Hyman Minsky

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Hyman Minsky, Ph.D. (September 23, 1919, Chicago, Illinois – October 24, 1996), was an American economist and professor of economics at Washington University in St. Louis. His research attempted to provide an understanding and explanation of the characteristics of financial crises. Minsky was sometimes described as a radical Keynesian whose research, nevertheless, endeared him to Wall Street.

Contents 1 Education 2 Financial theory 3 See also 4 References 5 External links

[edit] Education

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.

[edit] Financial theory

Dr. Minsky proposed theories linking financial market fragility, in the normal life cycle of an economy, with speculative investment bubbles endogenous to financial markets. Minsky claimed that in prosperous times, when corporate cash flow rises beyond what is needed to pay off debt, a speculative euphoria develops, and soon thereafter debts exceed what borrowers can pay off from their incoming revenues, which in turn produces a financial crisis. As a result of such speculative borrowing bubbles, banks and lenders tighten credit availability, even to companies that can afford loans, and the economy subsequently contracts.

"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."

Minsky's model of the credit system, which he dubbed the "Financial Instability Hypothesis" (FIH), incorporated many ideas already circulated by John Stuart Mill, Alfred Marshall,Knut Wicksell and Irving Fisher^[1]. "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 of the day, 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; such mechanisms, 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 California at 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.

[edit] See also

• Economics
• Irrational exuberance

[edit] References

[edit] External links

• Major Works of and Resource on Minsky
• Marc Schnyder: Die Hypothese finanzieller Instabilität von Hyman P. Minsky Thesis, University of Fribourg, Switzerland, (German)
• In Time of Tumult, Obscure Economist Gains Currency
• New Yorker article on Minsky