ProfSteveKeen | Rising Debt Causes Economic Crises @ProfSteveKeen | Uploaded August 2024 | Updated October 2024, 10 hours ago.
Neoclassical economists ignore the instability of capitalism.
This is a common belief.
Many think capitalism is a stable system.
They believe markets naturally find equilibrium.
But this is fundamentally wrong.
Hyman Minsky showed us that rising debt leads to economic crises.
His insights reveal that debt accumulation creates instability.
When debt rises, so does risk.
The more we borrow, the more vulnerable we become.
This isn't just theory; it's history.
Look at the Great Depression.
Debt levels soared while economic activity plummeted.
The result? A catastrophic collapse.
So, what should we believe instead?
We must abandon equilibrium models.
Instead, we need dynamic, far-from-equilibrium approaches.
This perspective recognizes the real-world complexities of capitalism.
It acknowledges that economies are not static.
They are constantly in flux, influenced by human behavior and external shocks.
This is crucial because ignoring these dynamics leads to disastrous policies.
For instance, the belief in market self-correction can delay necessary interventions.
When crises hit, the fallout is severe.
People lose jobs, homes, and livelihoods.
The economy doesn't just bounce back.
It requires thoughtful, proactive measures to stabilize.
By embracing a more realistic view of economics, we can better prepare for future challenges.
We can create a system that acknowledges risk and promotes resilience.
In doing so, we safeguard not just capitalism, but society itself.
The stakes are high.
Ignoring instability is no longer an option.
It's time for a paradigm shift.
Neoclassical economists ignore the instability of capitalism.
This is a common belief.
Many think capitalism is a stable system.
They believe markets naturally find equilibrium.
But this is fundamentally wrong.
Hyman Minsky showed us that rising debt leads to economic crises.
His insights reveal that debt accumulation creates instability.
When debt rises, so does risk.
The more we borrow, the more vulnerable we become.
This isn't just theory; it's history.
Look at the Great Depression.
Debt levels soared while economic activity plummeted.
The result? A catastrophic collapse.
So, what should we believe instead?
We must abandon equilibrium models.
Instead, we need dynamic, far-from-equilibrium approaches.
This perspective recognizes the real-world complexities of capitalism.
It acknowledges that economies are not static.
They are constantly in flux, influenced by human behavior and external shocks.
This is crucial because ignoring these dynamics leads to disastrous policies.
For instance, the belief in market self-correction can delay necessary interventions.
When crises hit, the fallout is severe.
People lose jobs, homes, and livelihoods.
The economy doesn't just bounce back.
It requires thoughtful, proactive measures to stabilize.
By embracing a more realistic view of economics, we can better prepare for future challenges.
We can create a system that acknowledges risk and promotes resilience.
In doing so, we safeguard not just capitalism, but society itself.
The stakes are high.
Ignoring instability is no longer an option.
It's time for a paradigm shift.
