Edited by Dimitri B. Papadimitriou and L. Randall Wray
Chapter 10: Financial Instability and Agents’ Heterogenity: A Post Minskyan Research Agenda
10 Financial instability and agents’ heterogeneity: a post Minskyan research agenda Tiziana Assenza, Domenico Delli Gatti and Mauro Gallegati Introduction Has the economics profession learned Hyman Minsky’s lesson? Ask a fellow economist brought up in the neoclassical tradition and the answer will be that there is no lesson to be learned because (i) the Financial Instability Hypothesis (FIH) was cast in purely aggregative old fashioned Keynesian terms and (ii) it yields extreme, catastrophic and therefore unrealistic predictions.1 Ask a fellow economist brought up in the post-Keynesian tradition and the answer will be that the profession has definitely not learned the Minskyan lesson and never will because there is no way for Minsky’s insights on financially sophisticated capitalism to penetrate the protective shield of the neoclassical mainstream based on the ‘village fair’ paradigm. Our impression is that the landscape of economics is much more rugged than these two apparently alternative answers would lead us to think. If, in fact, they were true, financial instability would not show up as a hot topic in the most thriving research agenda. But this, clearly, is not the case. The majority of economists either ignore Minsky or consider him plainly wrong; since the mid-80s, however, a few influential economists who have not embraced any unorthodox credo have grown more receptive to his ideas, and are eager to incorporate them in their models – even if diluted and sometimes disguised – in order to make them more palatable to the conventional ‘representative’ macroeconomist. Due to the asymmetric information...
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