ABSTRACT
Introduction This chapter makes two abstract theoretical arguments and one empirical one. The first theoretical claim advanced here concerns the nature of heterodoxy in economics. All economic theories define both the primary actors and forces that constitute any society’s economic relations, and propose some vision of the successful reproduction of these relations. Usually successful reproduction is equated with stable growth. Some theories embed the assumption that if a given set of economic relations can achieve stability or balance, it can, if left undisturbed, sustain stable growth. Other theories embed the assumption that the possible breakdown of stable growth is endogenous: a crisis in reproduction is immanent in the very nature of economic relations. This distinction – the exogeneity or endogeneity of the possibility of crisis – defines the difference between heterodox and orthodox approaches to economic theory. The second theoretical claim advanced here is that heterodox theories are more robust when they encompass the possibility that stable growth can be undermined, and crisis can emerge, for different reasons. A multidimensional approach, which encompasses several possible avenues in which economic relations can break down, is contrasted here with unicausal approaches in general and, in particular, Minsky’s single factor crisis mechanism. An empirical argument is then made, using a stylized rendering of aggregate US empirical evidence. Specifically, it is shown that Minsky’s ideas about what causes crisis, and about what policy measures can overcome crises, are largely consistent with these data through 1980; but after 1980, his specific theoretical/ policy approach are inconsistent with the data. Minsky remains a protean figure in heterodox theory because he insists so strongly that instability will invariably emerge from stability – a lesson that non-heterodox thinkers never seem to learn. But a multifaceted approach provides a surer framework for understanding the trajectory of lived crises, from the profit-squeeze episodes of the 1960s and 1970s to the global liquidity meltdown of the present day.
