Tuesday July 29th, 2014, 4:56 pm (EDT)

Thomas I. Palley

The Limits of Minsky’s Financial Instability Hypothesis as an Explanation of the Crisis

Aside from Keynes, no economist seems to have benefitted so much from the financial crisis of 2007-08 as the late Hyman Minsky. The collapse of the sub-prime market in August 2007 has been widely labeled a “Minsky moment,” and many view the subsequent implosion of the financial system and deep recession as confirming Minsky’s “financial instability hypothesis” regarding economic crisis in capitalist economies.…Recognition of Minsky’s intellectual contribution is welcome and deserved. Minsky was a deeply insightful theorist about the proclivity of capitalist economies to experience financially driven booms and busts, and the crisis has confirmed many of his insights. That said, the current article argues that his theory only provides a partial and incomplete account of the current crisis.… | more |