A Veblenian View of Minsky's Financial Crisis Theory

Abstract

Compares and contrasts the views of Hyman P. Minsky and Thorstein Veblen concerning the systematic development of financial crises in capitalistic economies. Advances the argument that Minsky and Veblen have both successfully met the challenge of providing a reasonable explanation for the speculative mania and related excesses critical to any theory of cyclical fluctuations. They agree that upturns tend to euphoria and ultimately, over‐capitalization and subsequent economic decline. Their rationales differ. Veblen stresses the effects of rising prices on collateral values and argues that the cumulative effect is over valued assets. Minsky seems to emphasize the ever‐growing fragility of financial structures. In the view of the authors, this article places Veblen′s contributions in a contemporary setting and ties Minsky more closely to the institutionalists.

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