and the model in the “Thimble” paper on the Research page is a first pass at this. I’ll be going much further in the book I hope to get back to writing next year, once this crazy semester is over.

What I understood from your articles is that this is one of your main charges as well. And if I understood correctly you are trying to make a model which would reflect those complex relationships.

As I said I’m not a specialist, but I do feel for a long time that current problems could be (partly) attributed to our banking system, our money and creditsystems and our government. A lot is written nowadays about inflation or deflation but as far as I know no models could reliable predict these outcomes today.

Do you think that such models could be built ?

But despite their proper position that a capitalist economy is never in equilibrium, and that a market economy is the best way to handle incomplete information, etc., they also seem to contradict this with the belief that the economy is never far from equilibrium either, and that somehow isolated individuals can anticipate the collective outcome of other individual behaviours (such as one private bank printing too much money) and therefore avoid crises…

The best outcome of the Austrian approach was Schumpeter’s analysis of the trade cycle, and that is something that is a core position of Evolutionary Economists (such as Nelson and Winter, Anderson, etc.). But most self-declared Austrians reject Schumpeter.

So I see it as a somewhat schizophrenic and internally contradictory school of thought. There have been lots of discussions of Austrian economics on this blog–with Anarcho being a regular very well informed critic–so if you search on those terms you’ll see what my perspective is on the Austrian school, and that of most bloggers here.

What I noticed here was that although the absolute levels of debt were quite different at these times (c1890,c1930,c2008) the rates of increase in debt were almost the same. This indicates to me that rate of increase had more influence on the control loop than the absolute level. The time lag that you mention places the increase rates even closer.

Perhaps this is included, but is it also as asset prices gain over savings (to start, diluted by expanding debt) this creates a real and relative urgency to buy assets, particularly when the asset is a need, like a family home (i.e. “don’t miss the boat”, “get in before it’s too late”, “prices are only going to go higher” and so on)?

That’s aligned to Minsky’s thinking, but the exponential growth in debt in my Minsky model is more about the willingness to take on debt because of both perceived asset price gains and perceived real production profits. If those don’t exist, then even an interest rate of zero won’t entice borrowing.