Friday, April 6, 2012

Was Hyman Minsky a Post Keynesian?

Hyman Minsky (1919–1996) is frequently classified as a Post Keynesian. Minsky’s financial instability hypothesis is an important insight into financial markets and business cycles; Minsky undoubtedly had an affinity with the Post Keynesian school, and his work is taken very seriously in Post Keynesian economics (most notably by Steve Keen). Nevertheless, Minsky was an idiosyncratic Keynesian and the question whether he should be categorised as a Post Keynesian is debateable. Paul Davidson has made the following argument:
“Hyman Minsky is identified [sc. in King 2002: 110] as the second American Post Keynesian … Minsky attended many ‘Post Keynesian’ summer schools in Trieste, Italy as did Kaleckians and many Sraffians who now identify themselves as neo-Ricardians. Accordingly, mere attendance at the Trieste school does not make one a Post Keynesian. Minsky often told me that he never wanted to be identified as a Post Keynesian (hence he fails King’s test of identifying oneself as a Post Keynesian). According to King, Minsky was not an advocate of incomes policies — a hallmark of Post Keynesianism in America. King states that Minsky ‘had no particular objection to aggregate supply-demand analysis or to a tax based incomes policy — but did not regard them as especially interesting or important’ … It is hard to understand why someone who thinks that Keynes’s aggregate supply and demand analysis of the principle of effective demand is neither interesting nor important can be classified as a Post Keynesian … In reality Minsky was, and always wanted to be, a mainstream Keynesian who used the Modigliani variant of the ISLM system and whose major distinction from other mainstream Keynesians was that he possessed knowledge of actual real world financial markets. His ‘inherently unstable’ financial fragility hypothesis … was based on his reading of the activities on financial markets during the period between the onset of the Great Depression and the beginning of the Second World War …. Since Minsky refused to adopt Keynes’s principle of effective demand as the basic analytical system, and instead adopted an analytical structure that relied on some of the restrictive axioms of the special case classical theory, it is difficult for me to understand why King classifies Minsky as a Post Keynesian much less the ‘second US Post Keynesian’” (Davidson 2003–2004: 252–253).
Yet it is very difficult to classify Minsky as a neoclassical synthesis Keynesian or New Keynesian either, for both these varieties of Keynesian theory were subject to heavy criticism in these papers of Minsky:
“An Introduction to Post-Keynesian Economics,” 1986.

“Beyond Post-Keynesian Economics,” 1989.

“Salient Attributes of Post- Keynesian Economics,” 1992–1993.

“The Essential Characteristics of Post-Keynesian Economics,” 1993.
It is perhaps better to say that Minsky was a heterodox Keynesian with a strong affinity for the Post Keynesian school, even if he “never wanted to be identified as a Post Keynesian” himself.

But then, I suppose, the history of economics has the odd brilliant figure (e.g., George L. S. Shackle*) who marched to his/her own drum, never quite fitting into neat classifications.

* Shackle is sometimes classified either as an Austrian or Keynesian, or hybrid Austrian-Keynesian.


There is a very interesting paper here by Matias Vernengo in which the question of how to classify Minsky (on pp. 5-6) is also raised:
Matias Vernengo, “The Return of Vulgar Economics: A Rejoinder to Colander, Holt and Rosser,” Working Paper No: 2011-14.
Matias Vernengo agrees that Minsky was a heterodox Keynesian:
“Minsky thought so much of the mainstream (standard course) that he would eliminate the course! Minsky may have been guarded about being seen as part of a particular heterodox group, not because he was cutting edge mainstream, but because he was too original to be boxed in a particular label.”

Matias Vernengo, “The Return of Vulgar Economics: A Rejoinder to Colander, Holt and Rosser,” Working Paper No: 2011-14. p. 6.


Davidson, P. 2003–2004. “Setting the Record Straight on ‘A History of Post Keynesian Economics,’” Journal of Post Keynesian Economics 26.2 245–272.

King, J. E. 2002. A History of Post-Keynesian Economics since 1936, Edward Elgar, Chelten.


  1. Speaking of Hyman P. Minsky, have you ever read Dr. Michael Emmett Brady's reviews of his three books?

    Also, you might want to check the comments on his review of Nicholas Wapshott's book. Go to the second page of comments, for it reveals an interesting personal anecdote.

  2. Actually, I was wrong. It's on the first page of the comments, and Dr. Brady does refer to Minsky.

  3. They are all very interesting reviews.

    I find it somewhat strange to see this, however:

    "The increased government spending advocated by Keynes in the 1930's was public infrastructure spending alone. It had nothing to do with tax cuts or discretionary demand management policies using changes in interest rates /tax rates. These are the ideas of Abba Lerner, Alvin Hanson, Walter Heller, James Meade and James Tobin ,not J M Keynes. Volume 27 of the Collected Writings of JMK has nearly 300 pages of exchanges between Keynes and the advocates of demand management. Keynes is not a fiscalist".

    Since deficit-financed public works is designed to use fiscal policy to affect AD, it is perplexing to see someone say that Keynes was "not a fiscalist".

  4. Did you see the remark in which Dr. Brady refers to Hyman Minsky?

  5. Yes, this remark:

    "I transferred to UC Riverside to write my dissertation on the connection between the TP and GT. I easily passed the doctoral exam in macroeconomics at UCR. I have read Minsky's works. However, there are deficiencies in his work due to his inability to understand the TP (1921). This is why I did not attend Minsky's week long visit to UCRiverside in late 1982.

  6. In case you haven't, I'll point the comment out for you. Dr. Brady states he turned down the opportunity to have a graduate seminar with Hyman Minsky at UC Riverside.

    Thanks for your comment. Unfortunately,the author deals with Bentham in only two paragraphs on two pages in his book .The same treatment is given with Adam Smith. The author, like yourself, is completely ignorant of the real clash between Keynes and Hayek, which is over the asset demand for money (speculative demand for money). If there are no M2 (M2=0) balances, given M = M1 +M2, where M is the total demand for money, M1 the Transactions demand for money and M2 the speculative demand for money, then there will be no involuntary unemployment. This is the same point made by Smith in his debate with Bentham. I never took Sherman's macro class because I had received grades of A- and A+ (A on my transcript as CGS had stopped issuing A+ grades) in the two semester macroeconomics PH.D sequence at Claremont Graduate School. I transferred to UC Riverside to write my dissertation on the connection between the TP and GT. I easily passed the doctoral exam in macroeconomics at UCR. I have read Minsky's works. However,there are deficiencies in his work due to his inability to understand the TP(1921). This is why I did not attend Minsky's week long visit to UC Riverside in late 1982.

  7. What did you make of it?

  8. Obviously there is an interesting story involving how the TP relates to the GT.

    But I am not sure why Minsky needed an advanced understanding of the TP to do outstanding work on finance, credit and business cycles.

  9. From the preface & acknowledgements: Stabilizing an Unstable Economy is in the post-Keynesian tradition, which I take to mean that Keynes provides us with the shoulders of a giant upon which we can stand in order to see far and deep into the essential character of advanced capitalist economies. However, being post-Keynesian does not mean being slavishly dependent on the works of the "Great Man." .."

    Making differentiations based on distinctions between such statements and whatever he said to Davidson, in light of the objective tenor and living influence of Minsky's work, is not all that useful, imho.

  10. I don't think that Dr. Brady is saying that Hyman Minsky didn't do a good job. I think Dr. Brady is saying that Minsky could have shown that J.M. Keynes had long ago proven (on theoretical terms) the special case of Subjective Expected Utility.

  11. Had a similar debate with Colander, Holt and Rosser. They suggest that Minsky was not an heterodox economist, but an author of what they refer to as the "edge of the mainstream." My reply here I would agree with your assessment. He was an heterodox Keynesian (note that sometimes Post Keynesian is just that, not necessarily it means that you emphasize fundamental uncertainty as the main element in Keynes' theories).

  12. Thanks for your comment.

    I have added an update above and linked to your excellent paper “The Return of Vulgar Economics: A Rejoinder to Colander, Holt and Rosser.”


  13. The quote from Davidson is astonishingly wide of the mark. Has he read Minsky's book on Keynes? It should be cited ahead of the Minsky papers you cite.

  14. Minsky cannot have been a neoclassical; that is impossible. His entire theory is predicated on the notion that money is not neutral and the future is uncertain.

    If he was content with using IS-LM models, then he was contradicting himself. IS-LM models presuppose Say's Law. Minsky's FIH accuses excessive credit creation of being the cause of depressions; economies with private credit, by definition, do not obey Say's Law, as aggregate demand, in a credit money system, is equal to income plus the change in debt.

    Minsky may not have thought he was a Post-Keynesian, but his work had all the hallmarks of it: non-neutral money, uncertainty about the future, dynamic modelling, institutions, etc.

    He actually said in John Maynard Keynes that it was absurd to try and understand his theory from a neoclassical, equilibrium perspective.

    What I am interested in knowing, on a somewhat related note, is how many percent of all Post-Keynesian economists explicitly reject Minsky.