Minsky through a neoclassical lens

What happens when Hyman Minsky’s financial instability hypothesis is read through a neoclassical lens?

Steve Keen explains:

My good friend and long term fellow rebel in economics Professor Rod O’Donnell once remarked that neoclassical economists are incapable of reading Keynes: they look at his words and then spout Walras instead. A similar phenomenon applies here: neoclassicals like Krugman read Minsky, and then proceed to build equilibrium models without banks, and think they’re modelling Minsky.

No they’re not: they’re creating an equilibrium-obsessed Walrasian hand puppet and calling it Minsky—just as they did to Keynes with DSGE modelling.

And I would add: just as they did to Marx, when his critique of political economy was taken to be a theory of market prices that corresponded to labor values.

Many Minsky moments

Hyman Minsky’s papers are available here [ht: Naked Keynes].

That’s one less excuse for mainstream economists to ignore his work on financial fragility.

Update

And here’s a link to John Cassidy’s 2008 article on the relevance of Minsky’s “financial-instability hypothesis.”

Many of Minsky’s colleagues regarded his “financial-instability hypothesis,” which he first developed in the nineteen-sixties, as radical, if not crackpot. Today, with the subprime crisis seemingly on the verge of metamorphosing into a recession, references to it have become commonplace on financial Web sites and in the reports of Wall Street analysts. Minsky’s hypothesis is well worth revisiting.

Minsky moment?

This has to be a first: Hyman Minsky, whose work on financial fragility most mainstream economists have never heard of, is part of the Occupy Comics Anthology.