Minsky's Contribution to the Current Macro Debate
DAN MONACO writes in The Straddle HERE
“A Moment among the Minskians” from (Michael Stephens, November 16, in Economic Policy, Levy Institute”:
[Read more on Minsky as a ‘post-Keynesian’ economist HERE
and HERE
“Dan Monaco, writing for The Straddler, attended this year’s Minsky Summer Seminar at the Levy Institute and put together an engrossing (and accessible) article that looks at the work of Hyman Minsky, paying particular attention to Minsky’s interpretation of Keynes (including his views about the misinterpretation of Keynes by mainstream economics). The article is sprinkled with excerpts from Monaco’s interview of Dimitri Papadimitriou:
“Economists have lost their credibility because they do not actually deal with the real world,” Dimitri Papadimitriou, President of the Levy Institute, told me in my conversation with him. …
“Minsky was in some ways a pioneer. He saw that economic theory assumed that everything is known and that there is some tendency of the system to reach for equilibrium and, at times, to reach periods of ‘tranquility,’ as he preferred to call them. Of course, he never believed that stability was possible. He didn’t believe in the invisible hand. There’s a reason why it’s invisible—because it’s not there.”
Comment
I strongly recommend that you follow all the links and spend ten to fifteen minutes at least judging for yourself the merits of what Minsky was arguing for his interpretation of Keynes’ General Theory in the context of post-war capitalism in the USA (he died in 1996), especially in the light of the current recession and financial/banking crisis, plus the chronic indebtedness of all European and American governments.
His approach to the modern theory of the “invisible hand” falsely attributed to Adam Smith, who was wholly innocent and never had a theory of the IH metaphor, Hyman P. Minsky reads the situation correctly. The IH doesn’t exist, (though he doesn’t directly nail the IH myth at the door of neoclassical economics), it is a fiction invented by (too?) clever neoclassical theorists in search of a respected figure head to give a gloss of historical authority to a convenient crowning of their undoubted mathematical achievements in proving the existence of general mathematical equilibrium in an imaginary world and, in passing, making, the Class A error of confusing their proofs with what happens in the real world with what happens in the mathematics of an imaginary world.
Whimpers that the ‘Emperor is Naked’ were (still are) drowned out in the loud exclamations of ‘genius’, ‘brilliant’, worthy of Nobel Prizes, and such-like praise for the simple reason that what was achieved was truly of that class. Economics is so divided politically and institutionally by the current standards of academe that young economists who challenge the creaking consensus risk their careers and access to publishing in the ‘leading’ journals, and as bad, risk their reputation among their peers, who conform and who slavishly demonstrate their conformity.
Johan Van Overtreldt’s history of the Chicago School provides a succinct summary of the worldview underlying neoclassical theory:
“The basic assumption of neoclassical economic theory is the proposition that in a competitive market environment, individuals and corporations pursuing their own self-interests necessarily promote the best interests of society as a whole.
Thus, neoclassical economics, whatever its modifications or adjustments, is always in essence a cry for “pure” capitalism, while Keynesianism, whatever its color, is always at heart a proffered solution (more or less “radical,” depending upon one’s interpretation) to the problems of capitalism from within capitalism.”
There’s more, much more, worthy of your time in the links. Some parts may appear more useful to economists, but most will appeal to general readers too.
“A Moment among the Minskians” from (Michael Stephens, November 16, in Economic Policy, Levy Institute”:
[Read more on Minsky as a ‘post-Keynesian’ economist HERE
and HERE
“Dan Monaco, writing for The Straddler, attended this year’s Minsky Summer Seminar at the Levy Institute and put together an engrossing (and accessible) article that looks at the work of Hyman Minsky, paying particular attention to Minsky’s interpretation of Keynes (including his views about the misinterpretation of Keynes by mainstream economics). The article is sprinkled with excerpts from Monaco’s interview of Dimitri Papadimitriou:
“Economists have lost their credibility because they do not actually deal with the real world,” Dimitri Papadimitriou, President of the Levy Institute, told me in my conversation with him. …
“Minsky was in some ways a pioneer. He saw that economic theory assumed that everything is known and that there is some tendency of the system to reach for equilibrium and, at times, to reach periods of ‘tranquility,’ as he preferred to call them. Of course, he never believed that stability was possible. He didn’t believe in the invisible hand. There’s a reason why it’s invisible—because it’s not there.”
Comment
I strongly recommend that you follow all the links and spend ten to fifteen minutes at least judging for yourself the merits of what Minsky was arguing for his interpretation of Keynes’ General Theory in the context of post-war capitalism in the USA (he died in 1996), especially in the light of the current recession and financial/banking crisis, plus the chronic indebtedness of all European and American governments.
His approach to the modern theory of the “invisible hand” falsely attributed to Adam Smith, who was wholly innocent and never had a theory of the IH metaphor, Hyman P. Minsky reads the situation correctly. The IH doesn’t exist, (though he doesn’t directly nail the IH myth at the door of neoclassical economics), it is a fiction invented by (too?) clever neoclassical theorists in search of a respected figure head to give a gloss of historical authority to a convenient crowning of their undoubted mathematical achievements in proving the existence of general mathematical equilibrium in an imaginary world and, in passing, making, the Class A error of confusing their proofs with what happens in the real world with what happens in the mathematics of an imaginary world.
Whimpers that the ‘Emperor is Naked’ were (still are) drowned out in the loud exclamations of ‘genius’, ‘brilliant’, worthy of Nobel Prizes, and such-like praise for the simple reason that what was achieved was truly of that class. Economics is so divided politically and institutionally by the current standards of academe that young economists who challenge the creaking consensus risk their careers and access to publishing in the ‘leading’ journals, and as bad, risk their reputation among their peers, who conform and who slavishly demonstrate their conformity.
Johan Van Overtreldt’s history of the Chicago School provides a succinct summary of the worldview underlying neoclassical theory:
“The basic assumption of neoclassical economic theory is the proposition that in a competitive market environment, individuals and corporations pursuing their own self-interests necessarily promote the best interests of society as a whole.
Thus, neoclassical economics, whatever its modifications or adjustments, is always in essence a cry for “pure” capitalism, while Keynesianism, whatever its color, is always at heart a proffered solution (more or less “radical,” depending upon one’s interpretation) to the problems of capitalism from within capitalism.”
There’s more, much more, worthy of your time in the links. Some parts may appear more useful to economists, but most will appeal to general readers too.
Labels: Invisible Hand, Keynes, Minsky, Neoclassical economics
