I probably didn t appreciate this book as much as I would have had I the technical competence to fully follow the economic theorising, but here are 3 things I did get out of this book 1 Consumption is important Even though Consumption is a derivative of employment, which is a derivative of Investment, and therefore it is Investment that Keynes believed is the driver of the economy, Consumption is still important This is b c Consumption is a major part of Aggregate Demand, and it is entrepreneur s and bankers expectations of Aggregate Demand that determine the perceived Return on Investment and Cost of Capital, which is what drives Investment and Employment It is necessarily circular, but his point is that it begins with Consumption I disagree with this in the sense that I think the origin of wealth creation in an economy is necessarily extrinsic i.
e ultimately all wealth originates from land resources and all economic activity is a multiplier on that initial exogenous input but I agree in the sense that I think Consumption is the biggest contributor to and starting point of that economic multiplier 2 It is a great summary of what Minsky thinks is wrong with neoclassical economics Again I don t pretend to completely follow, but I think these are the fundamental points i the neoclassicists omit consideration of the actual level of employment from their models by exogenously assuming that labor will always be employed up to where wages marginal productivity ii that debt is a burden on society, and that b c in a cyclical downturn, as the interest burden does not fall, firms have to take on debt to refinance previous debt, thus a society s debt level can build up over the course of several cycles and lead to growing financial instability, and that this cyclical instability is an intrinsic characteristic of modern capitalistic markets and economic models should reflect this reality, instead of assuming that economies always tend toward stable equilibrium and that cycles are merely the result of external shocks and rebalancing.
I wish I had time to jot down fuller notes, but unfortunately not for now It really does bear closer rereading to appreciate though.
3 An unexpected last chapter that highlights Keynes idealistic, socialist tendencies, and what he believed economies should tend toward, the euthanasia of the rentier Essentially, this is when an economy reaches maturity, consumers leave aside purely monetary pursuits and move on to non economic pleasures, all material wants are satisfied and people seek to gratify non material wants, so capital for production of material goods is no longer scarce I find the last rather compelling, a vision of a Socratic society Naturally it contradicts economist s assumption of infinite wants, but Keynes point here is that people move up the hierarchy of needs to non material, philosophic spiritual artistic pursuits This, Minsky writes, reflects that Keynes was a young man during the Edwardian enlightenment, an optimistic era when the intellectual constraints and social hypocrisies of the Victorian era were being cast off, and genuine progress toward an egalitarian and open society seemed assured Something to keep in mind when we apply Keynesian economic analysis to the millions billions gazillions of present and future Asian conspicuous consumers.
In this text Minsky analyzes why the Neo classical synthesis should be rejected and does not represent a outgrowth of Keynes work in The General Theory of Employment, Interest, and Money Minsky also firmly plants Keynes and himself in the tradition of Marx and the socialist position of the inherent instability of the capitalist system Like Keynes, Minsky came to see Smith s and Marx analysis of the speculative financial capital nature of Capitalism as destabilizing to the overall system and making market equilibrium a momentary and transitory state of existence.
Central to Minsky s analysis is the false equalization by financial theory of risk to uncertainty in advance capitalist economies This speculatively expansion and contraction by market participants leads to the cyclical and financial instability in the system unveiled by Keynes In his conclusion from 1975 Minsky emphasizes that the use of a trickle downward perspective in policy will result in a distortion of Keynesian tools for the socialization of investment risk over the social safety net by government, a prediction that the Great Recession, the Savings and Loan Crisis, and the Long Term Capital Management Bailout have illustrated in the experimental economical laboratory we know as reality Minsky concludes with the following statement But if capitalism is to be controlled so that the basic triad of efficiency, justice, and liberty is achieved, then the design of the controls will have to be enlightened by an awareness of what was obvious to Keynes that with regard to both the stability of employment and the distribution of income, capitalism is flawed A short and seminal read on the dynamics of financial markets and capital flows in our complex global economy.