Author Archives: Steve Keen

I like Joe Stiglitz, both pro­fes­sion­al­ly and per­son­al­ly. His Glob­al­iza­tion and its Dis­con­tents was vir­tu­al­ly the only work by a Nobel Lau­re­ate econ­o­mist that I cit­ed favourably in my Debunk­ing Eco­nom­ics, because he had the courage to chal­lenge the pro­fes­sion­al ortho­doxy on the “Wash­ing­ton Con­sen­sus”. Far more than most in the eco­nom­ics main­stream—like Ken Rogoff for exam­ple—Joe is capa­ble of think­ing out­side its box.

But Joe’s lat­est pub­lic con­tri­bu­tion—“The Great Malaise Con­tin­ues” on Project Syn­di­cate—sim­ply echoes the main­stream on a cru­cial point that explains why the US econ­o­my is at stall speed, which the main­stream sim­ply doesn’t get.

I’ve attend­ed two con­fer­ences in two days where both the pow­er and the impo­tence of the Euro­pean Cen­tral Bank (EBC) have been on vivid dis­play.

Its polit­i­cal pow­er is con­sid­er­able, both in form and in sub­stance. At both sem­i­nars, the ECB speak­er—ECB Board mem­ber Peter Praet at the first, and ECB Pres­i­dent Mario Draghi at the second—spoke first, and then left. In form, the ECB has no need to defend its poli­cies because it is unim­peach­able in its exe­cu­tion of them. In sub­stance, it does not even con­sid­er­ing engag­ing with its subjects—I use the word deliberately—in open and robust dis­cus­sion.

The posi­tion of the econ­o­my in the envi­ron­ment is a shared blindspot in eco­nom­ics: no exist­ing school han­dles the top­ic well, and yet this is the key issue we need to under­stand. I explain the Laws of Thermodynamics–as well as I could in an intro­duc­to­ry class with­out using mathematics–and pro­vide some links to impor­tant top­ics that stu­dents would­n’t nor­mal­ly hear about in an eco­nom­ics degree.

Click here for the Pow­er­point slides.

This lec­ture cov­ers the Post Key­ne­sian school of thought in eco­nom­ics, focus­ing main­ly on its mod­ern empha­sis upon endoge­nous mon­ey, sec­toral bal­ances, and Min­sky’s Finan­cial Insta­bil­i­ty Hypoth­e­sis. I also show how to do non-equi­lib­ri­um mod­el­ing (using my Open Source mod­el­ing pro­gram Min­sky of course).

Click here to down­load the Pow­er­point slides.

Paul Krugman’s lat­est col­umn—“Check Out Our Low, Low (Nat­ur­al) Rates” (which he didn’t flag as “Wonk­ish”, even though it is so in spades—noted that the “nat­ur­al real rate of inter­est” was falling, and that this jus­ti­fied the low inter­est rate set by the Fed­er­al Reserve.

And this made me think about Karl Marx.

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Actu­al­ly they’ve done no such thing. But they do effec­tive­ly assume that it’s unnec­es­sary all the time.

This tran­scen­den­tal truth became appar­ent to me in the reac­tions I have had from main­stream econ­o­mists to a lec­ture I gave to my Kingston stu­dents this month (which is post­ed on my YouTube chan­nel and blog).

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This lec­ture intro­duce the Aus­tri­an school of thought, which is close­ly relat­ed to the Neo­clas­si­cal mainstream–in that it shares its util­i­tar­i­an the­o­ry of val­ue, accepts basic sup­ply and demand analy­sis, and sees cap­i­tal­ism as gen­er­al­ly tend­ing towards equi­lib­ri­um. But it is also high­ly crit­i­cal of the main­stream for the absurd assump­tions about indi­vid­ual knowl­edge that it is will­ing to make to pre­serve its equi­lib­ri­um-ori­ent­ed math­e­mat­i­cal approach. It sees cap­i­tal­is­m’s strengths as how it encour­ages inno­va­tion, which is an equi­lib­ri­um-dis­turb­ing process, and regards mon­ey as being both inte­gral to cap­i­tal­ism and the pri­ma­ry source of eco­nom­ic cycles.

This talk cov­ers all “the usu­al sus­pects” for me–the Neo­clas­si­cal obses­sion with equi­lib­ri­um, finan­cial insta­bil­i­ty, the Loan­able Funds myth and the real­i­ty of Endoge­nous Mon­ey, and the fool­ish­ness of gov­ern­ments try­ing to run a sur­plus as if they are house­holds, when the bet­ter anal­o­gy is that they are banks and should run deficits to cre­ate part of the mon­ey sup­ply the non-bank pri­vate sec­tor needs.

Click here to down­load the Pow­er­point file (Min­sky files are embed­ded in it and can also be extract­ed and saved to your PC, if you’d like to play with them).

Becom­ing an Econ­o­mist is the intro­duc­tory course on eco­nom­ics for under­grad­u­ates at Kingston Uni­ver­sity. This is the sec­ond of 11 lec­tures in the sub­ject; I’ll post the oth­ers as I write them over the next few months. This lec­ture dis­cusses why the Main­stream approach, start­ing from the fun­da­men­tal ques­tion Wal­ras posed “Can a sys­tem of free mar­kets reach a set of prices that ensures that sup­ply equals demand in all mar­kets?”

The answer was “No”, but that did­n’t stop the “Equi­lib­ri­um Fetish Jug­ger­naut” that Wal­ras unleashed.

This is the Pow­er­point file for the lec­ture.

The Pri­vate Debt Project (this web­site will become active as of Decem­ber 2015) invites pro­pos­als for arti­cles, papers, and research notes relat­ed to the study of pri­vate debt and its rela­tion­ship to eco­nom­ic growth and finan­cial sta­bil­i­ty. The Project will pro­vide hon­o­rar­i­um for all pub­lished work. In cas­es involv­ing papers with orig­i­nal research, it will also con­sid­er small research grants to help cov­er the cost of the research.

Com­mis­sioned arti­cles, papers, and research notes will be pub­lished on The Pri­vate Debt Project’s on-line jour­nal and will be dis­sem­i­nat­ed to a wide audi­ence of aca­d­e­mics, pol­i­cy experts, gov­ern­ment offi­cials, investors, and busi­ness lead­ers.