[...] Where Keynes in the 1930s concentrated on dysfunctions of unemployment, Minsky in the 1970s focused on dysfunctions of inflation and asset price bubbles.

The underlying point is the same. There is no reason that the rational pursuit of individual self-interest on financial markets will generate a rational outcome for the system as a whole. There is no financial invisible hand.

But for Minsky in 1975, a stabilized capitalism would not be enough: the market also failed “in that it leads to a socially oppressive distribution of wealth.” A stable market may allocate efficiently, but efficiently much to the rich and efficiently little to the poor. “Acceptance of the market mechanism as the determinant of the direction of employment may rest upon a prior short-circuiting of the market distribution of income.”

Minsky’s Keynes saw this too and looked forward to the “euthanasia of the rentier,” but thought it would be all too easy. Keynes believed that returns to capital would diminish as wealth became abundant — in other words, there was a tendency for the rate of profit to fall. Rewards for mere wealth-holding would dwindle away. In fact, this was what would call for the “somewhat comprehensive socialization of investment”: the profit motive would dwindle away with it.

Alas, said Minsky, it was not so simple. Keynes thought capital would reach a saturation point because he mistakenly believed people would eventually be sated with commodities, at least commodities produced with substantial investments of capital. Rather than “philosophy and culture,” the rich continued to find new capital-intensive bundles of goods to desire and “their example filtered down to the not so rich.” Wave after wave of technological novelties hit the shops in the decades after World War II, while state contracts for capital-intensive weaponry continued to mount. There was no guarantee that capital would ever become abundant enough to wipe out returns from holding wealth. (This point, incidentally, was straight from Lange.)

Minsky thought that preferences might evolve in the direction of leisure and culture over gadgets and energy, but that this would be much more likely to happen in a society that was already egalitarian.