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Skepticism About Minsky's Financial Instability Hypothesis: A Comment on Flanders

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  • Lawrence H. White

Abstract

June Flanders (2015) provides a useful introduction to Hyman Minsky’s views on banking and macroeconomics. Minsky’s “financial instability hypothesis” (FIH) basically says that debt-based intermediation does not enable intertemporal equilibrium but rather self-generates boom and bust even in the absence of government intervention. The theory and history of banking cast doubt on the FIH.

Suggested Citation

  • Lawrence H. White, 2015. "Skepticism About Minsky's Financial Instability Hypothesis: A Comment on Flanders," Econ Journal Watch, Econ Journal Watch, vol. 12(1), pages 106-113, January.
    • Handle: RePEc:ejw:journl:v:12:y:2015:i:1:p:106-113
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    References listed on IDEAS

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    1. M. June Flanders, 2015. "It's Not a Minsky Moment, It's a Minsky Era, Or: Inevitable Instability," Econ Journal Watch, Econ Journal Watch, vol. 12(1), pages 84-105, January.
    2. Lawrence H. White, 2013. "Antifragile Banking and Monetary Systems," Cato Journal, Cato Journal, Cato Institute, vol. 33(3), pages 474-484, Fall.
    3. Dimitri B. Papadimitriou & L. Randall Wray (ed.), 2010. "The Elgar Companion to Hyman Minsky," Books, Edward Elgar Publishing, number 13122.
    4. David Prychitko, 2010. "Competing explanations of the Minsky moment: The financial instability hypothesis in light of Austrian theory," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 23(3), pages 199-221, September.
    5. Journal of Economics Bibliography, 2015. "New Economics Journals," Journal of Economics Bibliography, KSP Journals, vol. 2(4), pages 245-261, December.
    6. Ignacio Briones & Hugh Rockoff, 2005. "Do Economists Reach a Conclusion on Free-Banking Episodes?," Econ Journal Watch, Econ Journal Watch, vol. 2(2), pages 279-324, August.
    7. Hayek, F. A. & Caldwell, Bruce, 2007. "The Pure Theory of Capital," University of Chicago Press Economics Books, University of Chicago Press, number 9780226320991 edited by White, Lawrence H., December.
    8. Van Den Hauwe Ludwig, 2016. "Understanding Financial Instability: Minsky Versus the Austrians," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 22(1), pages 25-60, July.
    9. White,Lawrence H., 2012. "The Clash of Economic Ideas," Cambridge Books, Cambridge University Press, number 9781107012424, September.
    10. Journal of Economics Library, 2015. "New Economics Books," Journal of Economics Library, KSP Journals, vol. 2(4), pages 380-426, December.
    11. White, Lawrence H, 1999. "Hayek's Monetary Theory and Policy: A Critical Reconstruction," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(1), pages 109-120, February.
    12. Journal of Economics Bibliography, 2015. "New Economics Journals," Journal of Economics Bibliography, KSP Journals, vol. 2(3), pages 151-163, September.
    13. Journal of Economics Library, 2015. "New Economics Books," Journal of Economics Library, KSP Journals, vol. 2(3), pages 214-284, September.
    14. Lawrence H. White, 1999. "Why Didn't Hayek Favor Laissez Faire in Banking?," History of Political Economy, Duke University Press, vol. 31(4), pages 753-769, Winter.
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    Cited by:

    1. Van Den Hauwe Ludwig, 2016. "Understanding Financial Instability: Minsky Versus the Austrians," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 22(1), pages 25-60, July.
    2. François Facchini, 2015. "Financial Fragility and Central Bank: Are Minsky’s Crisis and Austrian Business Cycle are Complementary?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01349787, HAL.
    3. François Facchini, 2015. "Financial Fragility and Central Bank: Are Minsky’s Crisis and Austrian Business Cycle are Complementary?," Post-Print hal-01349787, HAL.

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    More about this item

    Keywords

    Hyman Minsky; monetary institutions; Friedrich Hayek; financial instability hypothesis; free banking;
    All these keywords.

    JEL classification:

    • B3 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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