![]() ![]() Minsky stated his theories verbally, and did not build mathematical models based on them. Minsky's theories have enjoyed some popularity, but have had little influence in mainstream economics or in central bank policy. It was at the University of California, Berkeley, that seminars attended by Bank of America executives helped him to develop his theories about lending and economic activity, views he laid out in two books, John Maynard Keynes (1975), a classic study of the economist and his contributions, and Stabilizing an Unstable Economy (1986), and more than a hundred professional articles. Minsky opposed the deregulation that characterized the 1980s. Such mechanisms did in fact come into existence in response to crises such as the Panic of 1907 and the Great Depression. "A fundamental characteristic of our economy," Minsky wrote in 1974, "is that the financial system swings between robustness and fragility and these swings are an integral part of the process that generates business cycles." ĭisagreeing with many mainstream economists of the day, he argued that these swings, and the booms and busts that can accompany them, are inevitable in a so-called free market economy – unless government steps in to control them, through regulation, central bank action and other tools. Minsky's model of the credit system, which he dubbed the "financial instability hypothesis" (FIH), incorporated many ideas already circulated by John Stuart Mill, Alfred Marshall, Knut Wicksell and Irving Fisher. And he underscored the importance of the Federal Reserve as a lender of last resort." "He showed us that financial markets could move frequently to excess. "He offered very good insights in the '60s and '70s when linkages between the financial markets and the economy were not as well understood as they are now," said Henry Kaufman, a Wall Street money manager and economist. This slow movement of the financial system from stability to fragility, followed by crisis, is something for which Minsky is best known, and the phrase " Minsky moment" refers to this aspect of Minsky's academic work. As a result of such speculative borrowing bubbles, banks and lenders tighten credit availability, even to companies that can afford loans, and the economy subsequently contracts. Minsky stated that in prosperous times, when corporate cash flow rises beyond what is needed to pay off debt, a speculative euphoria develops, and soon thereafter debts exceed what borrowers can pay off from their incoming revenues, which in turn produces a financial crisis. Minsky proposed theories linking financial market fragility, in the normal life cycle of an economy, with speculative investment bubbles endogenous to financial markets. He was a consultant to the Commission on Money and Credit (1957–1961) while at Berkeley. At the time of his death he was a Distinguished Scholar at the Levy Economics Institute of Bard College. In 1965 he became Professor of Economics of Washington University in St Louis and retired from there in 1990. Minsky taught at Brown University from 1949 to 1958, and from 1957 to 1965 was an Associate Professor of Economics at the University of California, Berkeley. in economics from Harvard University, where he studied under Joseph Schumpeter and Wassily Leontief. in mathematics from the University of Chicago and went on to earn an M.P.A. In 1937, Minsky graduated from George Washington High School in New York City. His father, Sam Minsky, was active in the Jewish section of the Socialist party of Chicago. His mother, Dora Zakon, was active in the nascent trade union movement. Education Ī native of Chicago, Illinois, Minsky was born into a family of Menshevik emigrants from Belarus. Minsky's economic theories were largely ignored for decades, until the subprime mortgage crisis of 2008 caused a renewed interest in them. Minsky is sometimes described as a post-Keynesian economist because, in the Keynesian tradition, he supported some government intervention in financial markets, opposed some of the financial deregulation of the 1980s, stressed the importance of the Federal Reserve as a lender of last resort and argued against the over-accumulation of private debt in the financial markets. His research attempted to provide an understanding and explanation of the characteristics of financial crises, which he attributed to swings in a potentially fragile financial system. Louis, and a distinguished scholar at the Levy Economics Institute of Bard College. Hyman Philip Minsky (Septem– October 24, 1996) was an American economist, a professor of economics at Washington University in St. ![]()
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