Andrew Lainton — The Cost (that is Price) of Speculation – Going Beyond The Minsky ‘Ponzi’ Model

How do you make speculation endogenous to economic theory?
Further how do you make the full suite of potential profit making activities, speculation, hedging, arbitrage and investment endogenous?

By endogenous I mean a variable that is determined alongside other variables rather than outside the economic model.

The reasoning in this post comes was prompted in part from speculation by Steve Keen on to what extent the speculative drive is a necessary component of capitalism even though it is destabilising, partly from some dissatisfaction with the Minsky ‘Ponzi’ model of asset speculation, which has been too easily dismissed by neoclassicals as somehow individuals not behaving ‘rationally’. The model here is a generalisation of our earlier model of default risk in banking and insurance across all sectors.

Decisions, Decisions, Decisions
The Cost (that is Price) of Speculation – Going Beyond The Minsky ‘Ponzi’ Model
Andrew Lainton