Nobel Laureate Edward Prescott claimed in 1999 that capitalism is inherently stable, and "absent some change in technology or the rules of the economic game, the economy converges to a constant growth path with the standard of living doubling every 40 years". 30 years earlier, the maverick economist Hyman Minsky made the opposing claim that "capitalism is inherently flawed, being prone to booms, crises and depressions" and that this instability "is due to characteristics the financial system must possess if it is to be consistent with full-blown capitalism". In this lecture I provide an incontestable way to compare the two arguments--with Minsky coming out on top.
