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Market processes and thwarting systems

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  • Ferri, Piero
  • Minsky, Hyman P.

Abstract

This paper suggests that there are two longstanding views on business cycles and economic dynamics: One emphasizes endogenous stability plus exogenous disturbances, while the other focuses on endogenous instability plus institutional 'containing' or "thwarting" mechanisms. The latter tradition regards business cycles and economic instability as the natural and inherent consequence of self-interest-motivated behavior in complex economies with sophisticated financial institutions. In fact, it is the interaction between the system's endoge-nous dynamics and the effects of institutions and interventions which, if "apt," constrains the outcomes of capitalist market processes to acceptable outcomes. The endogenous instability view of the economy, in which institutional structures and interventions stabilize the fragile, essentially refutes Lucas: He asserts that the economy is a mechanism that transforms exogenous shocks (either random or unanticipated policy interventions) into business cycles, thus generating a growth equilibrium. Recent history has illustrated the flaws of laissez-faire theory as the postwar capitalist economies that have enjoyed consistently high levels of growth are big government interventionist economies. The challenge for the future is recognizing that market processes are deficient not only in their ability to maintain aggregate demand, but also as devices for assuring productive investment and a tolerable distribution of income.

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Bibliographic Info

Article provided by Elsevier in its journal Structural Change and Economic Dynamics.

Volume (Year): 3 (1992)
Issue (Month): 1 (June)
Pages: 79-91

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Handle: RePEc:eee:streco:v:3:y:1992:i:1:p:79-91

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Web page: http://www.elsevier.com/locate/inca/525148

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Cited by:
  1. Leszek Kąsek & Marek Lubiński, 2010. "hyman," Contemporary Economics, University of Finance and Management in Warsaw, vol. 4(1), March.
  2. Passarella, Marco, 2011. "From the village fair to Wall Street. The Italian reception of Minsky’s economic thought," MPRA Paper 49593, University Library of Munich, Germany.
  3. L. Randall Wray, 2011. "Lessons We Should Have Learned from the Global Financial Crisis but Didn't," Economics Working Paper Archive wp_681, Levy Economics Institute.
  4. Dimitri B. Papadimitriou & L. Randall Wray, 1999. "Minsky's Analysis of Financial Capitalism," Economics Working Paper Archive wp_275, Levy Economics Institute.
  5. André Luís C. de Lourenço, 2005. "O Pensamento De Hyman P. Minsky: Alterações De Percurso E Atualidade," Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33th Brazilian Economics Meeting] 009, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  6. Steven M. Fazzari & Pietro E. Ferri & Edward G. Greenberg & Anna Maria, 2012. "Aggregate Demand, Instability, and Growth," INET Research Notes 2, Institute for New Economic Thinking (INET).
  7. Mehrling, Perry, 1999. "The vision of Hyman P. Minsky," Journal of Economic Behavior & Organization, Elsevier, vol. 39(2), pages 129-158, June.
  8. Christian Heebøll-Christensen, 2011. "Financial Instability - a Result of Excess Liquidity or Credit Cycles?," Discussion Papers 11-21, University of Copenhagen. Department of Economics.
  9. Christine Sinapi, 2011. "Institutional Prerequisites of Financial Fragility within Minsky's Financial Instability Hypothesis: A Proposal in Terms of 'Institutional Fragility'," Economics Working Paper Archive wp_674, Levy Economics Institute.
  10. K. Vela Velupillai, 2010. "The 'Minsky Moment' - A Critique and a Re-construction," ASSRU Discussion Papers 1009, ASSRU - Algorithmic Social Science Research Unit.
  11. Marco, Passarella, 2011. "A simplified stock-flow consistent dynamic model of the systemic financial fragility in the 'New Capitalism'," MPRA Paper 28499, University Library of Munich, Germany.
  12. Eric Tymoigne, 2006. "The Minskyan System, Part II: Dynamics of the Minskyan Analysis and the Financial Fragility Hypothesis," Economics Working Paper Archive wp_453, Levy Economics Institute.
  13. Charles J. Whalen, 2007. "The U.S. Credit Crunch of 2007: A Minsky Moment," Economics Public Policy Brief Archive ppb_92, Levy Economics Institute.
  14. Thomas I. Palley, 2009. "A Theory of Minsky Super-Cycles and Financial Crises," IMK Working Paper 05-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  15. Kosta Josifidis & Alpar Lošonc & Novica Supić, 2010. "Neoliberalism: Befall or Respite?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(1), pages 101-117, March.

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