Newsletter October 08: Can Hyman Minsky’s instability theory explain today’s global financial turmoil?

One indicator of the general dissatisfaction with mainstream explanations for the current crisis, and a search for alternative policy prescriptions, is the renewed interest over recent months in the ideas of the late Hyman Minsky, a heterodox US economist who died in 1996. He argued that the financial system is fundamentally unstable, with inevitable booms and busts; and he developed a model of the credit system, known as the “Financial Instability Hypothesis” (FIH).