Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56965
Authors: 
Wray, L. Randall
Year of Publication: 
2011
Series/Report no.: 
Working paper, Levy Economics Institute 662
Abstract: 
This paper examines the causes and consequences of the current global financial crisis. It largely relies on the work of Hyman Minsky, although analyses by John Kenneth Galbraith and Thorstein Veblen of the causes of the 1930s collapse are used to show similarities between the two crises. K.W. Kapp's social costs theory is contrasted with the recently dominant efficient markets; hypothesis to provide the context for analyzing the functioning of financial institutions. The paper argues that, rather than operating efficiently the financial sector has been imposing huge costs on the economy-costs that no one can deny in the aftermath of the economy's collapse. While orthodox approaches lead to the conclusion that money and finance should not matter much, the alternative tradition - from Veblen and Keynes to Galbraith and Minsky - provides the basis for developing an approach that puts money and finance front and center. Including the theory of social costs also generates policy recommendations more appropriate to an economy in which finance matters.
Subjects: 
Hyman Minsky
Kapp
Galbraith
Veblen
coase
theory of social costs
efficient markets hypothesis
money
finance
social efficiency
social provisioning
shadow banks
financial innovation
casino capitalism
securitization
deregulation
self-supervision
JEL: 
B14
B15
B22
B52
E3
E12
E40
E42
E50
E51
E52
G14
G21
Document Type: 
Working Paper

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