This chapter looks at how the now well-known institutional investment approaches to adding value, such as diversification, evolved in the late nineteenth century and first half of the twentieth century. The chapter explores how ways to optimize returns while minimizing risk for long-term...

While Keynes is known for his theory of normal backwardation in futures markets, he is less known as a trader in these markets. The question arises whether his theory acted as a guide to his trading activity or, rather, whether it was his trading activity that shaped his theory. Backwardation...

Karl Marx's (1818-1883) analysis of the capitalist system in Capital, Vol. I memorably inferred that the system's fragility is rooted in "real" causes. Marx also analyzed significant contributing causes entrenched in the banking and financial spheres in Capital, Vol. III and other writings. The...

This chapter explores Keynes’s monetary thought with a focus on financial instability and crises. Keynes’s early monetary work, Indian Currency and Finance (1913), shows his keen concerns for financial instabilities and his appreciation of central banks’ lender-of-last-resort role. In his...

Kalecki explained debt resolution by means of a fable about monetary circulation between mutually indebted individuals. This chapter generalizes the processes of debt payment in that fable to show how interest and debt payments depend on the financial circulation of money, rather than profits or...

The recent financial crises were preceded by a prolonged and sharp increase in inequality. This brought to the fore the possible relationships which may exist between the distribution of income and instability. As financial crises are typified by excessive risk-taking behaviour, we will argue...

This chapter looks at US household sector micro data since 1989, to explore the relation between income inequality and financial fragility from a macro perspective. In contrast with a portfolio (and wealth inequality) approach to household financial instability, which focuses on the investments...

Both classical and Keynes's theories of effective demand posit that capital accumulation is driven by the expected net rate of profit (i.e., by the difference between the expected rate of profit and the interest rate). In both schools, an increase in the interest rate will reduce the net rate of...

The paper aims to investigate how the macro agent-based literature, which has developed intensively since 2000, analyzes the issue of financial instability. Within this new paradigm, attention is focused on two research communities engaged in researching this question: the Keynes and Schumpeter...

New Keynesian Economics that rely on the DSGE technology has been criticized as being hopelessly inadequate for dealing with financial crises of the type that we have seen in recent years or - more generally - with failures of the intertemporal price mechanism to coordinate investment and...