Helsinki Eco­nom­ics and Pol­i­tics Sem­i­nar

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The Depart­ments of Polit­i­cal Sci­ence and of Eco­nom­ics at the Uni­ver­sity of Helsinki recently held a sem­i­nar enti­tled “Eco­nom­ics: Chal­lenges for Polit­i­cal, Philo­soph­i­cal and His­tor­i­cal Research”. The moti­va­tion was a reor­gan­i­sa­tion of the Uni­ver­sity that will com­bine these two Depart­ments. The flyer for the sem­i­nar adver­tised it in the fol­low­ing man­ner:

This sem­i­nar, orga­nized jointly by the Depart­ment of Polit­i­cal Sci­ence, Depart­ment of Eco­nom­ics and Cen­tre of Excel­lence on Global Gov­er­nance Research, will start with reflec­tions on the role of eco­nom­ics and eco­nomic stud­ies.

  • Can we com­bine eco­nom­ics and pol­i­tics through polit­i­cal econ­omy?
  • Have polit­i­cal and eco­nomic stud­ies neglected his­tory?
  • How can dif­fer­ent method­olog­i­cal tools be com­bined?

One of the con­texts for the sem­i­nar is the cre­ation of the new Depart­ment of Eco­nomic and Polit­i­cal Stud­ies at the Uni­ver­sity of Helsinki. More gen­er­ally, we hope to con­tribute to the­o­ret­i­cal and polit­i­cal debates on how to explain recent and future changes in global cap­i­tal­ism.

I was invited to put the per­spec­tive of econ­o­mists who are crit­i­cal of neo­clas­si­cal eco­nom­ics, while the per­spec­tive of those favourably dis­posed to this school of thought was put by Pro­fes­sor Vesa Kan­ni­ainen from the Depart­ment of Eco­nom­ics at the Uni­ver­sity of Helsinki. The other speak­ers were:

  • Isabella Bakker, Pro­fes­sor of Polit­i­cal Sci­ence, York Uni­ver­sity;
  • Susanna Fell­man, Pro­fes­sor of Eco­nomic His­tory, Uni­ver­sity of Helsinki;
  • Uskali Mäki, Acad­emy Pro­fes­sor of Phi­los­o­phy, Uni­ver­sity of Helsinki; and
  • Heikki Patomäki, Inno­va­tion Pro­fes­sor of Human Secu­rity, Glob­al­iza­tions and Global Insti­tu­tions, RMIT Uni­ver­sity.

The sem­i­nar was chaired by Teivo Teivainen, Pro­fes­sor of World Pol­i­tics, Uni­ver­sity of Helsinki.

I video­taped the talks, and also made an audio recording–the lat­ter includes about an hour’s dis­cus­sion that was not recorded on video (since my camera’s bat­tery ran out). The pre­sen­ta­tions and the dis­cus­sions should be of inter­est to any­one who is curi­ous about the capac­ity of eco­nom­ics to reform itself in the light of the global finan­cial cri­sis, and the fail­ure of neo­clas­si­cal eco­nom­ics to antic­i­pate this event.

The record­ing is in three seg­ments: from the intro­duc­tions and open­ing address by Vesa to most of the way through my talk:

Steve Keen’s Debt­watch Pod­cast 

| Open Player in New Win­dow

From the end of my talk to that by Uskali Mäki:

Steve Keen’s Debt­watch Pod­cast 

| Open Player in New Win­dow

And from Uskali Mäki till the end of the speeches

Steve Keen’s Debt­watch Pod­cast 

| Open Player in New Win­dow

Dis­cus­sion then fol­lowed for roughly an hour; all the pre­ced­ing speeches and this last hour of dis­cus­sion is recorded in the fol­low­ing audio file:

Steve Keen’s Debt­watch Pod­cast


The Pow­er­point file for my pre­sen­ta­tion is avail­able here.

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  • bb

    Hi Debtjunkies

    Excess new sup­ply is not the only require­ment for a bub­ble – the RBA recently admit­ted that in 2006 we had 8% more houses THAN house­holds”

    I think this com­ment was sourced to the 2006 Cen­sus (please cor­rect me if I’m wrong).

    I think the cen­sus data sug­gest 8% of housh­olds were vacant on cen­sus night (again, please cor­rect me if I’m wrong).

    If I am right, these last three words change the quote sig­nif­i­cantly.

    For instance, on aver­age 4% of all house­holds should be vacant at any one time (4 weeks hol­i­day per year over 52 weeks x say 50% chance of going away). One must also take into account sin­gle peo­ple work­ing late, or going out, some peo­ple not fill­ing out the cen­sus, and nat­ural vanacy required for a func­tion­ing mar­ket.

    I think this 8% vacant num­ber is no dif­fer­ence to pre­vi­ous cen­sus data going back to 1975. Again I don’t have all the data so I am happy to be cor­rected on these points.

  • bb

    ak / debtJ / BTB / pb / Mech Eng / All

    Thanks for the feed­back & Dis­cus­sion — I have very much enjoyed it. Must go now and read some of ak’s & Mech Eng’s links so I can bet­ter con­tribute to the debate (and also do some real work).

  • DrBob127


    Thank you for your polite and robust dis­cus­sion. I look for­ward to the next install­ment.

    Thank you to the other mem­bers (ak / debtJ / BTB / pb / Mech Eng / All) who have been feed­ing into the debate. 

    I do appre­ci­ate the learn­ing oppor­tu­nity.

  • debtjunkies

    bb @226,

    You are right about the ref­er­ence to RBA and cen­sus data com­ments.

    If you are inter­ested and have room to squeeze even more read­ing in, refer back to post 40, 53 & 56 of this blog entry.

    To any­one who has other links that bb may be inter­ested in Im sure he would like the refer­ral.

  • ak


    You must spend a lot of time think­ing about this stuff”

    I missed an oppor­tu­nity to make >100k by doing exactly noth­ing — hold­ing on to my flat in Poland when I moved to Aus­tralia. I did not see the bub­ble form­ing there and I sold at the bot­tom of the cycle and at the bot­tom of the exchange rate PLN/AUD cycle — at the end of the arti­fi­cial reces­sion intro­duced in Poland to throt­tle infla­tion, just before join­ing the EU. I did not have to sell the flat then — but I wasn’t even remotely aware of the scale of these macro eco­nom­i­cal processes.

    I think that I have learned my les­son.

    I pre­fer to spend some time analysing the econ­omy rather than have to swim against the tide again. 

    I am gen­er­ally quite con­cerned by the processes occur­ring in Aus­tralia but at least I am quite con­fi­dent that my fam­ily should do rea­son­ably well regard­less what hap­pens. We sim­ply don’t do cer­tain irre­spon­si­ble things.

    Thank you for your con­tri­bu­tion — by ques­tion­ing com­mon bear­ish views of the blog mem­bers you are forc­ing us to rethink the things again.

  • Keat­ing

    Mechan­i­cal Engi­neer @209

    I have been a builder in syd­ney for the last 15 years and from what I can see in the indus­try trades­mens wages have stag­nated, eg: in 2000 brick­lay­ers were charg­ing $1000 per 1000 bricks layed, the other day I was get­ting com­pa­nys only charg­ing $920 per 1000, Also when i was an appren­tice car­pen­ters sub con­tract wages were around the $40-$45 per hour mark, my car­pen­ters still only charge those rates.

    I think when you see tradies dri­ving around in new utes its more a case of most of them being duped by the 50% invest­ment allowance, and not the wages they earn,

    Another note on the price of build­ing, It has gone up but not due to wage increases and cer­tanly not builders profit mar­gins eg: AV jen­nings marster­ton homes are work­ing on 2–5% profit for a new home, and con­sid­er­ing the risks builders have to face these days that really is chicken feed.
    I beleive most of the price increase in build­ing has come from gov­ern­ment red tape and reg­u­la­tion BASIX, Home own­ers war­renty insur­ance, coun­cil fees and charges and of course the soar­ing cost of mate­ri­als, the cost of steel rose 50% last year alone

  • GSM

    Thanks very much Keat­ing.

    Your com­ments just go to prove that Govt (all lev­els) are sim­ply there to line their pock­ets at the trough filled with tax­payer money. One sure way of doing this is empire build­ing. And big­ger empires must cre­ate new rules and reg­u­la­tions- the more the bet­ter. That way the Empire jus­ti­fies it’s exis­tance.

    In a shrink­ing pro­duc­tive base, higher taxes (to pay down ris­ing debt and fund the Govt “empires” and deficit spend­ing) can become higly oppres­sive. That is where I am cer­tain we are all headed — Euro­pean lev­els of tax­a­tion but with­out the ben­e­fits. The test for this is sim­ple: name one area or one sin­gle instance where you can find Govt CUTTING back real costs.

    Thought so.

  • Keat­ing 231
    A very infor­ma­tive post. I agree that labour and earn­ings have taken an incred­i­ble decline. The stan­dard of liv­ing has dropped over the years.
    I put this as the most impor­tant rea­son Howard lost the elec­tion.
    It was alright for the party to show great eco­nom­i­cal man­age­ment skills and pro­vide a sur­pluss how­ever if one doesn’t address the cost of liv­ing stan­dards the elec­torate will ban­ish the con­queror so to speak.
    Pro­duc­tiv­ity has not been rewarded, more so the lever­age of finance through equity of prop­erty out­strips the abil­ity of pro­duc­tiv­ity to keep up with demand. Short cuts and inef­fi­cient and unqual­i­fied tradies enter the field.
    This in turn affects pro­duc­tiv­ity, effi­ciency and increases mal­prac­tice. Bad debts and shonky work­man­ship increase the prices to the level of incom­pe­tency (cor­rec­tion of errors cost more than qual­ity pricing)which even­tu­ally col­lapses the cur­rent labour mar­ket.
    You might have some sug­ges­tions as to how this can be cor­rected as I believe is is part of the prob­lem and by no means the cause. There is no doubt that easy money, irre­spon­si­ble lend­ing is the cause. Dubai is clas­sic in exam­ple. What waste.

  • Paul Andrews


    I’m look­ing at the Mir­vac annual report:

    Which mar­gins in par­tic­u­lar are you refer­ring to? I’d like to take a closer look to see which fac­tors may be impact­ing their mar­gins and whether they are iso­lated to only land + devel­op­ment + build­ing (on the expense side) and sales (on the income side). 


  • Mechan­i­calEngi­neer

    Keat­ing @ 231

    Thanks for the infor­ma­tion. I appol­o­gise for the clumsy accu­sa­tions in my pre­vi­ous post. I sus­pected that there was a large cost impo­si­tion on the build­ing trades. (insur­ance was a prime sus­pect)

    Do you believe that the big devel­op­ers are realy strug­gling to make a profit on the job, or is the profit dis­ap­pear­ing into ‘over­heads’ like exec­u­tive pays?

  • Mechan­i­calEngi­neer

    bb @ 221,

    I see your point, It would be inter­est­ing to see a chart of ‘net debt’ with our super bal­ances and like assets counted against the debt.

    I have read that the USA has a net debt, that is the rich­est coun­try in the world has less sav­ings than it owes. Can any­one con­firm this? I won­der if Aus is in the same sit­u­a­tion…

  • Keat­ing

    Mechan­i­calEngi­neer @ 235

    In rela­tion to big developers/residential project home builders, of course with any cor­pa­ra­tion large exec­u­tive pay outs are a drain on prof­its, but from what I can see as I have many friends in the project home indus­try is that these com­pa­nys rely on a huge turn over on very large estates to make a decent profit,( One house after the other )buy­ing mate­ri­als in bulk and srew­ing sub con­tracters down to the bare min­i­mum.

    But even after all of this these guys are not mak­ing any­where near what they used to, In my opin­ion the demand just isn’t there, the cost of a new build now exceeds the cost of buy­ing an exsist­ing house in an estab­lished area.

    Basi­cally the builder and the con­sumer are both get­ting screwed
    with the gov­ern­ment, prop­erty investers and real estate agents rid­ing this thing all the way to the bank.

    PS by no way am I say­ing that project home builders are the good guys either, there qual­ity of work and basic ethics are shock­ing at the best of times!

  • joshua

    Per­son­ally I have dealt with many builders and con­tinue to do so with my sis­ters home. From my expe­ri­ence this is just another spin to jus­tify the high prices. 

    I can tell you that they have a decent profit mar­gin. We did all our research and went for an upcom­ing builder who charges 30K less than the big builders and he is pro­vid­ing bet­ter alter­na­tives (brick, eco­brick, tiles, col­or­bond) and qual­ity (toi­let tiles till the ceil­ing, bet­ter floor­ing, kitchen.…, alfresco, dri­ve­way, land­scap­ing, fenc­ing, ducted air­con all included. The other builders only pro­vide the basic house for 30K more every­thing else is extra. 

    You would be look­ing at 25K~30K for the extras. there is no way for him to be sur­viv­ing on a thin mar­gin and a loss is out of the ques­tion. I have been deal­ing with builders for 1 year and 6 months. Cant under­stand why big builders increased their houses by 20K after the stim­u­lus while an upcom­ing builder charges 30k less for the basic and in total around 60K less. You got to be kid­ding me mate.

  • joshua

    In my opin­ion the demand just isn’t there, the cost of a new build now exceeds the cost of buy­ing an exsist­ing house in an estab­lished area”

    Fur­ther­more the above state­ment is totally false with my research and own expe­ri­ence. Exist­ing homes were around 30K extra to buy with lesser bed rooms and options( e.g is ducted ac, extra 2 bed rooms, bath­room or an extra bed room and media/study room) In fact it costs around 30K extra for a 3 bed­room house com­pared to build­ing say a 5 bed­room house. Of course you can deduct 10K in inter­est over the course of con­struc­tion so it comes out to 20K. This is the rea­son a lot of peo­ple went for build­ing new homes because it did not make any sense to pay extra for what you could build for. I can pro­vide with more details to back up my expe­ri­ence. I do agree that prob­a­bly the land component(landcom/government)is the largest chunk of the price and every­thing is set to delib­er­ately main­tain prop­erty prices.

  • Keat­ing

    joshua @ 239

    I sorry mate but I don’t know who you are talk­ing too, but they are tak­ing you for a ride. For starters how do you know with only 1 1/2 years expe­ri­ence in just talk­ing to builders what you are truly get­ting in rela­tion to qual­ity of pro­duc­tion, true floor space ratios?

    I mean have taken in to con­sid­er­a­tion the cost of BASIX alone wich has added 10% — 15% on a new build since it was intro­duced.

    Are you telling me that ba project home builder with the buy­ing capac­ity 100 times than that of your upcom­ing builder can’t give you a bet­ter price, You got to be kid­ding me mate where are you look­ing?

    @ 239 why are new build­ing approvals drop­ping then?

    Why live in kel­lyville when you can live in bal­main?

  • joshua

    Keat­ing @240,

    I agree the real estate agents and major­ity of the big builders are tak­ing every­one for a ride. Ini­tially we were told this story by every real estate agent dont go for con­struc­tion because of the hid­den cost and it will cost much more, inter­est, delays etc. 

    Well, we have close friends who have built around Kel­lyville, Stan­hope, Glenwood,Rouse Hill and New­bury (since 2003) who told us what to expect with hid­den cost. 

    Every big builder gave us a site cost of 25K for a flat back block of land except Eden Brae. Eden Brae said the site cost would be max 1.5K because the block is flat and they have built sev­eral homes in that area . Their price the same but did not include the dri­ve­way, ducted ac and fenc­ing. Infact Eden brae gave us an esti­mate that came close with­out the turn key pack­age.

    This builder said the same and the only vari­a­tion will be the peer­ing. Yes he has included the BASIX in the con­tract and every­one who has gone with them are very happy.

    In fact he was rec­om­mended by the sales lady at Land­comm based on feed­back by many cus­tomers. Also, the col­or­bond sales lady looked at what he was giv­ing us and she said it was good, his BASIX for the col­or­bond roof­ing was the top most range. 

    Even Win­crest and Avjen­nings saw the ini­tial esti­mate and said it was pretty good they were will­ing to throw in some free­bies like either ducted A/C or exten­sion of the the slab con­crete slab at the back and front porch for no extra cost.

    I can def­i­nitely vouch for the qual­ity and floor space mate because my dad had been an Architect/Interior Designer for 40 years and can dis­tin­guish a qual­ity fin­ish from the lousy work that most big builder charge. Infact my Dad did the plan and most builders would charge us 25K extra for a cus­tom plan. If you are talk­ing about the out­side build the options are eco­brick with ren­dered fin­ish, Aus­tral or PGH bricks, CSR Monier Hori­zon tiles or Col­or­bond roof­ing. By the way I even got a quote of a dou­ble brick home from him and it was far less than the 24K quote I got from the other builders.

    I hope to start a blog when con­struc­tion starts and doc­u­ment every stage of the project then every­one here can see who has been taken for a ride? 

    Are you telling me that a project home builder with the buy­ing capac­ity 100 times than that of your upcom­ing builder can’t give you a bet­ter price, You got to be kid­ding me mate where are you look­ing? Yes please see my post above.

    why are new build­ing approvals drop­ping then? Well this was the case before the 24K grant was intro­duced and just after it was announced and then going up because of the effects of FHOG and low inter­est rates. With the full FHOG already elapsed and fur­ther to trimmed I believe this trend will con­tinue with cou­pled with high inter­est rates. Please note I have always said here the cost of exist­ing home jumped by almost 70K before the grant in this area because of the stim­u­lus and peo­ple con­sider the 450 to 550K an entry mar­ket so there has been strong demand just because of FHOG. Most peo­ple I talk to dont pre­fer to build because they have been scared and brain­washed by the real estate agents and MSM.

    And I agree that Land prices are still the major com­po­nent of the high prices con­sid­er­ing the profit mar­gins of builders to be a small com­po­nent.

  • Keat­ing

    Ok but lets just con­sider if you didn’t want to build a Mc Man­sion in the mid­dle of the kel­lyville desert? that com­pared to a well estab­lished house in a nice res­i­den­tial area is like com­par­ing cheese and chalk.

    Believe me the rea­son most peo­ple are not build­ing is because it is too expen­sive, Why wouldn’t more prop­erty investors be devel­op­ing and build­ing new houses? 

    And that in my opin­ion is why Demand is drop­ping and basi­cally hasn’t been there in recent years, If all these builders are just rip­ping every­body off mak­ing large prof­its then why are they strug­gling to get new builds under­way? because all they would have to do is lower there mar­gins to lure home buy­ers, but the rea­son they don’t is because they can’t.

    Any­way I think all of this has been blown out of pro­por­tion, all I was try­ing to get across in my ear­lier posts was that the large costs in build­ing new homes is not the result of builders profit mar­gins and cer­tainly not increases in trades­mens wages.

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