Behavioral Finance Lecture 06: The Travesty of Neoclassical Macroeconomics

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One year after the start of the great­est eco­nom­ic cri­sis since the Great Depres­sion, the edi­tor of the jour­nal Amer­i­can Eco­nom­ic Review: Macro­eco­nom­ics claimed that “the state of macro [the­o­ry] is good”. How could he be so delud­ed? Macro­eco­nom­ics has been dis­tort­ed by appalling schol­ar­ship and a mis­guid­ed belief that macro­eco­nom­ics and micro­eco­nom­ics should be con­sis­tent. The best crit­ics of this, iron­i­cal­ly, include the econ­o­mist most respon­si­ble for the state of macro­eco­nom­ics, John Hicks and the archi­tect of Neo­clas­si­cal growth the­o­ry, Robert Solow.

Pow­er­point Slides (for Debt­watch Sup­port­ers & Above) Part 1

Giv­en how appalling­ly bad neo­clas­si­cal eco­nom­ics is, an alter­na­tive eco­nom­ics that is at least rough­ly capa­ble of repro­duc­ing the actu­al per­for­mance of the econ­o­my is bad­ly need­ed. One of the best stud­ies of the empir­i­cal data about the econ­o­my was iron­i­cal­ly under­tak­en by the two neo­clas­si­cal econ­o­mists who devel­oped Real Busi­ness Cycle the­o­ry, Kyd­land and Prescott. This lec­ture reports their find­ings, focus­ing on the con­clu­sion that “cred­it should play a larg­er role” in future analy­sis of the busi­ness cycle. I then out­line the basic propo­si­tions in the the­o­ry of endoge­nous mon­ey.

Pow­er­point Slides (for Debt­watch Sup­port­ers & AbovePart 2

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.