Advanced Polit­i­cal Econ­omy Lec­tures

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These are the first two lec­tures of my Advanced Polit­i­cal Econ­omy class at the Uni­ver­sity of West­ern Syd­ney. The class offers an in depth cri­tique of the fail­ures of neo­clas­si­cal the­o­ries, as well as detail­ing my approach to a new eco­nom­ics. Click on the links to down­load the Pow­er­point slides for the lec­tures.

Lec­ture 01: Part 1 — Intro­duc­tion to subject/Failure of Neo­clas­si­cal Macro




Lec­ture 02: Fail­ure of Neo­clas­si­cal Macro (Demand and Sup­ply)



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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  • cliffy

    Thanks for these Dave. Very gen­er­ous of you to post these Steve.

  • alain­ton

    @steve ques­tion

    How does a new firm then ratio­nally enter the mar­ket? If it has to lower the aver­age rate of profit then it will divert invest­ment from that sec­tor, if it has to offer lower wages then labour will flow to other sec­tors. It could only enter the mar­ket through accept­ing lower prof­its through self financ­ing- which most SMEs tend to do — or through inno­va­tion to lower costs. This is look­ing more like Adam Smith than Mar­shall — very classical/schumpeterian — monop­oly prof­its attract­ing a swam of new entrants.

  • alain­ton

    @steve The the­ory of moral sen­ti­ments was writ­ten before Smith’s visit to France. when there he was sub­ject to the ideas of Ques­ney and Can­til­lon. Smith kept the same term ‘invis­i­ble hand’ but took a rev­o­lu­tion­ary step — replac­ing god with the con­cept of a self reg­u­lat­ing sys­tem — the cir­cu­lar flows like those of blood that influ­enced William Petty and through him Can­til­lon and Ques­ney. You are unfair because as a result Smiths micro­eco­nom­ics were MACROFOUNDED, based on the cir­cu­la­tion of phys­i­cal goods and money. 

    BTW Say missed two things in his pre­sen­ta­tion of a much older idea. Firstly the con­cept from Can­til­lon that the entre­pre­neur reg­u­lates the gap between sup­ply and demand by fill­ing in the oppor­tu­ni­ties pre­sented by uncer­tainty, and sec­ondly from Stu­art that this gap had to be filled by credit. As in the empty ships leav­ing from French colonies ship­ping sta­ple goods — which was Says model. ‘Say

  • It’s actu­ally rather Schum­peter­ian Andrew; check the The­ory of Eco­nomic Devel­op­ment, where he details 4 ways in which a firm can enter. I sum­marise those in my Man­age­r­ial Eco­nom­ics lectures–see the lec­tures tab.

  • End­less


    Debt analy­sis, sug­gest rents should fall. With out mak­ing too large a gen­er­al­i­sa­tion, they are not. Here in Inner Bris­bane, they have risen, sig­nif­i­cantly. Not so much as to com­pen­sate for a lack of cap­i­tal growth, but if rents con­tinue to increase or hold ground, at some point this will surely soften the house price fall. 

    As I would also argue, will the sig­nif­i­cant slow down in new homes being built, this has an impact on sup­ply — which has some impact on house prices, even if one accepts the sig­nif­i­cance of Debt.

  • cliffy


    The way I see it:

    Rents come from wages, profit, debt, or sav­ings.

    How­ever, there can be redis­tri­b­u­tion of funds from other regions. The two impor­tant redis­trib­u­tive dynam­ics are:

    1. Rentals by for­eign­ers can tap into the wages, profit, debt and sav­ings of other regions [e.g. For­eign stu­dents mum and dad or sav­ings funds, tourists]

    2. The trans­fer of tax rev­enues taxed out­side a region trans­ferred into a region [e.g Min­ing roy­al­ties into rental sub­si­dies].

    If there are more peo­ple look­ing for the same hous­ing then, because it is unlaw­ful to live on the street, rents will rise up to the max­i­mal extent that wages, profit, debt, and sav­ings can fund.

    From the data below:

    - hous­ing starts has kept up with employ­ment growth in Queens­land
    — for­eign debt has pumped but it is hard to see how it would pump into inner city rents
    — per­haps your city has won a share of the increase in for­eign stu­dents, who I would imag­ine would be inner city and renters?
    — that min­ing boom up in Queens­land do work­ers rent in your area?


    17400 more peo­ple were employed in Queens­land at the end of Feb 2012 than Feb 2011.

    [ABS: 6202.0 — Labour Force, Aus­tralia, Feb 2012]

    16270 hous­ing starts in Queens­land Nov 2012 to Oct 2011.

    [ABS: 8731.0 — Build­ing Approvals, Aus­tralia, Jan­u­ary 2012]

    Aver­age total earn­ings per per­son in Queens­land grew by 2.0% from Nov 2011 to Nov 2012. 

    ($1033.30 per week at Nov 2012)

    [ABS: 6302.0 — Aver­age Weekly Earn­ings, Aus­tralia, Nov 2011]

    Credit Card Bal­ances in Aus­tralia grew 2.2% from Jan 2011 to Jan 2012

    ($49.1 bil­lion at Jan 2012)


    Net For­eign Debt in Aus­tralia grew 13% Dec 10 to Dec 11

    ($735.4 bil­lion at Dec 11)


    Com­pany Prof­its Before Income Tax in Aus­tralia Sep 2010 to Sep 2011 con­tracted 11%

    ($47.1 bil­li­ion at Sep 2011)

    [ABS: 13500DO017_201203 Aus­tralian Eco­nomic Indi­ca­tors, Mar 2012].

    <b<[If you want to see the sig­nif­i­cance of min­ing to Aus­tralia now you want to check out that ref­er­ence at the link below and take a look at “Table 7.3–Company prof­its before income tax, QUARTERLY–By broad indus­try” time series]

    Min­ing Prof­its

    Refi­nanc­ing of Estab­lished Dwellings (extend­ing the mort­gage) in Aus­tralia rose 22% from Jan 2011 to Jan 2012.

    [ABS: 5609.0 — Hous­ing Finance, Aus­tralia, Jan 2012].

    ($3.5 Bil­lion dur­ing Jan 2012)

    Short Term Arrivals rose 4.8% from Jan 2011 to Jan 2012

    (502,500 in Jan 2012)

    The num­ber of stu­dent visas granted in Aus­tralia rose 5.9% from the 6 moths to Dec 2011 to the 6 months to Dec 2012.

    (123598 stu­dent Visas Granted 6 month to Dec 2012)


  • Derek R


    Excel­lent stuff!

    Thanks once again for putting these lec­tures on the web. I’ve only lis­tened to lec­ture 1 so far but I found it very infor­ma­tive. I didn’t know about the Ricardo/Say con­nec­tion nor the Marx/Keynes one, so I was par­tic­u­larly inter­ested in those parts. 

    And lis­ten­ing to you talk about Keynes’ thoughts on uncer­tainty and unpre­dictabilty makes me think that Keynes and von Mises actu­ally have more in com­mon than the Aus­trian econ­o­mists might realise. 

    Now for lec­ture 2…

  • Steve Hum­mel

    makes me think that Keynes and von Mises actu­ally have more in com­mon than the Aus­trian econ­o­mists might realise.”

    Indeed, but it really only points up the fact that they agreed on the uncer­tainty and unpre­dictabil­ity of cap­i­tal­ism. Keynes and the Aus­tri­ans are the sup­posed polar oppo­sites of mod­ern eco­nomic think­ing, but they are in fact only two false choices that fight each other while the real prob­lem remains unex­am­ined. That prob­lem is wage slav­ery, empha­sis slav­ery, that will con­tinue on in ANY eco­nomic sys­tem which does not find a way to mon­e­tar­ily free its citizens.….even though it may craft an ele­gant and math­e­mat­i­cally rig­or­ous the­o­ret­i­cal frame­work, it will only pos­si­bly free the busi­ness enti­ties in the sys­tem, not the indi­vid­u­als inhab­it­ing it. And actu­ally it won’t even do that because the busi­nesses within the sys­tem will still be chas­ing the inad­e­quate demand that forces them into manic export­ing in search of its suf­fi­ciency.

    Keynes’ the­o­ries were the sta­tist solu­tion for finance that they knew (con­sciously or uncon­sciously) that they could con­ve­niently manip­u­late, demo­nize and replace with the devolved neo-lib­eral ver­sion of finance cap­i­tal­ism we see afflict­ing us today. 

    While we are on Keynes we should remind our­selves that he had a first rate eco­nomic mind, but was not a totally hon­est researcher. He some­what con­de­scend­ingly referred to “Major” C. H. Dou­glas as a pri­vate in his Gen­eral The­ory, and yet much of his work is again, a sta­tist pla­gia­riz­ing of Dou­glas. Keynes in fact admits in The Gen­eral The­ory, the real­ity of the “Gap” in pur­chas­ing power Dou­glas dis­cov­ered. Keynes in The Gen­eral The­ory:

    Thus the prob­lem of pro­vid­ing that new cap­i­tal-invest­ment shall always out­run cap­i­tal-dis­in­vest­ment suf­fi­ciently to fill the gap between net income and con­sump­tion, presents a prob­lem which is increas­ingly dif­fi­cult as cap­i­tal increases. New cap­i­tal-invest­ment can only take place in excess of cur­rent cap­i­tal-dis­in­vest­ment if future expen­di­ture on con­sump­tion is expected to increase. Each time we secure to-day’s equi­lib­rium by increased invest­ment we are aggra­vat­ing the dif­fi­culty of secur­ing equi­lib­rium to-mor­row.”

  • End­less

    That’s an inter­est­ing per­spec­tive Cliffy, thanks. Cer­tainly my area of inner Bris­bane would entice For­eign stu­dents, but not so sure it would be a min­ing work­ers area.

  • Bhaskara II

    Test of for­mula capa­bil­ity of word­press.

    $latex \frac{\mathrm{d} (\frac{\mathrm{dX(t)} }{\mathrm{d} t})}{\mathrm{d} t}=-x(t) $

    For­mula should be above if it works.