Having grown up during the Depression, Minsky was minded to dwell on disaster. Over the years he came back to the same fundamental problem again and again. He wanted to understand why financial crises occurred. It was an unpopular focus. The dominant belief in the latter half of the 20th century was that markets were efficient. The prospect of a full-blown calamity in developed economies sounded far-fetched. There might be the occasional stockmarket bust or currency crash, but modern economies had, it seemed, vanquished their worst demons.
Against those certitudes, Minsky, an owlish man with a shock of grey hair, developed his “financial-instability hypothesis”. It is an examination of how long stretches of prosperity sow the seeds of the next crisis, an important lens for understanding the tumult of the past decade. But the history of the hypothesis itself is just as important. Its trajectory from the margins of academia to a subject of mainstream debate shows how the study of economics is adapting to a much-changed reality since the global financial crisis.…The Economist