Finance, distribution, and the role of government: heterodox foundations for understanding the crisis

Abstract

Heterodox economists have produced important theories and empirical analyses that helped to anticipate the 2007–2009 crisis and to critically evaluate the policies adopted in its wake. This brief note covers three such contributions: Wynne Godley’s analysis of seven unsustainable processes; Hyman Minksy’s work on financial fragility and “big government”; and neo-Kaleckian models of how income distribution affects aggregate demand.