Microfoundations for the Vision of Minsky

Delli Gatti starts where his dissertation advisor, Hyman Minsky, left off. With tools from network theory and agent-based modeling, he simulates the economy as enormous web of credit relations. He says agent-based models can capture a simple idea that traditional macro models could not: when a business fails to pay, its creditors may fail to pay — that’s interaction — threatening to shake the entire web of credit relations. The microfoundations are a step beyond Minsky, the interaction is a step beyond the representative agent — this is new economic thinking.

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