Stabilizing an Unstable Economy

A Twentieth Century Fund Report

Hyman P. Minsky

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Since the mid-1960s, the American economy has been characterized by increasing turbulence—with periods of financial instability, inflation, and rising unemployment, and a marked slowdown in the pace at which living standards improve.  Current economic theories—including orthodox monetarism and Keynesianism—cannot account for this turbulence.  A respected economist presents here a new and pathbreaking financial theory of investment to explain the behavior of the American economy and offers a series of recommendations for stabilizing it.


Hyman P. Minsky argues that economic instability is part of the normal operation of a complex market economy and not, as orthodox theory claims, the result of government incompetence or outside shocks.  But even though instability is inherent in the economy, says Minsky, its worst consequences—debt-deflation and a long and deep depression—can be contained or moderated by such appropriate interventions as big government contracyclical deficits and refinancing by the Federal Reserve acting as lender of last resort. 


Noting that, despite a series of deep crises, the current system has successfully avoided deep depression during the postwar period, Minsky contends that big government capitalism is more effective at maintaining stability than small government capitalism.  However, Minsky shows big government is responsible for recurring periods of inflation.  Therefore, he presents an agenda for reform that addresses the appropriate limits of big government and proposes an employment strategy, financial reforms, and regulation of market power.  His integrated program is designed to enhance the stability of the economy and provide a more equitable and hospitable path to progress.    

ISBN: 9780300033861
Publication Date: September 10, 1986
372 pages, 6 x 9 1/4

Sales Restrictions: All rights reverted