Product Description

“Today, Mr. Minsky's view [of economics] is more relevant than ever.”- The New York Times

“Indeed, the Minsky moment has become a fashionable catch phrase on Wall Street.”-The Wall Street Journal

John Maynard Keynes offers a timely reconsideration of the work of the revered economics icon. Hyman Minsky argues that what most economists consider Keynesian economics is at odds with the major points of Keynes's The General Theory of Employment, Interest, and Money. Keynes and Minsky refuse to ignore pervasive uncertainty. Once uncertainty is given center stage, recurring episodes of financial system crises are all but inescapable. As Robert Barbera notes in a new preface, “Benign economic circumstances…invite increasingly aggressive financial market wagers. Innovation in finance is a signature development in a capitalist economy. Once leveraged wagers are in place, small disappointments can have exaggerated consequences.” Thus for Minsky economic calm on Main Street engenders financial system fragility which, in turn, ensures a perpetuation of boom and bust cycles.

Minsky colleagues Dimitri B. Papadimitriou and L. Randall Wray write in a new introduction, “We offer this new edition, in the hope that it will contribute to the reformation of economic theory so that it can address the world in which we actually live-the world that was always the topic of Minsky's analysis.”

Product Details

• Amazon Sales Rank: #34608 in Books
• Published on: 2008-04-16
• Original language: English
• Number of items: 1
• Binding: Paperback
• 181 pages

From the Back Cover

About the Author

Hyman P. Minsky, Ph.D., was the first to explain how uncertainty, risk, and financial markets drive the economy. He was a distinguished scholar at The Levy Economics Institute of Bard college, and taught at Washington University for 25 years.

Customer Reviews

A Book on Financial Instability
This is a great book. But it is a book about the views of Minsky, and not really on Keynes. The first chapter examines the way in which Keynes' 1936 book was received and interpreted, and Minsky's explanation is for the most part correct, namely, that Keynes' work represents more a revolution than an extension of "classical" economics. However, as is argued throughout Minsky's book, The General Theory contained only "the seeds for a deep intellectual revolution in economics and in the economists' view of society." According to Minsky, the Keynesian revolution was aborted and the seeds were prevented from reaching their full fruition due to the "bastardization" of Keynes' seminal message. Minsky sets himself the task in this book to bring these ideas back to life.

Chapter two explores the more orthodox (conventional) view of Keynesian economics. Chapter three is very good, as it spells out the concepts that are to be used later in Minsky's analysis of capitalism: the recurrence of the business cycle, uncertainty, and investment and disequilibrium.

Chapters 4 - 7 develop Minsky's theory of capitalism. Minsky argues that booms are inevitably followed by crises and debt deflation not because of certain institutional weaknesses, but because of the fundamental nature of capitalism. In other words, "Keynes visualized [the imperfections of the financial system] as systemic rather than accidental or perhaps incidental attributes of capitalism." Minsky explores the way investments are made, and examines how they are financed. Central to Minsky's analysis is the importance of uncertainty. Financing and liability structures cannot insulate themselves from danger (excessive risk) precisely because the future is uncertain. Another important element in Minsky's book is the importance of money, which he describes as as "insurance policy." This is consistent with Keynes' definition of liquidity. In the event that sales proceeds cannot meet existing liabilities, the possession of money becomes essential due to the frequent revaluations of capital assets making their quick sale at certain prices nearly impossible.

I really enjoy Minsky's work, but this book gives me the impression that Minsky was more concerned with fitting Keynes in his (minsky's) own analysis than in explicating very clearly and honestly Keynes' own economic views. This can best be seen in the last two chapters on social policy. Nevertheless, Minsky is the most important expositor of the "Financial Instability Hypothesis" and this book is a great place to begin.

Brilliant study of Keynes
This excellent book examines John Maynard Keynes' key work, The General Theory of Employment, Interest, and Money, published in 1936, seven years into the Great Depression, when one in seven US workers was still out of work.

Keynes' thinking largely broke free of the conventional wisdom, that wrecking the trade unions would make the market work again. But he didn't leave behind all conventional free trade thinking.

Minsky writes, "the missing step in the standard Keynesian theory was the explicit consideration of capitalist finance within a cyclical and speculative context." Minsky shows that private investment is the constant source of speculation, instability, slumps and mass unemployment.

Minsky shows the conflict at the centre of capitalism: "the boom is critical; it builds an ever-more-demanding liability structure on the base of a cash-flow foundation consisting of the prospective yields of capital assets, which are, because of technology and the limited ability to squeeze workers' real wages, at best constrained ultimately to grow at a steady rate in real terms. The debt base, which grows at an accelerating rate during a boom, is not so constrained. Thus, debts require increased servicing as they grow and as financing charges increase."

He observes, "In Keynes' own view his theory implied that the existing order should be replaced by a much more egalitarian economy, based upon a dominance of social control over investment. As the private, profit-motivated decisions to invest cannot guarantee a reasonable approximation to full employment, `a somewhat comprehensive socialization of investment' (GT, p. 378) will prove necessary." But Keynes breezed over the politics needed to do this. How could we socialise investment without taking power from the capitalist class?

Minsky notes, "Keynes also believed that `if nations can learn to provide themselves with full employment by their domestic policy ... there need be no important economic forces calculated to set the interest of one country against that of its neighbours.'" But if capitalism could do this, it wouldn't be capitalism. Capitalist economies are basically flawed - unstable and unequal, unworkable and unjust.

Two Great Economists
"But if capitalism is to be controlled so that the basic triad of efficiency, justice, and liberty is achieved, then the design of the controls will have to be enlightened by an awareness of what was obvious to Keynes--that with regard to both the stability of employment and the distribution of income, capitalism is flawed" -- Hyman P. Minsky

Hyman Minsky's 'John Maynard Keynes' is comprised of three parts. The first part, CH 1-3, deals with Keynes' General Theory, it's historical situation, and Keynes' later comments on the meaning of the GT. The second part of the book, CH 4-6, deals with Minsky's elaboration on crucial parts of the GT and revisions regarding some of Keynes' contradictory logic. The last section, CH 7-9, is Minsky's policy regarding what should be done to fulfill the aborted Keynesian Revolution.

'John Maynard Keynes' is a renunciation of the neoclassical synthesis. From the ashes rises a new theory of investment and business cycles. A perpetual series of booms and busts occur followed by a deflationary spiral. Eventually, after an unduly long period, the economy bounces back into an inflationary boom. Each time society thinks the cycle no longer exists: each time they are mistaken. The monetary and fiscal policy of the neoclassical synthesis is a poor prescription for this cycle and is becoming less effective at dealing with crisis's.

What is needed is government policy to reduce inequality and the complete socialization of investment. With less inequality investment will play a smaller role in aggregate demand. With the complete socialization of investment aggregate demand and employment can be controlled and maintained at potential. Ironically, it is only after investment has been socialized that the markets will act according to classical theory. So far Keynes' policy prescriptions have been perverted into 'socialism for the rich'. Keynes' advice needs to be implemented to create a more efficient, just, and liberal society.

With that said: This book is very limited in subject matter. It is a book primarily concerned with investment and its effect on the business cycle. For a more comprehensive macroeconomic analysis read Hyman Minsky's magnum opus 'Stabilizing an Unstable Economy'. JMK can be seen as a rough draft of Minsky's Financial Instability Hypothesis. I recommend Minsky to anyone willing to challenge economic dogma and learn how the economy actually works.