What is this “Financial Instability Hypothesis” by Hyman Minsky really about?

By L. Randall Wray

A version of this post first appeared at "Great Leap Forward”, my EconoMonitor blog.

Since Paul Krugman kicked-off a heated discussion about Minsky’s views on banks, and because the annual “Minsky Conference” co-sponsored by the Ford Foundation and the Levy Economics Institute starts this morning, I thought it would be useful to run a couple of posts laying-out what Minsky was all about. This first piece will detail his early work on what led up to development of his famous “financial instability hypothesis”.

Minsky’s Early Contributions

In his publications in the 1950s through the mid 1960s, Minsky gradually developed his analysis of the cycles. First, he argued that institutions, and in particular financial institutions, matter. This was a reaction aga...


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