Landlords grow rich in their sleep without working, risking or economising
John Stuart MillRead
Unless we understand what it is that leads to economic and financial instability, we cannot prescribe -- make policy -- to modify or eliminate it. Identifying a phenomenon is not enough; we need a theory that makes instability a normal result in our economy and gives us handles to control it.
Interpretation
What this quote means
Understanding the root causes of economic instability is essential for creating effective policies to manage it.
Hyman Minsky emphasizes the importance of not just identifying economic and financial instability, but also understanding the underlying theories that explain why such instability occurs in the economy. Without this deeper comprehension, any policies aimed at controlling or mitigating instability will be ineffective, as they would lack the necessary foundation to understand the mechanisms at play.
Themes
Economic InstabilityPolicyTheoryControlUnderstanding
In practice
Example use cases
In a discussion about the 2008 financial crisis during a seminar on economic theories.
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