Why Hyman Minsky matters for Modern Money Theory

This chapter explores the relevance of the work of Hyman Minsky to Modern Money Theory (MMT). While Minsky was influenced by the functional finance approach of his mentor, Abba Lerner, Minsky’s views were more nuanced. He was skeptical of the “steering wheel” metaphor and embraced targeted spending rather than “pump priming.” Furthermore, he argued that pursuit of full employment through general fiscal expansion could produce inflation and financial instability before full employment would be achieved. This is why he embraced what he called the “employer of last resort” (or Job Guarantee) approach to full employment. However, Minsky never rejected his early beliefs that countercyclical government budgets must play a significant role in stabilizing the economy. This chapter argues that Minsky’s work remains essential for the further development of MMT.