Money and Business Cycle: Hyman Minsky and the Austrian School

Since the Great Recession in 2008, the ideas of Hyman Minsky and the Austrian School have been revived, and often compared to the extent that Minsky was allegedly born out of the Austrian School. This comparative study shows that although Minsky and Austrian School both conceive an economic vision of credit driven economic prosperity and depression, and follow many similar methodologies in explaining this vision, there are fundamental differences between the overall economic visions they conceive, that is, the origin, inducing factors, development process and mechanism of economic cycle and instability. These visionary differences result in diametrically opposite policy positions and orientations, as well as distinct methodological differences. In fact, these divergences and differences highlight a deeper theoretical divide in the nature of money. Thus, far from being born of the Austrian School, Minsky is a post-Keynesian. Combined with their insights on money and business cycle, they have important theoretical enlightenments for preventing systemic financial risks and improving macroeconomic governance in China.