Hyman Minsky

"In Keynes's theory the proximate cause of the transitory nature of each cyclical state is the instability of investment; but the deeper cause of business cycles in an economy with the financial institutions of capitalism is the instability of portfolios and of financial interrelations."

"Whereas classical economics and the neoclassical synthesis are based upon a barter paradigm - the image is of a yeoman or a craftsman trading in a village market - Keynesian theory rests upon a speculative-financial paradigm - the image is of a banker making his deals on a Wall Street."

"The well-being of an ordinary business firm depends not only on the behavior of the market for its output and the terms on which it can hire inputs, but also on the behavior of financial markets; on the terms on which it can borrow, sell assets, or float shares."

"Once financial interrelations are admitted to be of vital importance as determinants of how an economy functions, money and the monetary system are the natural starting point for economic theory. The special significance of money in a capitalist economy does not follow from the fact that money is the means of payment. Money is a means of payment in a socialist economy, but money is not a key variable in the determination of output, employment, investment, and prices, because a socialist economy lacks the financial interrelations of a capitalist economy. Speculation about the value of productive assets is a characteristic of a capitalist and not a socialist economy. The relevant paradigm for the analysis of a capitalist economy is not a barter economy; the relevant paradigm is a system with a City or a Wall Street where asset holdings as well as current transactions are financed by debts."

"In a world with uncertainty, portfolios are of necessity speculative. The demand for money as a store of value exists because in a world where speculation cannot be avoided - where to decide is to place a bet - money is not barren. As has been pointed out earlier, money in our world has attributes of an insurance policy, in that possession of money protects against the repercussions of particular undesirable contingencies."

"Keynesian analysis, most especially in the alternative formulation, is institutional, in the sense that actual behavior , which determines how the transition in which we spend our time develops, depends upon how the existing institutions behave."

"No economy, controlled or uncontrolled, can long survive as a free society unless it is deemed equitable, unless it it seen to promote social justice. The promotion of social justice by economic means requires that the inequalities of income correspond to some consensus as to the differential worth of the contributions made to the cooperative effort that produces income."

"Economic systems are not natural systems. An economy is a social organization created either through legislation or by an evolutionary process of invention and innovation."

"Thus, economic policy must be concerned with the design of institutions as well as operations within a set of institutions. Institutions are both legislated and the result of evolutionary processes. Once legislated, institutions take on a life of their own and evolve in response to market processes. We cannot, in a dynamic world, expect to resolve the problems of institutional organization for all time. On the other hand, we cannot always be engaged in radically changing institutions."

"Economic policy must reflect an ideological vision; it must be inspired by the ideals of a good society."

"Social justice rests on individual dignity and independence from from both private and political power centers. Dignity and independence are best served by an economic order in which income is received either by right or through a fair exchange."

A moment among the minskians

Minsky's papers