Steve Keen's Debtwatch

A new organ­i­sa­tion called NEKS (for “New Eco­nom­ic Knowl­edge Ser­vices”, see www.neks.ltd) is hold­ing its inau­gur­al con­fer­ence on the eco­nom­ics of infra­struc­ture In West­min­ster on Tues­day Jan­u­ary 24^th, and you should attend.

Why NEKS, and why Infra­struc­ture? The eco­nom­ic impor­tance of infra­struc­ture is obvi­ous, but the actu­al per­for­mance of infra­struc­ture often dif­fers rad­i­cal­ly from what is pre­dict­ed when it is being planned. Three forms of delu­sion make many infra­struc­ture projects far less ben­e­fi­cial than expect­ed by their pro­po­nents: the com­plex­i­ty of exe­cu­tion is under­es­ti­mat­ed, the ben­e­fits are over­es­ti­mat­ed, and ben­e­fits are also cal­cu­lat­ed poor­ly using dodgy eco­nom­ic the­o­ry.

This is a talk I gave in Ams­ter­dam to launch the Ams­ter­dam Rethink­ing Eco­nom­ics cri­tique of the cur­rent state of eco­nom­ics “edu­ca­tion” in the Nether­lands. The text of my slides is repro­duced below.

• Teach­ing Eco­nom­ics the Plu­ral­ist Way
• Steve Keen
• Kingston Uni­ver­si­ty Lon­don
• IDEAe­co­nom­ics
• Min­sky Open Source Sys­tem Dynam­ics
  www.debtdeflation.com/blogs
• Gen­er­al Prin­ci­ples
• Teach Hon­est­ly: “Warts and All” treat­ment of every school

–Read the orig­i­nal sources—journals & books—not text­books

• Let experts teach maths & com­put­ing, not econ­o­mists
• Facts exist & are not the­o­ry-neu­tral

–Rules of account­ing ver­sus Mon­ey Mul­ti­pli­er

I’ve had some tough inter­views over the years (such as the BBC HARDtalk! inter­view ear­li­er this year with Stephen Sack­ur), but I’d have to cred­it the stu­dent inter­view­ers at the Uni­ver­si­ty of Ams­ter­dam’s Room for Dis­cus­sion event with giv­ing me the tough­est, well-informed grilling my ideas have had in pub­lic. I’m fol­low­ing up lat­er today with a keynote speech at the Dutch Rethink­ing Eco­nom­ics event tonight, and I’ll post that here lat­er this week.

Appar­ent­ly it’s the fifth anniver­sary of the day I gave this talk, to the Occu­py move­ment in Syd­ney, in Mar­tin Place, right out­side the offices of the Reserve Bank of Aus­tralia. The day after, the site was shut down by the police. It seems I was jinxed, because the same thing hap­pened in New York, the day after I sim­ply dropped off a cou­ple of copies of my book Debunk­ing Eco­nom­ics. The speech holds up pret­ty well, though I’ve devel­oped my tech­ni­cal argu­ments a lot since then.

I have observed and appre­ci­at­ed Olivi­er Blanchard’s intel­lec­tu­al jour­ney over the last decade. It began in August 2008, with what must be regard­ed as one of the worst-timed papers in the his­to­ry of eco­nom­ics. In a sur­vey of macro­eco­nom­ics enti­tled “The State of Macro”, he con­clud­ed, one year after the finan­cial cri­sis began, that “The state of Macro is good” (Blan­chard, 2008). How­ev­er, Blan­chard did not remain locked into that posi­tion, and he had the rare intel­lec­tu­al courage to say so in pub­lic and in aca­d­e­m­ic papers. His most recent post, before the one I am respond­ing to today (“Fur­ther Thoughts on DSGE Mod­els: What we agree on and what we do not”), stat­ed that, far from the state of macro being good:

In my last post on my Debt­watch blog, I fin­ished by say­ing that the Phys­iocrats were the only School of eco­nom­ics to prop­er­ly con­sid­er the role of ener­gy in pro­duc­tion. They ascribed it sole­ly to agri­cul­ture exploit­ing the free ener­gy of the Sun, and specif­i­cal­ly to land, which absorbed this free ener­gy and stored it in agri­cul­tur­al prod­ucts. As Richard Can­til­lon put it in 1730:

The Land is the Source or Mat­ter from whence all Wealth is pro­duced. The Labour of man is the Form which pro­duces it: and Wealth in itself is noth­ing but the Main­te­nance, Con­ve­nien­cies, and Super­fluities of Life. (Can­til­lon, Essai sur la Nature du Com­merce in Général (Essay on the Nature of Trade in Gen­er­al)

This inter­view, which was just record­ed today, will go to air tomor­row. The broad­cast details are:

BBC News Chan­nel: 02.30 BST, 04.30 BST and 20.30 BST Tues­day 16th August 2016, and 00.30 BST Wednes­day 17th August 2016

And from the 04.30 TX it will then be avail­able with­in the UK on BBC iPlay­er for one year.

BBC World News Chan­nel: 03.30 GMT; 08.30 GMT; 14.30 GMT and 19.30 GMT Tues­day 16th August 2016

It will also go out at numer­ous times­lots on Fri­day on the BBC World Ser­vice.

For decades, main­stream econ­o­mists have react­ed to crit­i­cism of their method­ol­o­gy main­ly by dis­miss­ing it, rather than engag­ing with it. And the cus­tom­ary form that dis­missal has tak­en is to argue that crit­ics and pur­vey­ors of alter­na­tive approach­es to eco­nom­ics sim­ply aren’t capa­ble of under­stand­ing the math­e­mat­ics the main­stream uses. The lat­est instal­ment of this slant on non-main­stream eco­nom­ic the­o­ry appeared in Noah Smith’s col­umn in Bloomberg View: “Eco­nom­ics With­out Math Is Trendy, But It Does­n’t Add Up”.

Fig­ure 1: Noah’s tweet announc­ing his blog post

This was my keynote speech at the French Asso­ci­a­tion for Polit­i­cal Econ­o­my (AFEP) annu­al con­fer­ence in Mul­house, France (the oth­er keynote was given–in French–by my good friend Marc Lavoie, who is now based at the Uni­ver­si­ty de Paris 13). In this pre­sen­ta­tion, I:

• Dis­par­age the “sec­u­lar stag­na­tion” expla­na­tion that Lar­ry Sum­mers has regur­gi­tat­ed for the tepid lev­el of eco­nom­ic growth today. As did Hansen in the 1930s, Sum­mers pon­ders “why growth would remain anaemic in the absence of major finan­cial con­cerns?”, when finan­cial con­cerns are obvi­ous if you under­stand cred­it;

A cliché—“Expect the Unexpected”—has hap­pened. As I not­ed in “The Divi­sive Brex­it Vote”, though I favoured Brex­it, I took the opin­ion polls at face val­ue, and expect­ed that Britain as a whole would vote to remain in the EU. Instead, in the largest elec­toral turnout in twen­ty years, the UK vot­ed 52:48 in favour of leav­ing the EU.

I’ll leave a post-mortem of the vote itself for lat­er; the main inter­est now is what will hap­pen because of it. Many pun­dits from the Cen­ter, Left and Right opposed Brex­it in the belief that eco­nom­ic Armaged­don for Britain and the globe would flow from it; we’ll now see how real­is­tic their fears were. I regard them as seri­ous­ly overblown, for a num­ber of rea­sons.