Rakesh Bhandari wrote:
> I think James Crotty puts his finger on a big question here, and expert
> clarifications would be most welcome:
>
> "Minsky is quite emphatic...(an) investment decline can never be
> *initiated* by a prior decline in the expected profitability of
> investment; rather, it takes an intial drop in investment to induce a
> *subsequent* decline in profits. Investment and profits are not mutually
> codetermining: investment spending calls the tune and profits dance
> accordingly. As Minsky puts it:
> 'In the simplest Kalecki case, where aggregate profit equals aggregate
> investment, the shortfall of realized profits below anticipated profits
> requires a logically prior shorttfall of investment. This leaves the
> question of...crises..and...depressions unexplained, for it is the decline
> of investment that has to be explained.'
> Minsky's view on this point is also summarized in the following quotation:
> 'The profitability of existing capital--and profit expectations-can only
> change if investment and expected investment [first]decline. Thus we have
> took elsewhere--to arguments other than those derived from assumed
> properties of production functions and hand waves with regard to
> over-investment--to explain why the marginal efficiency o investment
> falls. The natural place to look within the Schumpeter-Keynes-Kalecki
> vision is in the impact of financing relations.'
> Thus, Minsky, can find no impediments to perpetual balanced growth in the
> real sector of the economy. The roots of instability are to be found in
> the financial markets." Journal of Post Keyensian Economics, Summer 1990,
> p.530
>
> rb