DISCUSSION.

This article presents comments on papers by economists Frank de Leeuw and Hyman P. Minsky. De Leeuw's paper is a very impressive one. He not only displays a mastery of monetary theory and statistical technique but also shows considerable artistry in the construction of his model. He has managed to include in his model the main institutional features of the complex financial system of the U.S., while keeping the scale of his model down to manageable proportions. Anyone who has tried his hand at realistic financial analysis will realize that is in itself a considerable achievement. Minsky's paper is an equally interesting one, though entirely different both in style and content. He argues that the ratio of debt to income tends to rise progressively during a long period of prosperity interrupted only by minor recessions. The increase in debt ratios may operate as a drag on the rate of investment and slow down or bring to a halt the growth of demand. Of course, the system may simply move toward an equilibrium debt income ratio and continue to grow to scale. The effects of debt on the system are analogous to those of accumulating capital in simple capital-stock-adjustment models.