We develop a pair of models to show how non-ad-hoc shifts to expectational variables can be used to model tendencies toward crisis. In the Shackle model, as developed in the book Keynesian Kaleidics (1974), uncertainty can lead to a collapse in the marginal efficiency of investment and a jump in liquidity preference. In the Minsky version of the model, excessive private debt can lead to a financial collapse–again an endogenous breakdown in forces supporting growth. We extend the models to indicate how the dynamics of inflation and distribution affect the dynamics.
Keywords: Post Keynesian macro model, Poisson model of financial fragility, Keynesian dynamics, Hyman Minsky, G.L.S. Shackle, Keynesian Kaleidics, endogenous MEI and liquidity preference, financial fragility hypothesis
JEL classification: E12 E32
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