The illusions of the "new consensus" in macroeconomics: a Minskian analysis

Abstract

The present crisis raises some crucial questions about the foundations of the currently hegemonic model of conventional macroeconomics. This paper argues, from a Minskian viewpoint, that the "new consensus" in macroeconomics cannot be the basis for fruitful research on the behavior of the financial model of capitalism in which we live and for drawing useful economic policies to stabilize it. It shows that the most important problem is the relegation of key institutions, which entrap the economic profession and the policymakers into a self-regulated financial markets illusion and a fine-tune illusion. Macroeconomic research urgently needs to escape from conventional beliefs and preconceptions that minimize the realism of macroeconomic theory and policy.

Keywords:

• macroeconomics
• institutions
• money
• finance
• asset pricing
• financial instability hypothesis
• fine-tune economic policy