Importance of Expectations

• Business expectations of future profits drive investment spending and hiring

  • And thus drive changes in overall output and employment

  • Future is unknowable, so much business decision-making depends on "animal spirits"

• No guarantee that businesses will invest enough to generate full employment

  • L Randall Wray:

        "Entrepreneurs produce what they expect to sell, and there is no 
        reason to presume that the sum of these production decisions is
        consistent with the full employment level of output either in the
        short run or in the long run.” (Why Minsky Matters, 56-57)

• In technical terms: Capitalism can persist at "underemployment equilibrium"