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Paving the way for reconsidering the working of market economies: the Minsky perspective

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  • Faruk Ülgen

    () (CREG - Centre de recherche en économie de Grenoble - UPMF - Université Pierre Mendès France - Grenoble 2 - UGA - Université Grenoble Alpes)

Abstract

This essay develops the financial instability hypothesis of Hyman Minsky through an analysis of the pitfalls of the liberal regulatory framework in order to deal with long-standing and long-lasting financial issues of capitalist economies. It argues that the roots of the 2007/08 crisis are closely related to the regulatory environment in force. Since the 1970s, major capitalist economies evolve towards a new accumulation regime resting on a deep financialisation leading into growing speculative and short-sighted economic activities that generate recurrent crises. This evolution is encouraged and accompanied by market- friendly (de )regulatory mechanisms mainly founded on the belief that liberalised markets are globally self- adjusting. To cope with the pitfalls of such beliefs, the financial instability hypothesis assumes that the functioning of financialised capitalism endogenously generates instabilities and identifies the capital development as the core issue in capitalist evolution. From this perspective, some simple policy principles are suggested to design consistent regulatory mechanisms in order to reduce systemic failures and their consequences in the capitalist economy.

Suggested Citation

  • Faruk Ülgen, 2012. "Paving the way for reconsidering the working of market economies: the Minsky perspective," Post-Print halshs-00868521, HAL.
  • Handle: RePEc:hal:journl:halshs-00868521
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00868521
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    References listed on IDEAS

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    1. Shleifer, Andrei, 2000. "Inefficient Markets: An Introduction to Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780198292272.
    2. James Crotty, 2009. "Structural causes of the global financial crisis: a critical assessment of the 'new financial architecture'," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 563-580, July.
    3. Jensen, Michael C., 1978. "Some anomalous evidence regarding market efficiency," Journal of Financial Economics, Elsevier, vol. 6(2-3), pages 95-101.
    4. Paul Davidson, 2008. "Is the current financial distress caused by the subprime mortgage crisis a Minsky moment? or is it the result of attempting to securitize illiquid noncommercial mortgage loans?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 30(4), pages 669-676, July.
    5. Kane, Edward J, 1988. "Interaction of Financial and Regulatory Innovation," American Economic Review, American Economic Association, vol. 78(2), pages 328-334, May.
    6. Lawrence King & Michael Kitson & Sue Konzelmann & Frank Wilkinson, 2012. "Making the same mistake again--or is this time different?," Cambridge Journal of Economics, Oxford University Press, vol. 36(1), pages 1-15.
    7. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
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