A Real Minsky Moment in an Artificial Stock Market

Many authors have contributed to the idea that financial markets are dynamically unstable. Much of this line of thinking suggests that bubbles and crashes will be a generic feature of most any speculative market, and that removing them would be difficult, if not impossible. Hyman Minsky is probably the one of the earlier contributors to this area, and recently his work has been looked at with new respect. This paper shows that some of his basic thinking about risk and extreme portfolio positions hold in agent-based financial markets in a way that appears close to his thinking. The advantage of this is that it presents a fully operational computer generated model with testable Minsky like effects which can be used to connect our understanding of Minsky to more modern, and rigorous approaches to macroeconomics.