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Skepticism About Minsky's Financial Instability Hypothesis: A Comment on Flanders

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  • Lawrence H. White

Abstract

June Flanders (2015) provides a useful introduction to Hyman Minsky’s views on banking and macroeconomics. Minsky’s “financial instability hypothesis” (FIH) basically says that debt-based intermediation does not enable intertemporal equilibrium but rather self-generates boom and bust even in the absence of government intervention. The theory and history of banking cast doubt on the FIH.

Suggested Citation

  • Lawrence H. White, 2015. "Skepticism About Minsky's Financial Instability Hypothesis: A Comment on Flanders," Econ Journal Watch, Econ Journal Watch, vol. 12(1), pages 106-113, January.
    • Handle: RePEc:ejw:journl:v:12:y:2015:i:1:p:106-113
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    References listed on IDEAS

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    1. M. June Flanders, 2015. "It's Not a Minsky Moment, It's a Minsky Era, Or: Inevitable Instability," Econ Journal Watch, Econ Journal Watch, vol. 12(1), pages 84-105, January.
    2. David Prychitko, 2010. "Competing explanations of the Minsky moment: The financial instability hypothesis in light of Austrian theory," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 23(3), pages 199-221, September.
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    5. Van Den Hauwe Ludwig, 2016. "Understanding Financial Instability: Minsky Versus the Austrians," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 22(1), pages 25-60, July.
    6. White,Lawrence H., 2012. "The Clash of Economic Ideas," Cambridge Books, Cambridge University Press, number 9781107012424.
    7. White, Lawrence H, 1999. "Hayek's Monetary Theory and Policy: A Critical Reconstruction," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(1), pages 109-120, February.
    8. Lawrence H. White, 1999. "Why Didn't Hayek Favor Laissez Faire in Banking?," History of Political Economy, Duke University Press, vol. 31(4), pages 753-769, Winter.
    9. Lawrence H. White, 2013. "Antifragile Banking and Monetary Systems," Cato Journal, Cato Journal, Cato Institute, vol. 33(3), pages 474-484, Fall.
    10. Dimitri B. Papadimitriou & L. Randall Wray (ed.), 2010. "The Elgar Companion to Hyman Minsky," Books, Edward Elgar Publishing, number 13122.
    11. Ignacio Briones & Hugh Rockoff, 2005. "Do Economists Reach a Conclusion on Free-Banking Episodes?," Econ Journal Watch, Econ Journal Watch, vol. 2(2), pages 279-324, August.
    12. Journal of Economics Library, 2015. "New Economics Books," Journal of Economics Library, KSP Journals, vol. 2(4), pages 380-426, December.
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    Cited by:

    1. François Facchini, 2015. "Financial Fragility and Central Bank: Are Minsky’s Crisis and Austrian Business Cycle are Complementary?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01349787, HAL.
    2. Van Den Hauwe Ludwig, 2016. "Understanding Financial Instability: Minsky Versus the Austrians," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 22(1), pages 25-60, July.
    3. François Facchini, 2015. "Financial Fragility and Central Bank: Are Minsky’s Crisis and Austrian Business Cycle are Complementary?," Post-Print hal-01349787, HAL.

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    More about this item

    Keywords

    Hyman Minsky; monetary institutions; Friedrich Hayek; financial instability hypothesis; free banking;
    All these keywords.

    JEL classification:

    • B3 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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