Technology, Complexity, and Culture as Contributors to Financial Instability: A Generalization of Keynes's Chapter 12 and Minsky's Financial Instability Hypothesis
Keynes's discussion of "the state of long-term expectation" explains why uncertainty about the future makes investment unstable. Minsky used Keynes's ideas to explain why every economic boom sets the stage for a financial crisis. This paper extends the Keynes/Minsky framework by arguing that uncertainty about the future also biases scientific knowledge and human culture. Just like overly optimistic financial markets, the persistence of inaccurate scientific paradigms and cultural beliefs can also generate financial crises. For example, the debt toward nature that our capitalist culture continues to obscure is likely to be a case of Ponzi finance. The Keynes/Minsky framework is useful for analyzing diverse causes of potential economic instability.
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