Stabilizing an Unstable Economy: A Twentieth Century Fund Report
Hyman P. Minsky
As with any classic, it’s hard for me to gauge my feelings about this book now, and they may well be different several months on. But I’m very glad to have read it. For those who are not econ nerds, Minsky was an economist in the second half of the 20th century who was non-mainstream but whose views came back into vogue after the financial crisis, which appeared to validate his theories.
The only math in this book is algebra, mostly to do with simplified national accounting identities. In this sense Minsky is the forebear to modern MMT types. I like this style of argument: asserting the simple identities, then generating theory around “what adjusts.”
In a nutshell, Minsky’s argument is that capital goods are not amenable to the same equilibrium-welfare arguments that consumption goods are, due to uncertainty (as opposed to “risk”) regarding the future. This leads to a fundamental and endogenous instability, which brings about financial crises. I think this is a productive line of argument, which reflects the real possibility of crashes without resorting to some hand-waving about irrationality the way some behavioral economics does. I have recently discovered the work of Roman Frydman (a current economist) and think his ideas have some similar good qualities.
Finally, I have to note that this is one of the worst-edited books I’ve read recently! Come on, guys!