"Instability is an inherent and inescapable flaw of capitalism."
Who said that?
No Googling etc.
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11 comments:
What did he/she say immediately after saying this?
Vivek, I don't know.
Oh, because that would be the interesting bit for me. As of now, it just reads like another way of saying "creative destruction". But if the author said something about how to deal with the destruction/instability, that could be illuminating.
I'll take a chance on the obvious folks: Marx or Schumpeter
Vivek: yep, perhaps just another way of saying the famous CD phrase. But he did go further (though I don't know if immdly afterward). Hint: some people are now looking back at his work and saying he was prescient about last year's financial calamity.
as: Neither, but he was a student of Schumpeter.
Minsky!
I'll go with Abi and say that it's Minsky. Not because I am familiar with Minsky, but because I read an article about him recently that ties in with your hint.
I suppose Al Capone is ruled out?
How I wish I could tell km "You got it, it's Al Capone!"
But no, it was Minsky. Hyman Minsky, the originator of what's called the "Financial Instability Hypothesis". An interesting man with interesting ideas, particularly wary of the implications of rising debt in an economy. Worth reading about, in these times.
I've been trying to find out, was he related to Marvin Minsky, the famed AI researcher? Anyone know?
Ok, I don't know much about Minsky but I do hate such soundbites.
If, by instability, Minsky means fluctuations in the level of economic activity, then I doubt that there has been any economic system -- even the "primitive" tribal economies -- which has been totally free of it. Our economy was and still is notoriously suspect to the vagaries of the monsoon. Good economic management can insulate us from the variability of the monsoon but only to a limited extent. Of course, bad management can make a bad situation worse as in the Bengal famine of 1943 when millions died not due to a lack of food but because available food did not reach those who were starving. This was Amartya Sen's point in his famous work on famines. Should one refer to weather induced economic fluctuations as the inescapable and persistent flaw in our traditional (and even our current) economy? Perhaps, but it's silly.
Presumably, Minsky is talking about the instability in the capitalist system caused by the financial system. True, the financial system is notoriously volatile and often doesn't function well -- we know that much now thanks to a bunch of research. Some part of the volatility is for understandable reasons. Our willingness to invest in a company or a country depends on what we expect to happen in the company or the country in the future. Unfortunately, "expectations about the future" can change in totally unpredictable ways, often depending on things which can be thought of as "irrational."
The volatility surrounding financial markets is why even so ardent an economic liberalizer like Jagdish Bhagwati -- he who wrote "In defense of globalisation" -- nonetheless makes one exception to his economic liberalisation agenda: financial markets.
If Minsky's quote is simply to caution those who think that they can somehow "tame" the financial system so that the capitalistic economy has no fluctuations whatsoever, then I take the point. But talk of "inescapable flaw" is silly. It makes for a good soundbite but little more.
Suresh, point about soundbites taken, but the blame for that rests with me. I've been reading a little bit about Minsky, and I just wanted to provoke a little discussion about him and his ideas, also because they've been getting some attention of late -- so I chose that line.
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