Recent Posts

Wednesday, April 24, 2019

Minsky Versus Steindl Debt Dynamics?

 In Marc Lavoie's Post-Keynesian Economics: New Foundations, he has an interesting discussion in Section 6.10.4, which is labelled "Minsky or Steindl Debt Dynamics?" The Minsky dynamics are the well-known Financial Instability Hypothesis (link to primer), while the Steindl dynamics refers to the discussion in Maturity and Stagnation in American Capitalism by Josef Steindl. Lavoie's discussion raises some issues with the limitations of aggregated analysis in this context. This is a brief comment on this topic.

Sunday, April 21, 2019

Wednesday, April 17, 2019

Natural Rate Versus Neutral Rate: Austrian Perspective

The terms natural rate of interest and neutral rate of interest are often used interchangeably. In this article, I comment on how Richard W. Garrison distinguishes the terms, and how this fits in with the Austrian Business Cycle Theory (ABCT).

Sunday, April 14, 2019

Primer: Financial Instability Hypothesis (Part II)

The evolution of the financial sector in response to economic incentives and historical experience is the other key leg of Minsky’s Financial Instability Hypothesis. It lacks the catchy hedge-speculative-Ponzi unit (agent) scheme, and so is less well known. However, it perhaps poses a greater theoretical challenge, particularly to those who believe that only formal mathematical models are “rigorous.” The argument is that the financial sector changes the rules of the financing game over time – which invalidates any formal models based on the old rules.

(Note: This is an unedited draft from my manuscript of a book on recessions. Part I of this primer is found here. Please note that book links are affiliate links.)

Wednesday, April 10, 2019

Primer: Financial Instability Hypothesis (Part I)

The Financial Instability Hypothesis was associated with the economist Hyman Minsky, although it could be viewed as Minsky’s interpretation of Keynes. One summary of the concept is that stability is destabilising: economic stability leads to changes in behavioural changes that destabilise the economy.

Sunday, April 7, 2019

Recessions As A Random Walk

One possible way of viewing recessions is that they are essentially a form of a random walk. We can imagine that the economy can transition to a "low growth" state, and then it is easier for random fluctuations to result in a recession. This is often referred to as the economy being near its "stall speed." (An aircraft that drops below its stall speed cannot generate enough lift from its wing surfaces to overcome gravity.) This is a plausible way of looking at empirical recession models, but it dodges the theoretical question as to why the fluctuations happen.

Wednesday, April 3, 2019

Initial Comments On The Minsky Software Package

Figure: Feedback Loop in Minsky

I have started looking at the Minsky software package, developed by Steve Keen and with coding by Russell Standish. The package is in C++, with the source code available at An older version is available as a precompiled executable at SourceForge; later versions are now available as a benefit for the Minsky Patreon support page: I will be using the package as part of my recession modelling book; this article offers some initial pointers for those of us who do not read documentation.