Re: Minsky, FIH, and stability

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Response to Paul Davidson:
     This is in regard to the question of "what about Germany
and Japan" (I'll stay away from the NIC's specifically, other
than to note that they fit in partly as a spinoff of Japan).
     With respect to Germany, first of all there was no
"wirtschaftwunder" in the 1980's.  Average annual growth rates
between 1979-1987 were 1.5%.  The much discussed "miracle" was
the jump in industrial production of _50%_ (!) in 1948 following
the price and monetary reforms with a 25% increase in 1949.  Such
numbers were what underlay many of the pollyanna predictions
about what would happen after German reunification.  The last year
that the FRG had a double digit GDP growth rate was 1955, although
it got as high as 8.2% in 1969.
     I would submit that the recent recession in Germany and in
Europe at least partly reflects a "coordination failure," both
of investment and of policy, especially the latter.  In particular
the unexpected costs of reunification have drained investment funds
into the former GDR and triggered the extremely tight monetary
policy of the Bundesbank which has devastated Europe's economy
as a whole.  The latter has been opposed by most other European
policymakers.  Looks like "coordination failure" of a sort to me.
     With respect to Japan, I think the issue of nonlinearity is
more relevant.  The Japanese are known to have pursued a strategy
of attempting to take advantage of economies of scale as well as of
various network externalities through MITI coordinating policies.
Substantial portions of their success (plus playing a Gerschenkronian
technological catchup game) can be attributed to these factors.  The
end of the boom came with the 1) catching up technologically,
2) running out of such economies of scale, both internal and external
(the most interesting nonlinear models involve such alternations of
economies and diseconomies of scale) and 3) almost certainly an
investment overshoot that any decent Kaldor-Goodwin-Keen type nonlinear
investment response functon will generate.
     Further discussion of these cases can be found in the forthcoming
from Irwin book by me and my wife, Marina Vcherashnaya Rosser,
_Comparative Economics in a Transforming World Economy_.
     I could not agree more that many of these issues were "solved"
by nineteenth century economists, although often treated as weird
cases and relegated to footnotes or appendices.  In my 1991 book I
trashed Marshall as "Mr. Continuity," in contrast to Marx and Schumpeter.
But at the same time it was certainly Marshall who first understood
the possibility of multiple equilibria, did much to underscore the
significance of economies of scale, and even in an astounding passage
on p. 346 of the 1920 (8th and last) edition of his _Principles of
Economics_ foreshadowed the possibility of chaotic dynamics.  Yes,
the "esoteric goop" has been with us for a while.  I think the
difference now is that it is being brought more front and center,
although clearly you have serious doubts as the whether or not this is a
Good Thing.
      Hope your day is good enough that you get thawed out!
Barkley Rosser
James Madison University