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Post Keynesian Theories of Crisis

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  • Steve Keen

Abstract

Post Keynesian economics has two complementary theories of crisis that were used to predict the 2007 crisis and diagnose its causes: Minsky's financial instability hypothesis and Godley's stock-flow-consistent approach. Both theories take a monetary perspective on capitalism and argue that the dynamics of private debt caused the crisis. As well as explaining the crisis and enabling its occurrence (though not precise timing) to be predicted, both theories imply that the current recovery will be short-lived because the underlying cause of the last crisis has not been addressed by subsequent economic policy.

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  • Steve Keen, 2015. "Post Keynesian Theories of Crisis," American Journal of Economics and Sociology, Wiley Blackwell, vol. 74(2), pages 298-324, March.
    • Handle: RePEc:bla:ajecsc:v:74:y:2015:i:2:p:298-324
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    File URL: http://hdl.handle.net/10.1111/ajes.12099
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    1. Wynne Godley & George McCarthy, 1998. "Fiscal Policy Will Matter," Challenge, Taylor & Francis Journals, vol. 41(1), pages 38-54, January.
    2. Wynne Godley & Marc Lavoie, 2012. "Fiscal Policy in a Stock-Flow Consistent (SFC) Model," Palgrave Macmillan Books, in: Marc Lavoie & Gennaro Zezza (ed.), The Stock-Flow Consistent Approach, chapter 9, pages 194-215, Palgrave Macmillan.
    3. Wynne Godley & L. Randall Wray, 2000. "Is Goldilocks Doomed?," Journal of Economic Issues, Taylor & Francis Journals, vol. 34(1), pages 201-206, March.
    4. Wynne Godley, Alex Izurieta, 2002. "The Case for a Severe Recession," Challenge, Taylor & Francis Journals, vol. 45(2), pages 27-51.
    5. Eugene F. Fama, 2002. "Testing Trade-Off and Pecking Order Predictions About Dividends and Debt," Review of Financial Studies, Society for Financial Studies, vol. 15(1), pages 1-33, March.
    6. Harvie, David, 2000. "Testing Goodwin: Growth Cycles in Ten OECD Countries," Cambridge Journal of Economics, Oxford University Press, vol. 24(3), pages 349-376, May.
    7. Wynne Godley, 2001. "The developing recession in the United States," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 54(219), pages 417-425.
    8. Eugene F. Fama & Kenneth R. French, 1999. "The Corporate Cost of Capital and the Return on Corporate Investment," Journal of Finance, American Finance Association, vol. 54(6), pages 1939-1967, December.
    9. Julius Bonart & Jean-Philippe Bouchaud & Augustin Landier & David Thesmar, 2014. "Instabilities in large economies: aggregate volatility without idiosyncratic shocks," Papers 1406.5022, arXiv.org.
    10. Robert E. Lucas Jr., 2003. "Macroeconomic Priorities," American Economic Review, American Economic Association, vol. 93(1), pages 1-14, March.
    11. Wynne Godley, 1996. "Money, Finance and National Income Determination: An Integrated Approach," Economics Working Paper Archive wp_167, Levy Economics Institute.
    12. Wynne Godley, 2001. "The developing recession in the United States," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 54(219), pages 417-425.
    13. McLeay, Michael & Radia, Amar & Thomas, Ryland, 2014. "Money creation in the modern economy," Bank of England Quarterly Bulletin, Bank of England, vol. 54(1), pages 14-27.
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    Cited by:

    1. Ömer Tuğsal DORUK & Yusuf Can ŞAHİNTÜRK, 2019. "Minskian Financial Instability Hypothesis and Its Post Keynesian Roots: A Theoretical Approach," Sosyoekonomi Journal, Sosyoekonomi Society.
    2. Zora Kovacic & Marcello Spanò & Samuele Lo Piano & Alevgul H. Sorman, 2018. "Finance, energy and the decoupling: an empirical study," Journal of Evolutionary Economics, Springer, vol. 28(3), pages 565-590, August.
    3. Steve Keen, 2019. "Economics: What to Do About an Unreformable Discipline? الاقتصاد: ماذا نفعل لعلم غير قابل للإصلاح؟," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 32(2), pages 109-117, January.

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