Steve Keen's Debtwatch

I’m freez­ing this site and mov­ing to both Patre­on (https://www.patreon.com/ProfSteveKeen) and a new web­site http://www.profstevekeen.com/. There are sev­er­al rea­sons:

• This site’s signup secu­ri­ty failed, and some­thing like 50,000 bot-users have signed up.
  • It’s just too cum­ber­some in Word­Press to delete them selec­tive­ly from here, so it’s eas­i­er to move to a new, clean site;
• I used to be very active in dis­cus­sions here, but the demands on my time became so exces­sive over time that I have vir­tu­al­ly stopped par­tic­i­pat­ing;

One of my Patrons posed a very good ques­tion to me: in a nut­shell, how would I respond to a politi­cian who took my ideas and per­vert­ed them for polit­i­cal gain? Here’s Andre’s full query:

Hi Steve, thank you, you’ve giv­en me the gift of some of the most impor­tant ideas and expla­na­tions I’ve come across in my life­time.

I was won­der­ing how you might respond to a politi­cian who mis­reads your lat­est book, and then declares:

1.  Peo­ple will love me, because Steve Keen says I can become known as a mas­ter of man­ag­ing my coun­try’s econ­o­my by engi­neer­ing a pri­vate debt boom

Help me rebuild eco­nom­ics at https://www.patreon.com/ProfSteveKeen

Can we avoid anoth­er finan­cial cri­sis?

In 2008, con­ven­tion­al eco­nom­ics led us blind­fold­ed into the great­est eco­nom­ic cri­sis since the Great Depres­sion. Almost a decade lat­er, with the glob­al econ­o­my wal­low­ing in low growth that they can’t explain, main­stream econ­o­mists are reluc­tant­ly com­ing to realise that their mod­els are use­less for under­stand­ing the real world.

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As I explain in this video, gov­ern­ment attempts to turn Uni­ver­si­ty entrance into a mar­ket­place have had the unin­tend­ed side-effect of under­min­ing plu­ral­ist eco­nom­ics. The UK gov­ern­ment has removed con­trols on the num­ber of places that Uni­ver­si­ties can offer in first year cours­es, and as a result there has been an increase in human­i­ties places offered by high­ly ranked Uni­ver­si­ties. Final year high school stu­dents have flocked to these Uni­ver­si­ties, and enrol­ments at low­er-ranked Uni­ver­si­ties have fall­en sub­stan­tial­ly.

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)