Palley on The Limits of Minsky’s Financial Instability Hypothesis as an Explanation of the Crisis
Thomas I. Palley sent John Bellamy Foster the following article in October 2009 for publication in Monthly Review, accompanied by this note: “I’m hoping it might provoke some discussion and also generate some dialogue and consensus between Marxists (like yourself) and structural Keynesians (like myself).” Palley’s piece addressed (along with much else) the article “Monopoly-Finance Capital and the Paradox of Accumulation” by John Bellamy Foster and Robert W. McChesney in the October 2009 issue of Monthly Review. In the same spirit of promoting dialogue between Marxists and Keynesians on the present crisis, we agreed to publish his contribution, together with a response by Foster and McChesney:
Aside from Keynes, no economist seems to have benefited so much from the financial crisis of 2007-08 as the late Hyman Minsky. The collapse of the sub-prime market in August 2007 has been widely labeled a “Minsky moment,” and many view the subsequent implosion of the financial system and deep recession as confirming Minsky’s “financial instability hypothesis” regarding economic crisis in capitalist economies.
See rest hereFor instance, in August 2007, shortly after the sub-prime market collapsed, the Wall Street Journal devoted a front-page story to Minsky. In November 2007, Charles Calomiris, a leading conservative financial economist associated with the American Enterprise Institute, wrote an article for the VoxEU blog of the mainstream Center for Economic Policy Research, claiming a Minsky moment had not yet arrived. Though Calomiris disputed the nature of the moment, Minsky and his heterodox ideas were the focal point of the analysis. In September 2008, Martin Wolf of the Financial Times openly endorsed Minsky: “What Went Wrong? The Short Answer: Minsky Was Right.” And in May 2009, Paul Krugman posted a blog titled “The Night They Reread Minsky,” which was also the title of his third Lionel Robbins lecture at the London School of Economics...