Hyman P. Minsky Archive


Open Access


Six, single-sided pages of hand-written notes on Keynesian critique of capitalism. While according to J Robinson “Marx is a socialist who analyzed capitalism,” and “Marshal is a Capitalist who analyzed Socialist," Minksy writes “Keynes is a capitalist who analyzed capitalism,” and “uncovered flaws in capitalism due to the very nature of capitalism.” Discusses Keynes work in the 1930s and his time spent in Chicago, among other things. Marked in black ink.


Text underlined in the transcription indicates a handwritten underline in the original document. Not transcribed are a number of small, one or two word notes marked in the margins of the pages.


Is “Keynesian Policy” still Viable?

Keynesian theory is not just a theory that validates “demand management” by fiscal policy.

J Robinson: Marx is a Socialist who analyzed Capitalism. Marshall is a Capitalist who analyzed Socialism. Keynes is a capitalist who analyzed capitalism.

But Keynes’ analysis of capitalism uncovered flaws in capitalism due to the very nature of capitalism.

The euphemism of “monetary production economy” rather than the honest description of what we have: a capitalist economy with complex financial structure in which the preferred organizational form is a corporation.

The New Deal Reforms of corporate law, financial market, and banking made clear the importance of the corporate sector]

Keynes was aware of what was going on in the states. He came to Chicago in 1931 to sell the analysis of the “Treatise on Money.” He left Chicago with the germ of The General Theory. In Chicago in 1931 Real estate + other assets were falling in price.

The problem for the banks of falling prices was the piece that resulted from the Chicago trip.

Instead of focusing on the relation between money and the price level the question became what determines the price level of capital assets: what determines the flow of financing for investment

The lost message of the General Theory: Keynes – which Keynes never fully recognized – although it is “explicit” in his Fisher Festschrift (?) paper + in his rebuttal to Viner. Also in his g,c,l arguments in the G.T. – He may not have shed all his “skins”.

Capitalism is an economic model in which 1) Those who control capital assets + firms have borrowed money to achieve this control 2) Capital Assets, firms, parts of firms are bought, sold + refinanced.

It follows that there are two price levels in a capitalist economy.

(1) the “conventional” cpi or gnp deflators [?]

(2) the price level of “existing capital assets”: of funds, stocks, subdivisions etc.

What happened during the great contraction of 1929-1933.

end result.

output ↓30%

price ↓30%

gnp→50% (.7 ∙.7= .49)

but Dow Jones, Standard + Poors → ↓85%

The Great Depression in the United States deceminated [sic] the wealth of [a] large section of the economy: Arthur Miller’s The Price as a preferred statement of the impact of the Great Depression: (Saw it in Cambridge Eng. at the Arts Theater which I believe was a gift of Keynes to Cambridge)

Why was there a great decline in the price level of capital assets

“Make positions by selling out positions” → drop in price of assets

Financial institutions → drop in value of institutions liabilities → Bankruptcy of Banks→ decrease in liquid assets of public

Stop financing lows.

Drop the value of assets below the cost of production of investment outputs

In a small government capitalism

a π = I = The value of the good cash flows the π’s

Pk = Present Values of Expected Product

Keynesian Policy

a) contain explosions of “liquidity” value while lower Pk

b) prevent a collapse of the numerators which drastically lower πrofit [sic]

In the First Real Test of The Viability of the Financial System in the late 1980-“1990”s:

Government refinanced “financial institutions” so that there was no need to “make position by selling out position” i.e. prevent a drastic fall in price of assets underlying Bank assets.

So called “Keynesian” demand policy in truth is “Hansonian”

Belief in the exhaustion of investment

→emphasis upon “consumption”; i.e. transfer payments, the so called entitlements.

In K’s days G as big as % of G.N.P. as we now have was “off limits”. H. Simms’ radical position called for G that is 10% GNP financed by progressive income tax to reduce the disparity of incomes.

  1. government big enough to maintain π when I + (trade balance) do not maintain π

Keynesian Policy:

Investment invites (?) spending above + beyond the “operating element” of G.

Sustain price of assets so that demand for investment is sustained

Big inefficient


Casey Asprooth-Jackson