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Introduction: A Manual with Attitude

Technically, this book is a free companion to The New Economics: A Manifesto (Keen 2021)— hereinafter referred to as Manifesto —with two main functions:

  • To explain the Minsky models in Manifesto ; and
  • To be a manual for the Open-Source system dynamics program Minsky , which features prominently in Manifesto .

In practice, it has developed a 3rd function: it’s somewhere for me to rant about issues that I didn’t get to cover in Manifesto . This was partly for reasons of lack of space: the publisher’s guidelines limited the book to just 25,000 words. But it’s mainly because the audience for Manifesto was very broad, whereas the intended audience for this book is very narrow: I want to reach young economists who wish to construct realistic dynamic models of capitalism.

The main rants are:
  • That Bill Phillips (of the Phillips Curve) was a far greater economist—and person—than the mainstream economics caricature of the Phillips Curve has made him out to be;
  • That economists should stop modelling in “discrete time” or periods, and instead should model in continuous time, using differential equations; and
  • That “Loanable Funds”, Paul Krugman’s preferred model of banking, is utterly misleading about the role of banks, debt and money in macroeconomics.

There’d be a lot less text to read if I treated this as a standard “how to” manual for Minsky itself, which is what I would do if Minsky were just another, better way to do what you—an established or nascent economic modeler—are currently doing with different tools. But that’s not the case, even for Post Keynesian economists who are currently working in the Godley and Lavoie stock-flow consistent tradition. For those who’ve only been exposed to or developed Neoclassical models, whether that’s the old-fashioned IS-LM and AS-AD models, or the currently dominant practice of DSGE modelling, Minsky does not and indeed cannot do what you currently do—and I want to persuade you that this is a good thing .

Minsky is a system dynamics program. It works only in continuous time—not “periods”: see section 6.2 (starting on page 69) for the rant about why Minsky does not use “periods”—and it is designed to model systems that operate far-from-equilibrium, rather than systems that are assumed to return to their equilibrium values after an exogenous shock. Its unique feature, the “Godley Table”, enables the correct modelling of monetary dynamics, which are absent from mainstream economic models. Each of those facets of the program, and several others, reflect the needs of an approach to modelling that I believe is superior to the dominant methods in both Post Keynesian and Neoclassical economic modelling.[1]

The key foundation here is its use of system dynamics . “System” means an interacting set of factors that cannot be understood in isolation from one another. This puts it in the category that Neoclassicals call “general” as opposed to “partial”. But for Neoclassicals, “general” goes hand in hand with “equilibrium”, whereas the second word in the phrase “system dynamics” transcends “equilibrium”. An equilibrium is a state that a system can be in, but, in all likelihood, the interacting forces in a system will be such that its equilibria are unstable , so that they therefore describe conditions that the system will never display.

System dynamics models in general demonstrate the behaviour of a system of equations that the modeler believes mimic the behavior of a real-world system which changes over time. There are many other system dynamics programs out there—Stella, IThink, Vensim, Modelica, AnyLogic, Matlab’s Simulink, Wolfram’s System Modeler, Insight Maker, to mention but a few. What distinguishes Minsky from the pack are its “Godley Tables”, which are designed to make it easy to model the dynamics of monetary systems. System dynamics itself can be challenging, and it involves many concepts that may be foreign to you when you first use such a program. But Godley Tables are easy: if you have used a spreadsheet, you can design a model of a monetary system using Godley Tables.

Minsky is also Open Source, which means that (a) it is free and (b) its source code is available for anyone for anyone to inspect and, if they wish, modify.

To use Minsky , you first have to download it from one of its online repositories. The main site is SourceForge (https://sourceforge.net/projects/minsky/), and it is also available for more technically savvy users at https://github.com/highperformancecoder/minsky. The SourceForge system recognizes the operating system of the computer you’re using to access SourceForge, and delivers the appropriate version: Windows builds for windows users, Mac builds for Mac users and source code tarballs for anyone else. For most popular Linux distros, a prebuilt packaged Minsky is available from the OpenSUSE Build Service (OBS):

https://software.opensuse.org//download.html?project=home%3Ahpcoder1&package=Minsky

In this manual I exclusively use the Windows version of Minsky , which, at the time of publication of this book (31st December 2021), is version 2.35. This version has a vast number of improvements over the previous release, thanks to a £200,000 grant from the Friends Provident Foundation of the UK. The next major release—expected sometime in 2022—will implement Minsky’s user interface in Javascript , rather than its current GUI of Tcl/Tk.[2]

Pre-release versions of Minsky are made available as “betas”, to enable users to test extensions to the program out before a final release. User feedback is an essential part of the software development process, and we’d be delighted to have you help us out by testing the new versions, reporting bugs, suggesting improvements to features, etc. If you’d like to assist us in this work, please download MinskyBeta from https://sourceforge.net/projects/minsky/files/beta%20builds/ and sign up to the beta-testers program at https://sourceforge.net/p/minsky/mailman/. Both release and beta versions of Minsky can be installed at the same time.

Footnotes

1 That’s not to say that Minsky is without shortcomings of its own. There are many features I’d like to add to Minsky that I currently lack the funding to implement.

2 Tcl/Tk (see https://www.tcl.tk/) enabled the rapid development of Minsky with the initial grant from the Institute for New Economic Thinking (INET: https://www.ineteconomics.org/)—see https://www.ineteconomics.org/research/grants/extending-macroeconomics-and-developing-a-dynamicmonetary-simulation-tool. The port to Javascript will enable Minsky to run in a browser, and it will also enable us to make the program’s graphics more consistent with standard Windows programs.