George Monbiot Seminar

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This is the video of the sem­i­nar I gave in Oxford ear­li­er this month that The Guardian’s George Mon­biot attend­ed. George then wrote the fea­ture “It’s in all our inter­ests to under­stand how to stop anoth­er Great Depres­sion”, which briefly pro­pelled the new edi­tion of Debunk­ing Eco­nom­ics to No. 89 on Ama­zon UK’s Best­seller list.

Giv­en that my audi­ence includ­ed aca­d­e­m­ic economists–from PhD stu­dents to Pro­fes­sors of some note–I went into more depth on the mod­el­ling I have done of Min­sky’s Finan­cial Insta­bil­i­ty Hypoth­e­sis than I nor­mal­ly do in pub­lic talks. The dis­cus­sion I had after­wards is also record­ed, which is why the video is so lengthy.

One part of the dis­cus­sion that I found quite notable was that, even after show­ing empir­i­cal evi­dence on the impact that ris­ing and then falling pri­vate debt had on the econ­o­my both now and dur­ing the Great Depres­sion, I could­n’t con­vince sev­er­al of the aca­d­e­mics in the audi­ence of the impor­tance of pri­vate debt: they kept com­ing back to “one per­son­’s debt is anoth­er per­son­’s asset, there­fore the lev­el of debt does­n’t mat­ter”. They there­fore argued vehe­ment­ly that the dis­tri­b­u­tion of debt was impor­tant, but its aggre­gate lev­el was irrel­e­vant.

I tried to point out that since the rate of change of debt con­tributes to aggre­gate demand (for both new­ly pro­duced goods & ser­vices, and exist­ing assets), then the change in debt mat­ters, but I made no head­way at all with the argu­ment.

As I not­ed at the end, maybe I’d bet­ter come back for a longer sem­i­nar then. The point I would make, in much more detail, is that even if one accept­ed that the lev­el of debt can be any­thing at all with­out hav­ing macro­eco­nom­ic con­se­quences on its own (which I don’t accept–at some lev­el of debt, debts can’t be repaid and both cred­i­tor and debtor fail in a chain reac­tion of bank­rupt­cies), the rate of change of debt and its accel­er­a­tion do mat­ter. This in turn gives the lev­el of debt an imput­ed rel­e­vance, since at a low lev­el of debt the rate of accel­er­a­tion of debt can be both pos­i­tive and quite high, while at high­er lev­els of debt it will gen­er­al­ly be low and can be sub­stan­tial­ly negative–just as a car’s accel­er­a­tion can be very high and pos­i­tive when the car is mov­ing slow­ly, but will be low and poten­tial­ly very neg­a­tive when the car is trav­el­ling at a high speed.

I hope that argu­ment would get through, but there’s a les­son to be learnt in the fail­ure of my argu­ment on the day to get past eco­nom­ic a‑prioris–even amongst econ­o­mists who were quite sym­pa­thet­ic to my over­all crit­i­cal atti­tude to neo­clas­si­cal eco­nom­ics. This is that a sta­t­ic mind­set is so much a part of eco­nom­ic think­ing that the “slice of time” con­sid­er­a­tion that “one per­son­’s debt now is anoth­er per­son­’s asset now” com­plete­ly dom­i­nat­ed how they thought about the macro­eco­nom­ic impact of debt.

I would have left that sem­i­nar some­what deflat­ed if George had­n’t been in the audi­ence. But of course his pres­ence there, and his sub­se­quent col­umn, made it all worthwhile–and helped the first print run run out in a cou­ple of weeks (hence the delay in get­ting copies to some blog sub­scribers and CfE­SI Part­ners and Fel­lows; they’ll be on their way–and as signed copies to make up for the delay–after I get to Eng­land again in mid-Novem­ber)

If you’re not a reg­u­lar read­er of Mon­biot, you’re miss­ing some real gems of both com­men­tary and jour­nal­ism. Being an Aus­tralian, I have almost no idea of who Christo­pher Book­er is, but George’s hatch­et job on him in The super­hu­man cock-ups of Christo­pher Book­er in his blog today is a gem of a piece.

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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.