11 - From Efficient Financial Markets to the Theory of Crises

Summary

In the framework of a critical illustration of the contemporary history of economics, this chapter presents a general picture of developments in monetary theory and in the theory of financial markets, beginning with the monetarist approach. The transition in the policy field from domination of the Keynesian to domination of the monetarist approach is then illustrated. The theory of efficient financial markets is then considered, from the Modigliani–Miller theorem to Fama’s contribution. A section is devoted to various issues in the theory of financial markets and institutions, as an introduction to Minsky’s ‘truly Keynesian’ analysis of financial markets and their fragility as the repeated origin of crises. Finally, Minsky's idea of a new stage in the development of capitalism, the so-called money managers capitalism, is recalled.