John Maynard Keynes

Minsky covers a couple of disjointed topics in the most confusing way. The first one is how everyone so far got Keynes wrong. He covers that in the first couple of chapters. In doing so, Minsky criticizes a bunch of neo Keynesian models developed by eminent economists that invariably miss out on one or more of Keynes' key concepts. Some of those include: 1) the concept of uncertainty associated with any complex economic systems that renders quantitative models futile; 2) the volatility of capital investments that by its nature leads to unstable and less than full employment; 3) wage rigidity is not the sole problem underlying excessive unemployment. If wages were elastic, it would eventually exacerbate unemployment levels even more; and 4) a capitalist economy within an uncertain time vector left to its own resort is by its nature unstable and transits in unpredictable ways from one state to another (expantion, boom, crisis, depression, stagnation, recovery etc...).The second topic covered through most of the remainder of the book consists in the correct interpretation of Keynes according to Minsky and the integration of Minsky's own theory of crisis within Keynes' framework. Minsky attempts to do both simultaneously. And, he generates a rather awkward narrative. Minsky acknowledges numerous times that Keynes did not advance a logical model of bubbles and crises. He also adds that Keynes ignored the dynamics of the debt side of the balance sheet of households, companies, banks, and governments. And, that's where Minsky's own brilliant theory comes in. And, that is why he is one of the most praised economists in this post-housing crisis era.However, Minsky contradicts himself. If Keynes ignored the dynamics of debt and its impact on bubble and crisis, how could Keynes be interpreted so as to include those concepts he so explicitly missed? Yet, that is what Minsky is attempting to persuade the reader off. In other words, he suggests that Keynes and him are essentially one. If you had correctly interpreted Keynes you would have also deducted Minsky's crisis theory as part of the original Keynes foundation. That's a very bizarre leap.It remains unclear what Minsky truly added to Irving Fisher's  The Debt-Deflation Theory of Great Depressions  written three decades before Minsky's first work on the topic. Minsky is a brilliant economist on certain counts. But, I find him a very ineffective writer (if this book is representative) especially relative to Irving Fisher.If you want to understand Minsky, instead of reading his own writings, I recommend the far clearer book written by Charles Kindleberger  Manias, Panics, and Crashes: A History of Financial Crises (Wiley Investment Classics) . Minsky's basic concept is that the credit cycle exacerbates the business cycle because lenders lend excessively when collateral values go up and don't lend enough when they go down. Lending and asset values (collateral) create a positive feedback loop causing both asset bubbles and crashes. Although, this is a pretty straighforward concept (and a brilliant insight) Minsky is hardly able to articulate it clearly. Fortunately, Kindleberger does an excellent job of it on his behalf. It is almost like Minsky is a brilliant scientist who writes in a foreign language, he only knows. And, Kindleberger is the brilliant translator who can make sense of it all and clearly explain it to the rest of us.

I got this book from my local library in Kindle format. I liked it but needed more time to read it thoroughly, so I bought a paperback book version from Amazon. I recommend the paperback version because many of the equations in the Kindle version were unreadably small.This book is not easy reading. Minsky's purpose was to clarify the Keynes's book, "The General Theory of Employment, Interest and Money." Minsky's book does clarify that book somewhat but you'll have to work hard to understand Minsky's explanation. The book does not contain a glossary and many words and phrases are unfamiliar to a non-economist so I spent a lot of time online looking for explanations of those phrases.Minsky isn't always consistent in his use of those phrases, either. For instance, on pages 97 - 100 he uses the phrases "capitalization ratio," "capitalization factor," and "capitalization rate," all to refer (apparently) to the same thing.In some cases Minsky introduces new variables in equations without describing them. Eventually, through patience, I was able to dig out the meaning of each variable.So far, this is the best book I've found to explain the work of J.M. Keynes.

This is a great book. But it is a book about the views of Minsky, and not really on Keynes. The first chapter examines the way in which Keynes' 1936 book was received and interpreted, and Minsky's explanation is for the most part correct, namely, that Keynes' work represents more a revolution than an extension of "classical" economics. However, as is argued throughout Minsky's book, The General Theory contained only "the seeds for a deep intellectual revolution in economics and in the economists' view of society." According to Minsky, the Keynesian revolution was aborted and the seeds were prevented from reaching their full fruition due to the "bastardization" of Keynes' seminal message. Minsky sets himself the task in this book to bring these ideas back to life.Chapter two explores the more orthodox (conventional) view of Keynesian economics. Chapter three is very good, as it spells out the concepts that are to be used later in Minsky's analysis of capitalism: the recurrence of the business cycle, uncertainty, and investment and disequilibrium.Chapters 4 - 7 develop Minsky's theory of capitalism. Minsky argues that booms are inevitably followed by crises and debt deflation not because of certain institutional weaknesses, but because of the fundamental nature of capitalism. In other words, "Keynes visualized [the imperfections of the financial system] as systemic rather than accidental or perhaps incidental attributes of capitalism." Minsky explores the way investments are made, and examines how they are financed. Central to Minsky's analysis is the importance of uncertainty. Financing and liability structures cannot insulate themselves from danger (excessive risk) precisely because the future is uncertain. Another important element in Minsky's book is the importance of money, which he describes as as "insurance policy." This is consistent with Keynes' definition of liquidity. In the event that sales proceeds cannot meet existing liabilities, the possession of money becomes essential due to the frequent revaluations of capital assets making their quick sale at certain prices nearly impossible.I really enjoy Minsky's work, but this book gives me the impression that Minsky was more concerned with fitting Keynes in his (minsky's) own analysis than in explicating very clearly and honestly Keynes' own economic views. This can best be seen in the last two chapters on social policy. Nevertheless, Minsky is the most important expositor of the "Financial Instability Hypothesis" and this book is a great place to begin.

The typesetting and paper were a bit cheap. And Minsky is not always the clearest writer (he could have benefitted from reading Rudolf Fleisch). But these are important insights. I wish he had given some simple models to back up his assertions, but based on his (and Keynes') knowledge of how real banks work, his argument is credible. The book is also useful as a brief overview of Keynes' General Theory and his subsequent defenses of the work.

This book presents a convincing case that important aspects of Keynes' thinking has been neglected or omitted from the neoclassical synthesis. During an atypical period of financial stability in the post WWII decades, when: "The banking system came out of the war with a portfolio heavily weighted with government debt" (p127) and when memories of the 1929 crash held a stabilizing influence over finance in western countries, the neoclassical synthesis assumed away Keynes' focus on the destabilising role of investment sentiment and leveraged finance. Minsky effectively argues that Keynes' focus on uncertainty and the inherent instability caused by runaway 'animal spirits' was neglected by the so called Keynesian's. "Thus The General Theory is a theory of investment and why it is so prone to fluctuate. The glib assumption made by Professor Hicks in his exposition of Keynes' contribution ... is a caricature of Keynes' theory of investment" p92. "Keynes without uncertainty is something like Hamlet without the Prince" p55.Most of us remember from Keynes that his key focus was on aggregate demand in maintaining economic activity and growth. Of the components of this aggregate demand, consumption is a factor which is influenced in a self referencing way by the level of economic activity itself (endogenous in economics speak). As Keynes emphasises and Minsky re-emphasises, it is the cyclical swing in speculative appetites for risk and leverage found in the investment component of aggregate demand, which best explain booms and slumps. Booms provide the conditions for the formation of financial crisis by increasing the toleration and necessity for leverage and risk, partly in order to maintain profit levels. Once the system has predictably engorged itself full of leverage and risk during the good times, after a while any potential 'shock' or bad news can trigger the deleveraging crisis stage. Each stage causes the next, while the triggers or economic shocks are often incidental:"A boom once started lives a precarious life. It depends upon realization of optimistic expectations about yields, ..."p112. "Thus an increase in confidence and in the state of credit is equivalent in its effect upon the potential for debt-financing of investment to an improvement in current yield. Even if operating firms do not react to such changed views about the appropriate liability structure, an increase in leveraging can take place. Owners and prospective owners of shares can view the debt-financing of share ownership as an alternative to the debt-financing by the owning organisation, ... Thus with a fixed supply of shares, the market prices of shares increase." p119. "in a boom the ingenuity of bankers is directed at turning every possible source of temporarily idle cash into a source of financing for either real operations or financial position making."p140.The solution which Keynes arrived at all those years ago was the 'socialisation of investment'. In other words, government controlling a main portion of the unstable investment function in the economy:"To do better it is first necessary to constrain the liability structures of business firms. Debt-financing of investment and of positions in the stock of capital will have to be regulated, especially for large-scale organisations."p165. "As socialization of the towering heights is fully compatible with a large, growing, and prosperous private sector, this high-consumption synthesis might well be conducive to greater freedom for entrepreneurial ability and daring than is our present structure."p164.This later point seems an outdated solution, and opposite to the direction in which economies and economics have been travelling since this book was written. But even if the proposed answer here is questionable, that does not take away from the impressive predictive power contained within his analysis of the problem.As other reviews have noted, this is a technical book including much algebra etc., so not for everyone. But I skipped past all the algebra pages and still got a lot from it, and also found it to be a good partial guide to Keynes' 'The General Theory', which is arguably even more technical and impenetrable in places. The comments made by Minsky regarding the weak points or unfinished business of 'The General Theory' seem very valid to me. I sympathise with his opinion that events (1937 heart attack, WWII, early death) prevented Keynes from adequately fine tuning and directing the shape and course of Keynesian thought. Many economists and theories have attempted to be acknowledged as continuing the furrow which the brilliance of Keynes started, but Minsky seems to me to have taken over the mantle most sincerely in the right spirit.Although this book was written in 1975, as the extracts above illustrate, it feels very very modern in places, and its message certainly rings very loud and true since 2007. The many allusions Minsky makes to speculation, refinancing and "experimentation with liability structures" seem to explain the sub-prime securitisation crisis in a nutshell, and shine a critical light on the growth of derivatives markets etc. It also provides a convincing narrative for the inflation and other problems of the 1970's which I had not heard before.As the popular 'Minsky moment' term illustrates, the all important judgement of history accords a great deal of credibility to Minsky's analysis regarding the instability of capitalism. A credibility which free market thinkers have conclusively lost. All in all not an easy read, but well worth the effort for a book which is only going to grow in recognition.

An excellent book, but rather than focussing on Keynes or his work as such, its more about the Keynesian Revolution and how despite its much vanted triumph in the 1940s and 50s, it was actually still born. That at least is the opinion of the author and other post Keynesian economists like Joan Robinson and Paul Davison. Minsky makes his case very well. However this is a very technical book, making heavy use of calculus and dense argument. I dont reccomend it to the general reader unless they are very good at math - there are many other books showing the relevance of Keynes work to our current circumstances more simply, such as Davidsons 'The Keynes Solution' or Lord Skidelskys 'Keynes: the return of the master'.

Una vez la jihad neoliberal que empezó en los 80s ha perdido el favor del mainstream, es hora de volver a preguntarse como pueden las instituciones atemperar la violencia de los ciclos económicos y gestionar su parte de la economía de manera que se tienda al pleno empleo. En los años que han pasado desde que se escribió este libro (1975) y no digamos desde que Keynes escribió el suyo, han habido cambios estructurales en el mercado de trabajo y en el mercado financiero que deben ser analizados en detalle y una buena forma de empezar es comprender el marco mental sobre el que trabajaba Keynes.Uno de los principales méritos del libro, es que es una lectura del Keynes original. no de su domesticación por parte de Hicks et al. A veces parece que Keynes rescató al pensamiento Marshalliano del pozo en que lo metió su incapacidad para comprender la crisis de 1929 tal como no había comprendido el propio Marshall la crisis de 1973. Leyendo a Minsky vemos lo que pasó realmente. La academia -dicho sea en el peor sentido de la palabra- reinterpretó el pensamiento keynesiano una vez él estaba muerto para compatibilizarlo con la tradición neoclásica. MInsky dedica muchas páginas a retirar el baniz con el que que los catedráticos del establishment cubrieron el brillo original del pensamiento keynesiano y muestra como las incógnitas que dejó abiertas fueron ignoradas y sustituidas por el típico pensamiento neoclásico aritmético que ignora con la mayor naturalidad todo lo que no cabe en el modelo. En la lectura de Keynes por MInsky, la economía recupera su empirsismo y su provisionalidad. El pensamiento de Keynes se revela como un marco para analizar situaciones conretas en lugar de como el recetario que pintan los políticos "keynesianos" o la reflexión abstracta e intemporal que enseñan las universidades donde ha reinado 40 años el doctrinarismo marshalliano como coartada pseudo-científica del randianismo y el hayekanismo.Hay que avisar al lector que se trata de un libro académico que solo es accesible si se han atendido cursos de Teoría Económica, si uno se prepara antes utilizando algún manual de Macroeconomía, o bien visionando vídeos que puede econtrar en Youtube (buscar p.e. "curvas IS-LM"). Son matemáticas elementales, basicamente aritmética y alguna derivada, por lo que la dificultad es solo conceptual (p.e. qué es "el tipo de interés"). En la dificultad conceptual el lector se encontrará muy bien acompañado por Minsky y Keynes, dos colosos de la ciencia económica cuyas dudas son mucho más interesantes que las certezas de los seguidores de la escuela neoclásica.

I used this book for an essay in my master, very good book. I must say I started to love Minsky, an extraordinary scholar.

Even more informative than I expected.Greater clarity tnan Keynes himself; a gift of hindsight. In bringing the original up-to=date, Minsky cleanses it of neo-liberal misinterpretations.