By J.D. Alt
The commentary on one my recent posts included the following statement: “It’s a fallacy of composition to imagine that what we can’t afford individually is affordable collectively.”
I cannot get this sentence out of my mind. It seems to pinpoint a central cognitive dissonance that enshrouds our thinking about money. The common-sense logic of the phrase seems to say, at first glance, that if each citizen of a nation cannot afford to pay for, say, a road from village A to village B, then collectively they cannot afford to pay for it either. However, if they pooled their money, with each citizen putting in a little bit, it seems clear they might be able to collectively cover the cost. So the person who wrote the comment cannot have intended to mean what, at first glance, the sentence seems to say. They must have meant something deeper.
American economist Hyman Minsky died in 1996, but his theories offer one of the most compelling explanations of the 2008 financial crisis. His key idea is simple enough to be a t-shirt slogan: “Stability is destabilising”.
BBC Radio 4’s Analysis program has an episode on Minsky and looks at topics such as:
- In the aftermath of the financial crisis, why did Minsky die an outsider?
- What do his ideas say about the response to the 2008 crisis and current policies like Help to Buy?
- And has mainstream economics done enough to respond to its own failure to predict the crisis and the challenge posed by Minsky’s ideas?
A big MMT thanks to Donna D’Souza aka Trixie aka @HaikuCharlatan. She has done an awesome job of animating J.D. Alt’s wonderful new ebook Diagrams & Dollars: Modern Money Illustrated. For your viewing enjoyment, Donna’s video is below.
Conference dates have been announced for September 25-28, 2014 in Kansas City MO