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The work of Hyman Minsky represents an important link between Post Keynesians and Institutionalists. This essay begins with a brief summary of Minsky's early work, including his well-known financial instability hypothesis and his policy proposals designed to reform the financial system. It then moves on to discuss other proposals that are less well known, and developed after the publication of his Stabilizing an Unstable Economy (1986) book. One of them in all the work of Minsky is his demand that theory be institution-specific. Because there are a variety of possible types of economies, theory must be appropriate to the specific economy under analysis. His analysis concerned an evolving, developed, big-government capitalist economy with complex and long-lived financial arrangements. His policy recommendations were designed to promote a successful, democratic form of capitalism given these financial arrangements. These policies would have to 'constrain' instability through creation of institutional `ceilings and floors' while at the same time addressing the behavioral changes induced by reduction of instability. The policies would also have to promote rising living standards, expansion of democratic principles, and enhancement of security for the average household.
1. Introduction
Hyman (Hy) Minsky was born in Chicago on 23 September 1919 and died in Rhinebeck, New York, after a year's battle with pancreatic cancer, on 24 October 1996. The influence of Oscar Lange, Paul Douglas, Jacob Viner, Frank Knight and Henry Simons, all members of the University of Chicago economics faculty in 1937 when Hyman Minsky was an undergraduate there, played a pivotal role in reinforcing his interest in studying economics, even though his BS degree was in mathematics. The courses and seminars taught by the `Chicago greats', his friendship with Gerhard Meyer and Abba Lerner as well as the socio-economic environment of his youth contributed to Hy's decision to further his education in economics, which he did (after a number of years of involvement in the US Army serving in New York, Britain and Germany) at Harvard, where he earned his master's and doctoral degrees (Minsky, 1985). At Harvard, he asked Joseph Schumpeter to be his doctoral supervisor, which surprised Alvin Hansen, since Hy had been teaching assistant for the money and banking course that Hansen taught. As it turned out, however, Hy finished the thesis...