The Elgar Companion to Hyman Minsky
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The Elgar Companion to Hyman Minsky

Edited by Dimitri B. Papadimitriou and L. Randall Wray

This Companion provides a timely and engaging treatment of Hyman Minsky’s approach to economics, which is enjoying a renewed appreciation because of its prescient analysis of the slow but sure transformation of the capitalist economy in the post-war period. Many have called the global financial crisis that began in the United States in 2007 a ‘Minsky crisis’, and these original contributions demonstrate precisely why both academic economists as well as policymakers have turned to Minsky for guidance. The book brings together the foremost Minsky scholars to provide a comprehensive overview of his approach, with extensions to bring the analysis up to date.
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Chapter 12: A Spatialized Approach to Asset Bubbles and Minsky Crises

Gary A. Dymski


Gary A. Dymski* The most significant economic event of the era since World War II is something that has not happened: there has not been a deep and long-lasting depression. (Hyman Minsky 1982) Introduction The succession of financial crises in the neoliberal era that began in 1980 initially titillated the economics profession. These crises posed a series of puzzles for theorists working with au courent banking models, all of which were premised on the idea that economic agents are rational and self-interested. Academic opinion leaders could come up with wrinkles in principal–agent models of credit markets: they competed to explain how design flaws in credit markets or in their regulation, in the presence of asymmetric information, could lead to loan non-payment or currency crisis (or both). But then the 1997 Asian crisis jarred economists’ confidence that economic outcomes must somehow reflect a rational (willed) outcome because economic agents are rational, and because asset prices respond to fundamentals. Ideas that allowed for irrational behavior in financial markets gained more currency. For example, economists affiliated with the market-oriented World Bank and IMF wrote numerous post-1997 working papers on how (expectationally arational, fundamentals-defying) contagion effects constituted an important dimension of the Asian crisis.1 The subprime crisis has done even more damage to the old conceptual starting point. In this crisis, the ideas of Hyman P. Minsky about financial crises, long overlooked by mainstream financial economists, have come to the fore. Influential economists (Nouriel Roubini) and columnists (Martin Wolf) alike have turned to...

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