"Sometimes I think that the Keynesian and Austrian Schools of economic thought can be merged into a consistent synthesis that would disagree about the goals of policy, but largely agree on how economies work. One of the men that would help promote such an idea would be Hymen Minsky."Here's an attempt to do just that:
1) Prices are sticky and markets (e.g. for labour) don't always clear; there is 'involuntary unemployment'. (Keynes) -- [Evidence? For example, graph of unemployment (x-axis) against inflation (y axis) 1990-2010 is approximately horizontal - ie big changes in unemployment without changes in inflation. the following graph is from Austalia]
2) Fractional reserve banking adds a second class (bank deposits) of money to the first (banknotes issued by the central bank). The second class of money, bank account money is usually created at the same time as debt, causing asset price inflation (Austrians); and deflation (Fisher) when the the two are cancelled out when de-leveraging.
3) Conventional economic thinking tends to ignore asset prices. But increases in credit money lead to increase in asset prices, and these lead to wealth effects which may add to economic instability.
To put it simply, markets (as currently constituted) don't always work, that's why you need a Keynesian response in a 'great depression' scenario. Some of the reasons that markets as currently constituted don't work may be 'Austrian' (ie the markets are distorted by the existence of fractional reserve banking), but the 'Austrian' message tends to be distorted as 'make markets freer, but ignore the privileges of the financial sector and the asset-owning sector', when these sectors are probably the most important distortions. However, there may be other reasons that 'markets don't work' apart from the 'Austrian' ones.