Randy Wray — Minsky on Banking: Early Work and Critiques by Krugman and Horizontalists Revisited

In this piece I will revisit only the main underlying issue: what was Minsky’s early approach to banking? Did Minsky adopt an endogenous money approach–at the time that he was first developing his financial instability approach? If he did, that, by itself, does not prove that his FIH is consistent with an endogenous money approach. Nor does it disprove the claim that there is a Says Law of finance. Both of those criticisms could still be made whether or not Minsky held and explicated an endogenous money approach. I have argued elsewhere, however, that these positions do not hold up to scrutiny. In fact, Minsky’s FIH relies critically on an endogenous approach to money, and the Say’s Law approach of some Post Keynesians is fundamentally flawed. In any case, we will not detail those critiques here. (4)

Further, it is useful to return to Krugman’s critique of Minsky to compare Minsky’s early view of banking with the current view held by many macroeconomists. I’ll argue that Minsky’s views over half a century ago are far more advanced than those held today by Krugman.

Economonitor — Great Leap Forward
Minsky on Banking: Early Work and Critiques by Krugman and Horizontalists Revisited
L. Randall Wray | Professor of Economics, University of Missouri at Kansas City