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Keynes’ and Minsky’s Macroeconomics

In: Economic Instability and Stabilization Policy

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  • Ralf Pauly

    (Osnabrück University)

Abstract

In Minsky’s novel economic paradigm, unlike the Keynesian-influenced ISLM model, profits, private banks and debt financing play a central role. Minsky replaces the Keynesian relationship between investment and saving with the future-oriented interdependence between investment and profit. Profit is ultimately the focus of economic activity in the capitalist market economy. In good times, debt financing increases the chances of profit drastically through its leverage effect, but in bad times the risk of loss is even more drastic. Private banks, together with central banks, favor economic risks and make the economic process inherently unstable.

Suggested Citation

  • Ralf Pauly, 2021. "Keynes’ and Minsky’s Macroeconomics," Springer Books, in: Economic Instability and Stabilization Policy, chapter 0, pages 95-139, Springer.
    • Handle: RePEc:spr:sprchp:978-3-658-33626-4_3
    DOI: 10.1007/978-3-658-33626-4_3
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