Minsky's theories

Minsky's theories focus on how financial markets and economies are inherently unstable due to human psychology and institutional behaviors. He argued that people and institutions often take on increasing risks during boom periods, fueled by optimism and the belief that gains will continue. When confidence wanes, markets can rapidly decline, leading to economic crises. His “Financial Instability Hypothesis” suggests that economic stability breeds instability, as periods of prosperity encourage risky financial behavior that eventually causes downturns. Overall, Minsky’s work highlights the importance of understanding financial behaviors and risks to prevent or manage economic collapses.