Integrating Schumpeter and Keynes: Hyman Minsky’s Theory of Capitalist Development

Abstract

In a number of books and articles, Hyman P. Minsky influenced many of today's institutional and Post Keynesian economists. In fact, Minsky often chose the pages of this journal as the place to present and extend his Wall Street paradigm, financial theory of investment, and investment theory of business cycles, the latter of which is often called the financial instability hypothesis (FIH). Those contributions have all received significant attention in recent years, along with Minsky's writings on what might be called the secular (multi-cycle) dimension of the FIH.1 What has gone almost entirely unnoticed, however, is that during the last decade of his life Minsky adopted, and sought to develop and explore, an even more historical approach to economic analysis-a theory of capitalist development. This article seeks to prompt professional consideration of Minsky's theory of capitalist development by explaining and presenting it. The article begins by describing Minsky's interest in such a theory. The theory is then outlined, both in terms of its essential elements and as it applies to the US economy. Directions for future research are also identified.