Hyman Minsky
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Hyman Minsky (born in 1919, died in 1996) was an American economist. Born on September 23, 1919 in Chicago, Dr. Minsky received a bachelor of science degree from the University of Chicago. He went on to earn a master's degree in public administration and a doctorate from Harvard University, where he studied under Joseph Schumpeter and Wassily Leontief. He proposed theories that endogenize financial fragility in the normal going of an economy. His research attempted to understand the characteristics of financial crises.
Minsky was sometimes described as a radical Keynesian whose research nevertheless endeared him to Wall Street.
"He offered very good insights in the '60s and '70s when linkages between the financial markets and the economy were not as well understood as they are now," said Henry Kaufman, a Wall Street money manager and economist. "He showed us that financial markets could move frequently to excess. And he underscored the importance of the Federal Reserve as a lender of last resort."
British economist John Maynard Keynes had written about unstable financial markets, but Minsky was the first to explain how this instability developed and interacted with the economy. In doing so he incorporated some of the findings of Irving Fisher and other earlier economists.
Basically, Minsky found that in prosperous times, when corporate cash flow rises beyond what is needed to pay off debt, a speculative euphoria develops and soon lending gets beyond what the borrowers can pay off from their incoming revenues that produces a crisis. As a result there is a pull-back in lending, even to companies that can afford the loans, and the economy contracts.
"A fundamental characteristic of our economy," Minsky wrote in 1974, "is that the financial system swings between robustness and fragility and these swings are an integral part of the process that generates business cycles."
Disagreeing with many mainstream economists, he argued that these swings, and the booms and busts that can accompany them, are inevitable in a free market economy, unless government steps in to control them, through regulation, central bank action and other tools that in fact came into existence in response to the Great Depression. He opposed the deregulation that characterized the 1980s.
It was at the University of Berkeley that seminars attended by Bank of America executives helped him to develop his theories about lending and economic activity, views he laid out in two books "John Maynard Keynes" (1975), a classic study of the economist and his contributions, and "Stabilizing an Unstable Economy" (1986), and more than a hundred professional articles.
Minsky is survived by his wife, Esther, a son, Alan, and a daughter, Diana, all of Rhinebeck.
