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Minsky Moments, Russell Chickens and Grey Swans: The Methodological Puzzles of Financial Instability Analysis

In: Minsky, Crisis and Development

Author

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  • Alessandro Vercelli

Abstract

Although Minsky’s FIH has been discussed and extended by many scholars since its inception, it is not yet a full-fledged theory as a precise specification of the relationship between some of the crucial variables is still missing or remains largely implicit (a critical survey of much of the literature may be found in Tymoigne, 2006). For that reason Minsky has been often accused of ‘implicit theorising’ (see in particular Tobin, 1989). In this view the theoretical axioms are not clearly spelled out and their implications for explanation and prediction are insufficiently argued (Toporowski, 2005, 2008). For that reason most academic economists dismissed the FIH, although a few high-level practitioners continued to consider it quite relevant for their choices. In our opinion this is a non sequitur. We have to take seriously the criticism of implicit theorising but from it we should draw conclusions quite different from those of many Minsky’s critics. Implicit theorising is typical of new revolutionary theories (in the sense of Kuhn, 1970).

Suggested Citation

  • Alessandro Vercelli, 2010. "Minsky Moments, Russell Chickens and Grey Swans: The Methodological Puzzles of Financial Instability Analysis," Palgrave Macmillan Books, in: Daniela Tavasci & Jan Toporowski (ed.), Minsky, Crisis and Development, chapter 1, pages 15-31, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-29232-1_2
    DOI: 10.1057/9780230292321_2
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    Citations

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    Cited by:

    1. Sordi, Serena & Vercelli, Alessandro, 2012. "Heterogeneous expectations and strong uncertainty in a Minskyian model of financial fluctuations," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 544-557.
    2. Filippo Gusella & Anna Maria Variato, 2021. "Financial Instability and Income Inequality: why the connection Minsky-Piketty matters for Macroeconomics," Working Papers - Economics wp2021_15.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    3. Passarella, Marco, 2012. "A simplified stock-flow consistent dynamic model of the systemic financial fragility in the ‘New Capitalism’," Journal of Economic Behavior & Organization, Elsevier, vol. 83(3), pages 570-582.
    4. Alessandro Vercelli, 2011. "A Perspective on Minsky Moments: Revisiting the Core of the Financial Instability Hypothesis," Review of Political Economy, Taylor & Francis Journals, vol. 23(1), pages 49-67.

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