The Economic Legacy of Hyman Minsky, Volume I
Edited by Riccardo Bellofiore and Piero Ferri
Chapter 3: Hyman Minsky and the dilemmas of contemporary economic method
3. Hyman Minsky and the dilemmas of contemporary economic method Duncan K. Foley INTRODUCTION Hyman Minsky’s work on ﬁnancial fragility and the political economy of instability in advanced capitalist economies has had more inﬂuence in the policy-making and ﬁnancial communities than among academic economists. This fate of Minsky’s thought raises some basic questions about contemporary economic methodology, particularly the relations between economic theory, mathematical models and statistical estimation. Minsky, in pursuing seriously the project of understanding the dynamics of contemporary capitalist society, ran into fundamental limitations of contemporary economic modelling technique. Given Minsky’s strong quantitative training and the nature of his early work in economics, his refusal, often remarked upon, to develop a rigorous mathematical model to express his ideas about ﬁnancial instability is a sharp reminder of the limits of our current methods. The fertility of Minsky’s insights and the resonance they met in the practical worlds of ﬁnance and policy-making suggest that the examination of Minsky’s work offers a valuable critical perspective on modern economic method. Minsky himself was aware of these dilemmas, and refers to them from time to time in explicating his ideas (for example, Minsky, 1989), but never, I think, systematically addressed the methodological crisis inherent in his work; nor did he put forward an explicit methodological alternative. Contemporary economics is a distinctive branch of statistical social science. Statistical social science, in turn, is an attempt to adapt the methods of experimental and observational physical sciences to the analysis of data generated in the...
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