William Janeway writing at Project Syndicate, May 22:
Although Hyman Minsky’s version of John Maynard Keynes’s economics had a minimal impact on the mainstream during his own lifetime and in the years following, its central insights remain as relevant as ever. Both men understood that economic theory cannot get away with ignoring the fact of uncertainty.
CAMBRIDGE—Consideration of economic and financial conditions today calls to mind the economic theorists who most influenced my own thinking, as an academic and as a venture capitalist: John Maynard Keynes and Hyman Minsky. Their relationship, though virtual, is essential. It was Minsky who revealed the profound conflict between “the economics of Keynes” and the “Keynesian economics” that dominated the teaching and practice of macroeconomics for at least a generation, and which remains embedded in contemporary “New Keynesian” models of the economy.
Minsky completed his doctorate at Harvard under the supervision of Joseph Schumpeter, whose concept of “creative destruction” illuminated how technological innovation drives economic transformation, and emerged as a “heterodox economist”—a dissident from the prevailing Keynesian doctrine developed at MIT by the Nobel laureates Paul Samuelson and Robert Solow.
Based at Washington University in St. Louis for much of his career, Minsky developed a reading of Keynes’s work that contrasts fundamentally with that formulated by Samuelson and Solow. In their Neoclassical Synthesis, Keynesian macroeconomic policy would ensure that resources are fully employed. Then the traditional neoclassical microeconomics of efficient markets could be deployed, devoid of the uncertainty that pervades Keynes’s own work. The economist Joan Robinson called this “Bastard Keynesianism.”
I myself was sufficiently immersed in Keynes’s own thinking that, rather than teach the Neoclassical Synthesis, I embarked on a 35-year sabbatical as a venture capitalist. My one significant brush with academia in these years was when I met Minsky in the mid-1980s. The relationship deepened when he joined the Levy Economics Institute, conveniently close to New York City. Minsky sponsored a paper I presented to the Annual Meeting of the Association for Evolutionary Economics in December 1985.
That paper, “Doing Capitalism: Notes on the Practice of Venture Capitalism,” examined the differing profiles of the “financial agent” in the works of Fernand Braudel, Karl Marx, Schumpeter, and Keynes, drawing parallels between each and the role of the modern professional VC investor. It served as the seed that would grow into Doing Capitalism in the Innovation Economy, which I published almost 30 years later, in 2012. Still following where Keynes had led, I focused on the economics of innovation, where investment at the frontier of technology necessarily takes place under conditions of radical uncertainty and volatile financial conditions.
As L. Randall Wray shows in his excellent 2015 book, Why Minsky Matters, Minsky’s most important message is that economists’ fixation on defining equilibrium conditions evades a central, existential truth: stability is itself destabilizing. Minsky set out to explain what he identified as Keynes’s “investment theory of fluctuations in real demand and a financial theory of fluctuations in real investment.” He began by walking carefully through “the conventional wisdom, the standard interpretation of Keynes,” which had served to obscure what Keynes had achieved and derailed the revolution in economic theory he had launched.
Throughout his 1975 book, John Maynard Keynes, Minsky repeatedly cites Keynes’s invocation of uncertainty as the fundamental factor conditioning economic and financial decisions. “Keynes without uncertainty is something like Hamlet without the Prince,” he observed. As Keynes himself had emphasized in a 1937 commentary for the Quarterly Journal of Economics, uncertainty is effectively an ontological condition of the universe:
“By ‘uncertain’ knowledge … I do not mean merely to distinguish what is known for certain from what is only probable. … The sense in which I am using the term is that in which the prospect of a European war is uncertain, or the price of copper and the rate of interest twenty years hence, or the obsolescence of a new invention, or the position of private wealth owners in the social system in 1970. About these matters there is no scientific basis on which to form any calculable probability whatever. We simply do not know.”
What Money Does
This argument moves from metaphysics to the sublunary plane of financial economics as soon as Keynes (and Minsky) turns to money. It is all very well to note the convenience that money offers as a medium of exchange, eliminating the simultaneous “coincidence of wants” that would otherwise be necessary to motivate trade. But why hold money as an asset, as something to hoard, when it yields no income? “Why,” Keynes asked, “should anyone outside a lunatic asylum wish to use money as a store of wealth?” The answer, of course, is that it provides insurance against all that cannot be known in advance.
Money is unique among assets for its extreme liquidity, which complements its lack of return....
*For what it's worth, we are fans of Janeway:
William Janeway: "Productive Bubbles"
"The Rise of Mesoeconomics" - William H. Janeway
In our last visit with Bill Janeway, "The Forgotten Origins of Silicon Valley" - William H. Janeway, I didn't mention that he is not your typical pointy-headed academic. Here's his mini-bio at Cambridge Uni.:
Ambassador for Cambridge Judge Business School
Senior Advisor & Managing Director, Warburg PincusDr William H Janeway is a Senior Advisor and Managing Director of Warburg Pincus. He joined Warburg Pincus in 1988 and was responsible for building the information technology investment practice. Previously, he was Executive Vice President and Director at Eberstadt Fleming. Dr Janeway is a director of Magnet Systems, Nuance Communications, O’Reilly Media, and a member of the Board of Managers of Roubini Global Economics. He is a Visiting Lecturer in Economics at the University of Cambridge and Princeton University.....
Also November 2025's ""In Search of the AI Bubble’s Economic Fundamentals" by William H. Janeway".
