The currently observed turmoil in financial markets, which is believed to have been ignited by the collapse of the subprime mortgage market, has recently brought to prominence the ideas of Hyman Minsky (1919â€“1996), a prominent member of the post-Keynesian school of economics. Many commentators are of the view that Minsky’s framework of thinking accurately anticipated the current financial crisis.
While most mainstream economists are of the view that economic busts are the outcome of various external shocks to the economy, Minsky held that, even in the absence of such shocks, the capitalistic economy has an inherent tendency to develop instability, which culminates in severe economic crises. The key mechanism that pushes the economy towards a crisis is the accumulation of debt. FULL ARTICLE