With the announcement that Toyota will stop its manufacturing in Australia in 2017, Australia has become one of the few wealthy nations on the planet without a car industry. But there’s a good argument that Australia never had a car industry in the first place.
Douglas Adams’ brilliant comic farce The Hitchhiker’s Guide to the Galaxy describes Earth as residing in sector ZZ9 Plural Z Alpha, one of “the uncharted backwaters of the unfashionable end of the Western Spiral Arm of the Galaxy” and being inhabited by “ape-descended life forms” who “are so amazingly primitive that they still think digital watches are a pretty neat idea”.
Sometimes when I return to Australia, I feel that I’ve arrived in the planet’s sector ZZ9 Plural Z Alpha. Here, the economic debate is so primitive that people still think the economy can be controlled by tinkering with the rate of interest.
“I know my place” was the title of a famous sketch on English class sensibilities from the 1960s, starring the very tall (Upper Class) John Cleese, the average height (Middle Class) Ronnie Barker, and the very short (Lower Class) Ronnie Corbett.
The Upper Class Cleese generally looked down on both Middle Class Barker and Lower Class Corbett; Barker looked up to Cleese and down on Corbett; and Corbett “knew his place”. That was at the bottom of the English class system pecking order, and surviving his place meant living life with lowered expectations.
This paper will be published in a forthcoming book on the crisis edited by Malliaris, Shaw and Shefrin. In what follows, I derive a corrected formula for the role of the change in debt in aggregate demand, which is that ex-post aggregate demand equals ex-ante income plus the circulation of new debt, where the latter term is the velocity of money times the ex-post creation of new debt.
The PDF is available here: Keen2014ModelingFinancialInstability. The Minsky models used in this paper are here in a ZIP file. The latest version of Minsky can be downloaded from here.
That verbose title is almost the reverse of a quintessentially arrogant statement of economic supremacy published in the UK’s Daily Telegraph — on the editorial page of the business section — by Andrew Lilico. Entitled “Economists are nearly always right about things, despite what you may think” in the print edition, its content and tone encapsulated everything about economic theory, and economists’ blind belief in it, that led me to write Debunking Economics over a decade ago.
Figure 1: Lilico’s article in the print edition of the UK Daily Telegraph
On January 31, we will bid goodbye to chairman Ben Bernanke and say hello to chairman Janet Yellen. Most commentary has focused on what Yellen’s ascendancy might mean for the Federal Reserve and the US economy, but today I’d like to consider how Bernanke’s legacy might he be regarded in future years — say, 70 years after the crisis we’re in now.
It certainly won’t be as he expected it to be before he took on the job of Fed chairman in February 2006. In the worst case scenario, he will be blamed for causing the ‘Great Recession’, just as he blamed his predecessors for causing the Great Depression.
To support SourceForge’s Project of the Month featuring Minsky, here are some sample Minsky models. To download them, right click and choose “save as”–otherwise they will open in a separate browser window as XML files.
I’ve also made a playlist of 8 short videos showing some of the features of Minsky. Those videos are also linked at the bottom of this post.
SourceForge is one of the main development and repository sites for Open Source software, and late last year their community voted to make Minsky its Project of the Month for January 2014.
We (myself and Dr Russell Standish, who is the chief programmer for Minsky) were delighted of course: it’s a public affirmation that the project is useful and respected by a very critical audience: other developers of Open Source software. Here is the interview SourceForge conducted with us, which is published on its blog.
SourceForge: Tell us about the Minsky project please…
I was going to write a retrospective on Ben Bernanke this week, since his tenure as Federal Reserve chairman ends soon, and it’s time to look back on his period in office – as he himself did on his predecessors during the Great Depression. But a far more important departure occurred last week: the Italian economist Professor Augusto Graziani died at the age of 80.
Augusto who, you may ask? Graziani’s name is not widely known even among economists, let alone the general public, because he was outside the neoclassical mainstream – and also outside continental America, which has a pseudo-monopoly on fame in economics these days. His Wikipedia entry emphasises his current obscurity: it is a mere stub.
I’m sorry, I couldn’t help it: when Larry Summers first made his secular stagnation speech at the IMF, and the American economics tribe heralded it as if it were the greatest (and latest) thing since sliced bread, my irony gene went into overload—and that showed in my first post on the topic. The argument that the West has been suffering from secular stagnation, and that only a series of financial bubbles have kept the illusion of prosperity going, has been part of non-orthodox economics for over three decades.
