﬁnance capital expansion and consumption competed with the demand for liquidity. For both Schumpeter and Keynes, money had real effects; for both, markets worked out of equilibrium; for both, ﬁnance was the very heart of the system. With his dissertation Minsky plunged into the further development of this vision, subsequently shifting from theoretical research in the manner of Samuelson, Goodwin, Modigliani and Tobin to the investigation of ﬁnancial institutions themselves by means of direct observation. This made his work accessible to members of the ﬁnancial community. It probably drove a wedge between him and the great body of macroeconomists. Historical, institutionalist methods of research, so important on the Continent in the nineteenth century and passed on to America by Richard T. Ely and John R. Commons, were being abandoned...
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