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Financial Fragility and Investment in the Capitalist Economy

The Economic Legacy of Hyman Minsky, Volume II

Edited by Riccardo Bellofiore and Piero Ferri

Hyman Minsky is renowned for his theoretical and empirical investigation of the capitalist economy. In this book, a distinguished group of contributors provides an authoritative account of his contribution to the analysis of capitalism and, more particularly, to the fields of monetary and post Keynesian economics.
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Chapter 4: Minsky's financial fragility hypothesis: a missing macroeconomic link?

Marc Lavoie and Mario Seccareccia


4. Minsky’s financial fragility hypothesis: a missing macroeconomic link? Marc Lavoie and Mario Seccareccia* There is no doubt that the work of Hyman Minsky has influenced a complete generation, especially of North American heterodox economists of postKeynesian, institutionalist and Marxian perspectives and has spawned a tradition that has been appropriately dubbed ‘Monetary Keynesianism’ because of its direct affinity with critical aspects of Keynes’s monetary thought. Our own personal research over the last two decades has been strongly inspired by many of the concerns raised by Minsky’s work. Whether it be his work on investment and finance, on prices and profits in a capitalist economy, or his views on banking and central bank behaviour, all have conditioned our basic thinking and have served, for heuristic reasons, in furthering our own research agenda. Though our connection with Minsky’s work goes back over twenty years, it was perhaps his special lecture that he gave in Ottawa at the Economic Council of Canada in the spring of 1980 that left the most lasting impression on both of us. At that lecture, he revealed to us not only his profound understanding of the complexities of financial markets and institutions but, most importantly, he imparted his distinct metaphor of modern capitalism that still today remains embedded deep in our intellect. This pertains to his famous distinction between the neoclassical ‘village-fair’ image of capitalism as a coordinated exchange system in which Patinkinesque ‘manna’ money emerges to grease the wheels of trade and his particular...

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