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A thoughtful and timely but frequently abstruse brief for the proposition that government big enough to make a difference is a must if a capitalist economy like that of the US is to be kept on a tolerably steady course. In his text (prepared under the aegis of the Twentieth Century Fund), Minsky (economics professor at Washington University in St. Louis) takes impartial exception to monetarists, orthodox Keynesians, and other doctrinaire theorists. To illustrate, he argues that instability is an integral and normal element in a complex market economy, not invariably the result of official incompetence or external jolts. Nor, according to the author, were the near disasters that have periodically convulsed the banking/financial system since the 1960's quite what Adam Smith had in mind when he suggested that the pursuit of self-interest leads to market equilibrium. The point, for Minsky, is to stave off or alleviate the worst-case consequences of instability--deep depressions, credit shortages, etc.--with appropriate forms of intervention. Among other possibilities, he cites contracyclical budget deficits and refinancing by the Federal Reserve as a lender of last resort. The author warns, though, that there's a down-side to the government's presence--chronic inflation. In closing, Minsky offers a reform agenda that proposes definite limits to the regulatory powers and authority of government as well as an industrial policy to curb the market sway of major corporations. He's at pains, however, to emphasize that his program is mainly a basis for discussion. Any restructuring ""will enjoy only transitory success,"" the author observes; eventually, the inherent instabilities of capitalist finance will push the system close to a new breaking point requiring responsive containment. In making this case, Minsky shrinks from neither complex algebraic equations nor the verbal arcana of his profession, e.g., ""banking as an endogenous destabilizer,"" which ranks among the more accessible examples. In purely economic terms, then, lay readers may not find the potential gain worth the cost.

Pub Date: May 14th, 1986
ISBN: 0071593004
Publisher: Yale Univ. Press