This paper investigates the instability of capitalism defined as a condition under which capitalism creates inflation, unemployment, and business cycles. Great economists such as Marx, Veblen, and Schumpeter have examined this problem, concluding that capitalist instability will transform...

This paper provides an explanation for situations in which the state variables describing the economy do not change, but aggregate consumption experiences significant changes. We present a theory of pseudo-wealth—individuals' perceived wealth that is derived from heterogeneous beliefs and...

We investigate the role of systemic financial instability in an empirical macrofinancial model for the euro area, employing a richly specified Markov-Switching Vector Autoregression model to capture the dynamic relationships between a set of core macroeconomic variables and a novel indicator of...

The extraordinary events surrounding the Great Recession have cast a considerable doubt on the traditional sources of macroeconomic instability. In their place, economists have singled out financial and uncertainty shocks as potentially important drivers of economic fluctuations. Empirically...

This chapter examines the link between the instability features of a profit-driven economy and the structural changes inherent to that type of economy. Moving from consideration of the profit motive as search and exploitation of price (or cost) differentials, the chapter considers the structural...

We estimate new indices measuring financial and economic (in)stability in Austria and in the euro area. Instead of estimating the level of (in)stability in a financial or economic system we measure the degree of predictability of (in)stability, where our methodological approach is based on the...

What can explain the large changes in aggregate demand that occur in the absence of any seemingly corresponding shock to the underlying state variables of the economy? We show that macroeconomic volatility can arise from dispersions of beliefs among agents. These dispersions give rise to bets...