Hyman Minsky

Hyman Philip Minsky (September 23, 1919 – October 24, 1996) was an American economist, a professor of economics at Washington University in St. Louis, and a distinguished scholar at the Levy Economics Institute of Bard College. His research attempted to provide an understanding and explanation of the characteristics of financial crises, which he attributed to swings in a potentially fragile financial system. Minsky is sometimes described as a post-Keynesian economist because, in the Keynesian tradition, he supported some government intervention in financial markets, opposed some of the financial deregulation policies popular in the 1980s, stressed the importance of the Federal Reserve as a lender of last resort and argued against the over-accumulation of private debt in the financial markets.

Quotes

• Stability is destabilising.
  • Undated. Quoted in Edward Chancellor, "Ponzi Nation"

• In economies where borrowing and lending exist, ingenuity goes into developing and introducing financial innovations... Financing is often based upon an assumption 'that the existing state of affairs will continue indefinitely' [a quotation from Keynes]... As a recovery approaches full employment, the current generation of economic soothsayers will proclaim that the business cycle has been banished from the land and a new era of permanent prosperity has been inaugurated. Debts can be taken on because the new policy instruments — be it the Federal Reserve System or fiscal policy — together with the greater sophistication of the economic scientists advising on policy assure that crises and debt deflations are now things of the past. But in truth neither the boom, nor the debt deflation, nor the stagnation, and certainly not a recovery or full-employment growth can continue indefinitely. Each state nurtures forces that lead to its own destruction.
  • John Maynard Keynes (1975). Quoted in Edward Chancellor, "Ponzi Nation"

Quotes about Minsky

• The name of Hyman Minsky, who died just over a decade ago, isn't well known in financial circles. He never won a Nobel Prize or published a best-selling book. In fact, he spent most of his professional life in the relative backwater of Washington University in St. Louis. Nevertheless, Minsky has attracted something of a cult following over the years. Conferences are held in his honor, and collections of learned (and largely unreadable) essays are published to celebrate his legacy. Hard-core Minsky fans pay upwards of $3,000 for used copies of his last work, Stabilizing an Unstable Economy, published in 1986.
  • Edward Chancellor, "Ponzi Nation", 7 February 2007, Institutional Investor

• Twenty-five years ago, when most economists were extolling the virtues of financial deregulation and innovation, a maverick named Hyman P. Minsky maintained a more negative view of Wall Street; in fact, he noted that bankers, traders, and other financiers periodically played the role of arsonists, setting the entire economy ablaze. Wall Street encouraged businesses and individuals to take on too much risk, he believed, generating ruinous boom-and-bust cycles. The only way to break this pattern was for the government to step in and regulate the moneymen. 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. In trying to revive the economy, President Bush and the House have already agreed on the outlines of a “stimulus package,” but the first stage in curing any malady is making a correct diagnosis.
  • John Cassidy, "The Minsky Moment", The New Yorker, 4 February 2008.