This entry examines the approach of Hyman P. Minsky to financial crisis. Minsky famously developed an ‘investment theory of the cycle and a financial theory of investment’. His thesis was that, over the course of the cycle, behaviour changes in such a way that financial fragility develops. This makes a financial crisis more likely. When the global financial crisis hit in 2008, many commentators returned to the theories of Minsky, calling it a ‘Minsky crisis’ or a ‘Minsky moment’. This entry agrees that Minsky deserves credit for identifying the processes that led up to the crisis. However, it is not sufficient to narrowly constrain the analysis to the transition that occurred over the past decade or so. Beginning in the 1980s and through to his death in 1996, Minsky had been arguing that a new form of capitalism had appeared, which he called ‘money manager capitalism’. In important respects it reproduced the conditions that Hilferding had called ‘finance capitalism’ in the early 20th century – a form of capitalism that collapsed into the Great Depression. What Minsky was arguing was that an extremely unstable form of capitalism had emerged – one based on what is often called financialisation of the economy. He (rightly) feared that it would ultimately lead to a great crash. The rest of the entry looks at Minsky’s proposals for reforms that would help to promote stability. Yet, as Minsky always said, stability is destabilising.
KeywordsFinancial instability hypothesis Global financial crisis Hyman Minsky Money manager capitalism Self-Regulating markets Stability is destabilizing
- Bernanke, B.S. 2004. The great moderation. Speech given at the meetings of the Eastern Economics Association, Washington, DC, 20 February. Available at http://www.federalreserve.gov/Boarddocs/Speeches/2004/20040220/default/htm. Accessed 12 May 2009.
- Bhaduri, A. 2005. Development with dignity: A case for full employment. India: National Book Trust.Google Scholar
- Cassidy, J. 2008. The Minsky moment. The New Yorker, 4 February. http://www.newyorker.com/. Accessed 29 Jan 2008.
- Cassidy, J. 2009. How markets fail: The logic of economic calamities. New York: Picador.Google Scholar
- Chancellor, E. 2007. Ponzi Nation. Institutional Investor, 7 February.Google Scholar
- Felipe, J., W. Mitchell, and L.R. Wray. 2009. A reinterpretation of Pakistan’s ‘economic crisis’ and options for policymakers. Manuscript, Asian Development Bank.Google Scholar
- Hirway, I. 2006. Enhancing livelihood security through the National Employment Guarantee Act: Toward effective implementation of the Act. The Levy Economics Institute, Working paper no. 437. http://www.levy.org/
- McCulley, P. 2007. The plankton theory meets Minsky. Global Central Bank Focus, March. PIMCO Bonds: http://www.pimco.com/LeftNav/Featured + Market + Commentary/FF/1999–2001/FF_01_2001.htm. Accessed 8 Mar 2007.
- Minsky, H.P. 1965. The role of employment policy. In Poverty in America, ed. M.S. Gordon. San Francisco: Chandler Publishing Company.Google Scholar
- Minsky, H.P. 1982. Can it happen again? Armonk: M. E. Sharpe.Google Scholar
- Minsky, H.P. 1986. Stabilizing an unstable economy. New Haven/London: Yale University Press.Google Scholar
- Minsky, H.P. 1996. Uncertainty and the institutional structure of capitalist economies. The Levy Economics Institute of Bard College, Working paper no. 155.Google Scholar
- Minsky, H.P. 2008 (1987). Securitization. Levy Economics Institute of Bard College, Policy note no. 2, 12 May.Google Scholar
- Tcherneva, P.R., and L.R. Wray. 2007. Public employment and women: The impact of Argentina’s Jefes program on female heads of poor households. Levy Economics Institute, Working paper no. 519. http://www.levyinstitute.org/publications/? docid=965
- Whalen, C. 2007. The U.S. credit crunch of 2007: A Minsky moment. Levy Economics Institute, Public policy brief, no. 92. http://www.levy.org/
- Wray, L.R. 2000. A new economic reality: Penal Keynesianism. Challenge, September–October, 31–59.Google Scholar
- Wray, L.R. 2005. The ownership society: Social security is only the beginning. Levy Economics Institute, Public policy brief, no. 82. http://www.levy.org/
- Wray, L.R. 2007. The employer of last resort programme: Could it work for developing countries? Economic and Labour Market Papers, 2007/5, International Labour Office, Geneva.Google Scholar
- Wray, L.R. 2008. The commodities market bubble: Money manager capitalism and the financialization of commodities. Levy Economics Institute, Public policy brief, no. 96. http://www.levy.org/