Stabilizing an Unstable Economy

Minsky’s thesis on financial instability is a brilliant intellectual blow against the liberal legend concerning the balancing powers of (financial) markets.

It suggests that manifest crises and breakdowns are not simply caused by external tremors, by fiscal or political coups de théâtre; rather, they are brought about by the parameters and endogenous movements of the financial economy itself.

Unlike cybernetic and self-regulating systems, the financial market is inclined to be spooked by its own tranquillity and destabilized by its own stability. The very efficiency of its functioning turns out to be utterly dysfunctional.

Hyman Minsky might well have been the most underrated economist during the second half of the twentieth century. In Stabilizing an Unstable Economy, Minsky identified the psychological factors that create in financial markets and exacerbate economic downturns. Viewed against the backdrop of recent financial crises, his writings appear prescient. Readers of this book will discover that Minsky explained that the same factors which underlie economic instability also underlie the creative spark that produces economic progress. Readers will also learn that Minsky warned about being naïve in thinking that we can avoid instability.