Mathew Forstater forstate at levy.org
Thu Sep 24 14:16:28 PDT 1998

Rakesh- What exactly is the question? Whether Minsky actually believed this, whether the argument is sound, or...? Ed Nell has a paper which is a sympathetic critique of Minsky on these grounds. Yes financial fragility, but the "real" economy is also unstable. Of course the danger is getting caught back in dichotomizing the "monetary" and "real." mat

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

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