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Minsky and Economic Policy: 'Keynesianism' All Over Again?

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  • Eric Tymoigne

Abstract

Recently, national newspapers all over the world have suggested that we should reread John Maynard Keynes, and that Hyman P. Minsky provides a valuable framework for understanding the world in which we live. While rereading Keynes and discovering Minsky are noble goals, one should also remember the mistakes that were made in the past. The mainstream interpretation and implementation of Keynes's ideas have been very different from what Keynes proposed, and they have been reduced to simple "fiscal activism." This led to the 1950s and 1960s "Keynesian" era, during which fine-tuning was supposed to be a straightforward way to fix economic problems. We know today that this is not the case: just playing around with taxes and government expenditures will not do. On the contrary, problems may worsen. If one wants to get serious about Keynes and Minsky, one should understand that the theoretical and policy implications are far-reaching. This paper compares and contrasts Minsky's views of the capitalist system to the tenets of the New Consensus, and argues that there never has been any true Keynesian revolution. This is illustrated by studying the Roosevelt and Kennedy/Johnson eras, as well as Keynes's reaction to the former and Minsky's critique of the latter. Overall, it is argued that the theoretical framework and policy prescriptions of Irving Fisher, not Keynes, have been much more consistent with past and current government policies.

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  • Eric Tymoigne, 2008. "Minsky and Economic Policy: 'Keynesianism' All Over Again?," Economics Working Paper Archive wp_547, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_547
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    1. Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
    2. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    3. Hyman Minsky, 1993. "On the non-neutrality of money," Quarterly Review, Federal Reserve Bank of New York, issue Spr, pages 77-82.
    4. Allen, William R, 1993. "Irving Fisher and the 100 Percent Reserve Proposal," Journal of Law and Economics, University of Chicago Press, vol. 36(2), pages 703-717, October.
    5. William R. Allen, 1977. "Irving Fisher, F. D. R., and the Great Depression," History of Political Economy, Duke University Press, vol. 9(4), pages 560-587, Winter.
    6. Stephanie Bell & L. Randall Wray & L. Randall Wray, 2004. "The War on Poverty Forty Years On," Challenge, Taylor & Francis Journals, vol. 47(5), pages 6-29.
    7. Barber,William J., 2006. "Designs within Disorder," Cambridge Books, Cambridge University Press, number 9780521034319.
    8. Pavlina R. Tcherneva, 2008. "Keynes's Approach to Full Employment: Aggregate or Targeted Demand?," Economics Working Paper Archive wp_542, Levy Economics Institute.
    9. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
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    Cited by:

    1. Leszek Kąsek & Marek Lubiński, 2010. "hyman," Contemporary Economics, University of Finance and Management in Warsaw, vol. 4(1), March.

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