Minsky Moment

Hyman Minsky was an obscure microeconomist who died 10 years before the recent economic crash, but he predicted it as a natural outcome of Keynesian economics. In reading Keynes' works, Minsky came to the conclusion that unmonitored capitalism was unstable and would lead to crashes just like the one we have suffered. The Boston Globe has an excellent article about his theories and how they predicted the recent financial collapse. Read it here.

Did he have suggestions about how to recover from economic recession? He did. Just as the government became the lender of last resort to failing financial institutions, Minsky suggested that the government also become the employer of last resort, offering minimum wage jobs to anyone who wanted one. Workers could provide basic services such as childcare, street cleaning, etc. He felt it would significantly lower welfare costs and would keep higher-skill job salaries from plummeting. This plan contains socialistic elements which are unpalatable to most conservatives and many moderates.

An article from Mises Institute counter-argues that federal regulation of the banking industry is what led to our crisis. However, a totally unregulated market is unpalatable to most liberals and many moderates.

What's behind door #3, Monty?