Minsky Moments, Russell Chickens and Grey Swans: The Methodological Puzzles of Financial Instability Analysis

Although Minsky’s FIH has been discussed and extended by many scholars since its inception, it is not yet a full-fledged theory as a precise specification of the relationship between some of the crucial variables is still missing or remains largely implicit (a critical survey of much of the literature may be found in Tymoigne, 2006). For that reason Minsky has been often accused of ‘implicit theorising’ (see in particular Tobin, 1989). In this view the theoretical axioms are not clearly spelled out and their implications for explanation and prediction are insufficiently argued (Toporowski, 2005, 2008). For that reason most academic economists dismissed the FIH, although a few high-level practitioners continued to consider it quite relevant for their choices. In our opinion this is a non sequitur. We have to take seriously the criticism of implicit theorising but from it we should draw conclusions quite different from those of many Minsky’s critics. Implicit theorising is typical of new revolutionary theories (in the sense of Kuhn, 1970).