Economics has met the enemy, and it is economics

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That is the title of a fea­ture in the Cana­dian news­pa­per The Globe and Mail that a cor­re­spon­dent has just brought to my atten­tion. It’s not an earth-shattering arti­cle, as my cor­re­spon­dent observed, but it is remark­able to see arti­cles like this turn­ing up in the main­stream media. The author Tra Basen observes at one point:

While the pro­test­ers occu­py­ing Wall Street are not car­ry­ing signs denounc­ing rational-expectations and efficient-market mod­el­ling, per­haps they should be.

Eco­nom­ics has met the enemy, and it is economics

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.
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20 Responses to Economics has met the enemy, and it is economics

  1. The Peak Oil Poet says:

    ah yes

    the Magi­cians are weav­ing new spells as the old spells loose their potency



  2. ken says:

    One of the prob­lems is that these seem to work well enough on a small scale, but fail the larger the econ­omy. What has hap­pened is that we then attempt to fix the global prob­lems by putting in a lot of reg­u­la­tion on the smaller scale, and it just doesn’t work out. It doesn’t mat­ter how many processes you set up, a 95% home loan in an econ­omy with huge amounts of debt is a dodgy loan.

  3. ken says:

    I have a nice exam­ple. I was look­ing at pre­vi­ous sale prices for a prop­erty. They were
    2002 $220,000
    2006 $260,000
    2010 $330,000
    2011 $270,000

    At least one of these sales was not ratio­nal. We seem to have decided that if lots of peo­ple do it, then it must be rational.

  4. helgenome says:

    Inter­est­ing arti­cle.
    We should know that alter­nat­ing fear and greed in the mar­ket place will hardly lead to ratio­nal behavior!

  5. peterjbolton says:

    ” One of the sad­dest lessons of his­tory is this: If we’ve been bam­boo­zled long enough, we tend to reject any evi­dence of the bam­boo­zle. We’re no longer inter­ested in find­ing out the truth. The bam­boo­zle has cap­tured us. It is sim­ply too painful to acknowl­edge ~ even to our­selves ~ that we’ve been so cred­u­lous. So the old bam­boo­zles tend to per­sist as the new bam­boo­zles rise.” - Carl Sagan -

    eco­nom­ics” is not the enemy; we are!

  6. alainton says:

    @steve some tips here on becom­ing a global research brand

    The lav­ish parties…the groupies…the bling :)

  7. alainton says:

    Swiss com­plex sys­tems the­o­rists pro­duce global map of cap­i­tal­ism and how this cre­ates sys­tem insta­bil­ity — the head­line is rubbish–the-capitalist-network-that-runs-the-world.html

  8. peterjbolton says:

    Fabian Stealth and Decep­tion fall back tac­tics for the defence of Fas­cism for increased Tax­a­tion in Australia.

    LEADING media organ­i­sa­tions have rejected a pro­posal from the fed­eral gov­ern­ment for a pro­to­col to limit report­ing of sen­si­tive law enforce­ment and secu­rity infor­ma­tion. How­ever, they have agreed to facil­i­tate com­mu­ni­ca­tion with police and secu­rity agen­cies in the inter­est of pub­lic safety.

    The pro­posal by the Attorney-General, Robert McClel­land, for a national secu­rity media pro­to­col was sharply crit­i­cised by media organ­i­sa­tions as counter-productive, unwork­able and disproportionate.

    The Australia’s Right to Know coali­tion, which includes Fair­fax Media, expressed con­cern that the pro­posed pro­to­col would have “a chill­ing effect on free­dom of speech”.

    Read more:

    The Default Bogan agenda with High Court Judge Julia Gillard

  9. peterjbolton says:

    Foxes guard­ing the Chick­ens” Fabian Fas­cism at Play

    “The most pow­er­ful entity in the United States is rid­dled with con­flicts of inter­est,” Sen. Bernie Sanders (I-Vt.) said after review­ing the Gov­ern­ment Account­abil­ity Office report. The study required by a Sanders Amend­ment to last year’s Wall Street reform law exam­ined Fed prac­tices never before sub­jected to such inde­pen­dent, expert scrutiny.

    The GAO detailed instance after instance of top exec­u­tives of cor­po­ra­tions and finan­cial insti­tu­tions using their influ­ence as Fed­eral Reserve direc­tors to finan­cially ben­e­fit their firms, and, in at least one instance, themselves.

    “Clearly it is unac­cept­able for so few peo­ple to wield so much unchecked power,” Sanders said. “Not only do they run the banks, they run the insti­tu­tions that reg­u­late the banks.”

    Sanders said he will work with lead­ing econ­o­mists to develop leg­is­la­tion to restruc­ture the Fed and bar the bank­ing indus­try from pick­ing Fed directors.

    This is exactly the kind of out­ra­geous behav­ior by the big banks and Wall Street that is infu­ri­at­ing so many Amer­i­cans,” Sanders said.

    Only ques­tion is: What took him so long? And you can bet those “lead­ing econ­o­mists (Rubin, Sum­mers… ?) will carry on the grande tra­di­tions of their Reli­gion er, Profession.

    Sav­ing the Defenceless.

  10. Lyonwiss says:

    @ Peter­jbolton

    Secrecy in the name of national secu­rity is used to cover up gov­ern­ment lies.
    Had the peo­ple known that there were never any “weapons of mass destruc­tion”,
    they would not likely have sup­ported the inva­sion of Iraq. No one was ever held
    account­able for the unnec­es­sary deaths. Wik­iLeaks, or the pos­si­bil­ity of sim­i­lar expo­sure, pro­vides some pro­tec­tion for democ­racy against more and more bla­tant lies by those in government.

    We are not the enemy; the insti­tu­tions we cre­ate are the ene­mies: cor­po­ra­tions, gov­ern­ments, unions, lobby groups etc. All sorts of crime have been com­mited by insti­tu­tions, which can­not be put in goal, or be ade­quately pun­ished. Under­stand Gresham’s Law for insti­tu­tions: bad peo­ple drive out the good.

  11. peterjbolton says:

    @ Lyon­wiss Octo­ber 20, 2011 at 11:14 am | #

    We are not the enemy; the insti­tu­tions we cre­ate are the ene­mies: cor­po­ra­tions, gov­ern­ments, unions, lobby groups etc. …”

    May I assume that you refer to my comment:

    @ Peter­jbolton Octo­ber 19, 2011 at 3:47 pm | #

    “eco­nom­ics” is not the enemy; we are!”

    Please note in my defence and sup­port for my obser­va­tion and posi­tion here, and I note that you also make it abun­dantly clear, is that it is “we” that not only cre­ate these insti­tu­tions but pop­u­late them by elect­ing une­d­u­cated and inex­pe­ri­enced “pop­u­lar” morons to the high­est offices and not only allow these feral and Bogan to apply Gresham’s Law, but rally to pro­tect their lies and their right to lie to us, ad nau­seum ad con­tin­uum.; and we scream Hooray!

    I have never heard any­thing so sick, informed and essen­tially so out­ra­geously crim­i­nal than the Aus­tralia Main Stream Media in their out­rage of Wik­ileaks and the Aus­tralian Assange for hav­ing the audac­ity to press trans­parency and account­abil­ity for the cir­cles of our “lead­er­ship”. There were US politi­cians call­ing for the “messenger’s” death, mur­der, killing, exe­cu­tion so as to pro­tect the rights for politi­cians and all that hangs off them, to lie to the peo­ple for whom they draw salary. They are not insane as they rape their employ­ers, “we” — it is “we” that drop our trousers so that they can have their ways and plea­sures with us. We are insane.

    There is no need — at all — for secrecy — in gov­er­nance; how­ever, in crime there is always need for secrecy.

    I must also say that thingy that “we” call “eco­nom­ics” is essen­tially a failed, false and fraud­u­lent illu­sion — a con­sen­sual con­spir­a­to­r­ial schema — of false sci­en­tific respectability,which is uti­lized to divert atten­tion from the Recur­sive Scam though Pol­icy by “lead­er­ship”; the whole idea should be wiped off the eco­nomic record so that we can begin again with real fun­da­men­tals and encap­su­lated within sci­en­tific Prin­ci­ples. Eco­nom­ics today just can­not be taken seriously.

    And again, your point is well received.

    The diver­sion sce­nario below; Please note the pocket being picked; this is called “eco­nom­ics”: the conjurer.

  12. koonyeow says:

    Title: The Seen and The Unseen

    Fear-of-death-and-desire-to-survive is the enemy. More con­cretely, our (bio­log­i­cal) ner­vous sys­tem is the enemy. If we can cre­ate insti­tu­tions, can we not uncre­ate them?

  13. peterjbolton says:

    @ Koonyeow Octo­ber 20, 2011 at 2:34 pm | #

    More con­cretely, our (bio­log­i­cal) ner­vous sys­tem is the enemy. ”

    With respect I object strongly to the above com­ment: Within our bio­log­i­cal ner­vous sys­tem resides as an inte­gral com­po­nent the Autonomous Ner­vous Sys­tem where one has a choice to either func­tion on the Sym­pa­thetic mode or the Para-sympathetic mode, the lat­ter being the mode pre­ferred for intel­lec­tual and human activ­ity; this mode is for the spir­i­tual and intel­lec­tual devel­op­ment of the human species.

    Fear, or the induc­tion of fear is the pre­ferred tool of “lead­er­ship”, for the unwashed such as we and as such main­tains the ANS in Sym­pa­thetic mode which cap­tures, a pri­ori, all the the bod­ies resources includ­ing cog­ni­tive processes in ‘fight and flight’ mode and main­tains it so, in per­petu­tity. Its an old trick; well worn; where in this mode, it is impos­si­ble to con­sider mat­ters on an intel­lec­tual and or rea­soned foundation.

    If we can cre­ate insti­tu­tions, can we not uncre­ate them?

    Being main­tained in the Sym­pa­thetic mode of the ANS allows the manip­u­la­tion and trans­fer of all basic rights to “lead­er­ship” through spik­ing the fear and WMD scare com­po­nents and hence, the sug­gested and accepted need for greater pro­tec­tion from unknown shadow threats and allows for greater tax­a­tion col­lec­tion, tighter con­trols, greater skewed edu­ca­tion pro­pa­ganda to keep the game going and afoot, while enrich­ing those of “lead­er­ship” through the inabil­ity by the removal of indi­vid­ual thought and analy­sis by induced fear, while build­ing big­ger Fabian tools that can main­tain con­trol of the centre.

    There­fore fear becomes the tool that pro­hibits chal­lenges of “leadership”.

    You may notice that we in Aus­tralia now needs and approve of the US Mil­i­tary occu­pa­tion of Aus­tralia so that we may con­front the bel­liger­ent China (who just hap­pens to be our major trad­ing part­ner and with­out which, we would be at the top of the Global Bank­rupt Nations — I didn’t say Sov­er­eign Nations as Aus­tralia remains a Crown Colony, the Head of which arrive today in Canberra).

    Fear trumps all as it lever­ages stupid.

    There is always a choice!

  14. koonyeow says:

    Title: Need Fur­ther Clar­i­fi­ca­tion from Peterjbolton

    From Peter­jbolton:

    Within our bio­log­i­cal ner­vous sys­tem resides as an inte­gral com­po­nent the Autonomous Ner­vous Sys­tem where ONE has a CHOICE to either func­tion on the Sym­pa­thetic mode or the Para-sympathetic mode, ”

    Who or what is that ‘ONE’ refer­ring to? It seems to me that that ‘ONE’ implies the exis­tence of a non-physical entity that is inde­pen­dent of the ner­vous sys­tem and that entity can make a CHOICE.

    From Peter­jbolton (continued):

    the lat­ter being the mode PREFERRED for intel­lec­tual and human activ­ity; this mode is for the spir­i­tual and intel­lec­tual devel­op­ment of the human species.”

    Pre­ferred by whom or what? Can you point me to any sci­en­tific arti­cles (or books) which say the para-sympathetic mode is for the spir­i­tual and intel­lec­tual devel­op­ment of the human species?

  15. peterjbolton says:

    @ Koonyeow Octo­ber 21, 2011 at 3:28 am | #

    Who or what is that ‘ONE’ refer­ring to?” The poten­tial is in all of us to become that which we are.

    Pre­ferred by whom or what?” Pre­ferred by one’s-self.

    Can you point me to any sci­en­tific arti­cles (or books) which say the para-sympathetic mode is for the spir­i­tual and intel­lec­tual devel­op­ment of the human species?”

    Aston­ish­ing Hypoth­e­sis by Sir Fran­cis Crick

    Biol­ogy of Belief,
    Spon­ta­neous Evo­lu­tion, Bruce Lipton

    Much, much more — try Google as I don’t have access to my Library any more.

    I remem­ber that the ancient Egyptian’s were also well aware of this switch­ing mech­a­nism of choice, over 5,000 years ago.

  16. peterjbolton says:

    Poor white trash and the Global Death Machine — from another Aus­tralian Heretic:

    Son of Africa: “national secu­rity of the United States” — John Pilger

    Shows what Aus­tralia has to look for­ward to with Gillard’s US Mil­i­tary Occu­pa­tion of Australia:

    This is HOW real “Econ­o­mists” work!

  17. peterjbolton says:

    @ Lyon­wiss et al, per­haps you could sum­mon a com­ment here please?:

    I decided to go back and look at this subject:

    ***************************$600Trillion to $1.4Quadrillion (1000 x$1.4T) Derivatives–

    (just a sam­pling for reference)

    … and note that really noth­ing has been done or said about this recently despite the need to and while we are about that, we must also con­sider such things as lever­age and post­ing mar­gins to meet requirements.

    What are these “lead­ers” think­ing? Nary a word?

    This is nigh impos­si­ble for the lesser mor­tals but here we have: G14 (or Group of 14 deal­ers that dom­i­nate deriv­a­tives trad­ing includ­ing Bank of America-Merrill Lynch, Bar­clays Cap­i­tal, BNP Paribas, Citi, Credit Suisse, Deutsche
    Bank, Gold­man Sachs, HSBC, JP Mor­gan, Mor­gan Stan­ley, RBS,
    Soci­ete Gen­erale, UBS and Wells Fargo Bank)

    I believe I have seen these names else­where this evening — what “entan­gle­ment” you have here ^^? All worthless!

    I can see no way that this stuff will ever be accept­able to any­body sane and yet, it has to go but to where? Any­body with a hot­line to Alpha Centauri?

    $1.4QT / 14 com­pa­nies = ~$100T per company

    Global GDP =~$<100T (~$70T)


    Unleash this on J6P and the guilty will need a fortress on some rock in a far away Galaxy to save the very essence of his soul!

    There is only one choice and that is find, locate, iden­tify and value this stuff: and what­ever the cost, burn it!

    Put the above com­pa­nies in Bank­ruptcy and the Exec­u­tives in the dock for trial and break up what is good and sell it off!

    Then you get a choice; Nation­al­ize the Banks at very small scale (and this is prob­a­bly the best solu­tion) or allow them to oper­ate in the free mar­kets at full risk but under Glass Stea­gall type regulation.

    Their is no way that con­fi­dence can ever be returned to this lot and their rot­ten sys­tem and besides that sys­tem has already changed beyond recog­ni­tion; surely very few com­pre­hend the Big Pic­ture today as Ben helps BoCA and tries to buy MBS; is this des­per­a­tion and insan­ity or some­thing else?

    From QED Prin­ci­ples I have been mod­el­ling this sit­u­a­tion cog­ni­tively and I see that there are numer­ous, I repeat numer­ous sep­a­rate core prob­lems and none of them are really related sys­tem­at­i­cally, but they are all depen­dant, over­all. In other words, one solu­tion will not fix anything.

    This is far too com­plex to be left in the hands of econ­o­mists, politi­cians and or bureau­crats and we all know damned well, you just can’t trust the Bankers, so we need another approach.

  18. koonyeow says:

    Title: Thank You, Peterjbolton


    Thanks for the books rec­om­men­da­tion. I reckon that you are famil­iar with Anto­nio Damasio’s works too.

  19. peterjbolton says:

    @ Koonyeow Octo­ber 22, 2011 at 2:48 am | #

    I also highly rec­om­mend to you ‘The Ori­gin of Con­scious­ness in the Break­down of the Bicam­eral Mind’ by Julian Jaynes RIP A Mon­u­men­tal Work.

    As regards Anto­nio Damasio’s, I am aware but only now, through you — I will fol­low it up!

    Thank you

  20. peterjbolton says:

    @ Deriv­a­tives Post above:

    Coin­ci­den­tally, the fol­low­ing post at Zero Hedge ~3 hours ago brings up the same issues and ends its edi­to­r­ial as follows:

    When “the house” goes “bust”, every­body loses. The gov­ern­ments of the world could step in and try to bail every­one out, but the real­ity is that when the deriv­a­tives mar­ket comes totally crash­ing down there won’t be any gov­ern­ment on earth with enough money to put it back together again.

    A hor­ri­ble deriv­a­tives cri­sis is coming.

    It is only a mat­ter of time.

    Stay alert for any men­tion of the word “deriv­a­tives” or the term “deriv­a­tives cri­sis” in the news. When the deriv­a­tives cri­sis arrives, things will start falling apart very rapidly.


    The con­sen­sual silence is deafening.

    Through the mur­der or exe­cu­tion of Gadaffi and its global cel­e­bra­tions led and cheered on by our so illus­tri­ous “Lead­er­ship”, we see or devolved human­ity for that which has become; a geno­ci­dal preda­tor which lusts as a can­ni­bal upon itself in its hia­tus of the final feed­ing frenzy known as ‘extremis’. There is no music here only cancer.

    Vic­tory no cause for rejoic­ing.
    If you rejoice in vic­tory, then you delight in killing;
    If you delight in killing, you can­not ful­fill your­self.“
    — Tao te Ching — Lao Tzu — chap­ter 31

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