Minsky and Kindleberger – an explanation of financial crises

In an often cynical world, standard financial and macroeconomic quantitative models give people the benefit of the doubt. Fundamental economic theory assumes the best of us, supposing that human beings are perfectly rational, know all the facts of a given situation, understand the risks, and optimize our behavior and portfolios accordingly. Reality, of course, […]

via Why Minsky matters — LARS P. SYLL

Inequality, credit and financial crises: establishing a link

Rising inequality of income and wealth has been a much documented trend in the richest countries during the last three decades. Free-market economists have readily embraced this as necessary for improved economic performance, claiming that it improves individual incentives to work, invest and create wealth. The benefits are held to ‘trickle-down’ to all levels of society.

Even if this analysis is correct, there are other economic forces creating more complex chains of causation when it comes to the impact of inequality. Incentives matter, but can be affected by many factors. Continue reading