Presentations at UMKC

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I had hoped to post this on the day of my presentation to UMKC, but the site fell over that day and it has taken volunteers several days to sort out the problems. I had to buy additional storage space on the server, and large system logs had to be deleted. These are some of the issues that have motivated the development of Debunking Economics as a subscription site: with professional staff support, this problem would never have occurred; without them, and with me being too busy to do the work myself, it’s resulted in the site being down for about 4 days.

That said, finally I can put these three presentations up on the blog.

Reconciling MMT & MCT with DEB

In this presentation I prove that sectoral balances and aggregate (or effective) demand exceeding income are fully compatible.

The Keen model with Government–comparing deficit spending and austerity

Matheus Grasselli, Professor of Mathematics at McMaster University and Deputy Director of the Fields Institute, explains my 1995 Minsky model and extensions to it that enable different government policies–austerity versus deficit spending–to be evaluated.

Demonstrating Minsky

A live demonstration of building both a physical and a monetary model of the economy in Minsky. The first release version of the program is now available for download.

I recommend watching this video in full screen mode, since the design palette in Minsky is very hard to read at the small scale of a 640×480 window.


At my site, Debunking Economics, we dig even deeper into these issues. Check out DE’s preview page here, if you’re interested. SK


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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17 Responses to Presentations at UMKC

  1. Steve Hummel says:

    The first video makes perfect sense in terms of the business economy. In terms of the individual it still ignores the effects of cost accounting’s systemic enforcement of income scarcity in comparison to prices and hence BUILT IN price inflation. Velocity theory is fallacious, virtually all money is created as debt and so one dollar of income can only liquidate one dollar of price/debt. The SYSTEM can continue on for long periods of time with central bank and government injections all the while being increasingly unstable and inequitable. Meanwhile monopolies develop as an “answer” to the instability and inherent scarcity of effective demand.

    The individual must be completely considered, and the DEEPLY EMBEDDED REALITY, not the THEORY of cost accounting’s conventions must be acknowledged.

    Considering the inexorable force of technological innovation, only policies based on, crafted from and accurately reflecting the higher order of thinking that is human wisdom, the crystallization and condensation of which can be summed in the ideas, values and experiences of Faith as in Confidence, Hope, Love and Grace…is up to the task of creating a humane economic future for Humanity.

    Wisdom, by definition can only be opposed by the ignorant, the foolish or the self interested whose bottom line and/or control may somewhat negatively effected by its institutionalization. Philosophical and policy alignment with Wisdom. An idea whose time has come.

  2. John Hawkins says:

    When will you be coming out with a foreign trade model?

  3. Mary-Ellen Large says:

    Sorry to hear about your technical problems. Thanks (and thanks to your volunteers) for sorting it out. I really appreciate you sharing your work. The outcome of the collaboration between yourself and Prof Graselli is a very exciting development. Who knows, one day we might all look back to this model as a turning point in history?

  4. F. Beard says:

    Nice presentation! I’ll add that because of government deposit insurance and a legal tender lender of last resort, that the comercial banking system as a whole is able to create liabilities that it is in little danger of needing to redeem. Thus there need be no “loanable funds” since the banks can simply create new deposits.

  5. Steve Keen says:

    That’s some time away John. Fortunately the framework of Minsky is intended to support building such a model as a simulation tool–think of how meteorologists model the weather using 100m cubes and you’ll have an idea of what is intended. But that will take 2 years programming work to implement.

  6. John Hawkins says:

    Ah well I’ll keep my ear to the ground! Also, I remember e-mailing you perhaps 6 months back and suggesting the possibility of using margin debt for the stock prices the way mortgage debt is used for analyzing housing prices. I then went and did some work on my own, and found margin debt data on the NYSE

    I wasn’t able to make results that were at all comparable to yours. When you make the debt accelerator, what is the actual formula you are using?

    is it [D(t+1) – D(t)] / D(t) and then that done over again, simply getting the percentage changes (which puts out some pretty wild and untame numbers, usually on the negative side)? or is it something more exotic?

  7. John Hawkins says:

    And I must say, that stock market data for Australia is astounding in the strength of that correlation. I’m assuming the highest correlation was coincident rather than having some sort of lead or lag?

    Sorry for the double post and questions, hope you don’t mind!

  8. alainton says:

    The fullest explanation yet of your approach to aggregate demand – lets hope its convinces Lavoie and (unlikely) Krugman

    I would like you to model the velocity channel at some point – my hunch is that Basil Moore was wrong for, very similar reasons, in arguing that the Kahn/Kenyes multiplier violated the S=I identity.

    I would also be keen to see you do a similar flow-fund-flow model of interest

    Been reading JA Hobson in the last few days – The Industrial System 1909- and he has a flow-fund-flow model of prices and a chapter on growth in credit leading to business cycles – but sadly he never did the Math. Interestingly he makes the case that is you adopt a flow-fund-flow pricing model then the marginal productivity theory of distribution cannot hold (except in the special case of perfect competition, a single commodity and constant returns to scale), what would be interesting would be to build a model of his relative market power theory of distribution.

  9. Steve Keen says:

    It’s the change in the change in debt over a year, divided by GDP at the midpoint of the interval Jo.

    And yes those correlations were coincident.

  10. Leonard C. Tekaat says:

    I believe tax policy has more to do with how much debt is created by the private sector than what has been discussed. As the credit bubble starts to form we should use the tax code to slow down non productive credit creation instead of credit tightening policies used by central banks. My idea is The Zero Inflation Tax Policy. The Zero Policy would create a more productive and efficient economy. Asset values would be more stable and long term interest rates would remain constant. The value of debt (money) would would be changed by the tax on interest earned and the amount of credit created by the private sector would be reduced by the automatic reduction of the interest deduction. The long term capital gains tax devalues money (debt) because interest earned is taxed at a higher tax rate than asset price increases that have increased without the investor increasing the value of the asset (inflation). The Zero Policy will neutralize the capital gains tax during the inflation cycle. In this way we can reduce the amount of debt banks can create without rising cost of productive businesses. Raising interest rates is very damaging to the middle class and small businesses. The Zero Policy reduces demand from the top of the economic ladder. It allowes the normal economy to continue providing jobs to the employed and revenues to local, state and federal governments. The Zero Policy reduces inflation psychology investments during the inflation cycle, slowing down the volosity of money, which will allow production the time it needs to increase supply. Prof. Keen please read the articles I have posted on my web sites at and Please, I would like to know your thoughts on this subject.

  11. cyrusp says:

    Professor Keen – off topic but you might be interested in this presentation by Nate Hagens at the Association for the Study of Peak Oil (ASPO).

    Nate is considered on of the best thinkers in the peak oil community and at 8.02 minutes he sounds like he is quoting you verbatim on endogenous money.

  12. Steve Hummel says:


    Extremely interesting and insightful video. There truly are elephants in the room. I would like to quote one of the axioms and logics of what I refer to as Alignment with and Bind Back to the Wisdom of Policy based on Faith as in Confidence, Hope, Love and Grace here. I think fits in with some of what Hagens referred to in his presentation:

    “Consumption within a paradigm of Faith, Hope, Love and Grace does not mean excessive or “conspicuous” consumption, but rather the facilitation of the most efficient meeting of goods and services with consumers.”

    All of the axioms and logics are the last part of a book I’ll be publishing on Kindle hopefully within a week entitled:

    Money and Wisdom, The Way Out, The Way Home

  13. Jack Cribb says:

    Hi Steve, I noticed when you are demonstrating the two models you were using the Runge Kutta method to solve the differential equations. This method can give unstable results. It would be better if you used a method known not to have this problem, eg a predictor-corrector method.

  14. As any financial schoolboy knows, (FV-PV)/FV = iT = 1-u where (PV/FV =u)

    As T = 1/V, where V is the velocity a borrower can turn over his inventory, one can write

    i = V(1-u) meaning that V =i/(1-u)

    As u is the PV/FV ratio, also known as the wage share, and wage share has the macro definition u =wL/(paL) = w/pa, one can write

    u’/u = w’/w- p’/p – a’/a where w is wage, a is productivity, and p is price level.

    From this equation, one can see that u declines with inflation.

    From V = i/(1-u) with u decreasing, (1-u) increases so that for any i , V also decreases with inflation.

    All the economies of the world are dying from low velocity. I find it had to understand that all the world’s economists cannot understand the above simple financial math. The convoluted math of the model in the article sheds no light, but that is to be expected as it is based on a Keynesian fallacy.

  15. richard hodge says:


    ive been reading your debunking book and its really helped to put my own thoughts in a proper framework

    recently i was involved in a disscussion on unemployment on a brithish politics blog and i made the statement that “low wages cause unemployment” of course the right wingers disagreed and one of the wrote that he didnt belive in an upwaedly sloping demand slope as he did not consider that labor was a “vebooten good” i thought you might interested in my reply as it draws both on your debunking book and my own personal experiance


    You say that you don’t believe in upwards demand curves, I don’t believe in demand or supply curves at all especially in the labour market. I know it looks nice on paper to see two slightly curved lines intersect, its very tempting and very human to call that reality, its so aesthetically pleasing and intellectually tempting, as humans we desire to bring order to chaos. But in nature its rare, very rare to find perfectly curved lines and economics is not just or even mainly a mathematical discipline, how could it be when the whole idea of an economy springs from human nature and as we know humans are often pretty twisted.

    But if we don’t have demand curves or supply curves, (here I’m most concerned with supply curves because its most relevant to our discussion on low wages and unemployment) then what do we have? I would say we have wiggly lines and each of us has their own individual wiggly labour supply line which is never constant, it changes according to circumstances and to a degree age. Of course we could combine those individual labour supply lines to create a universal labour supply line but that would be next to useless because it would be so far from reality for most people to be able to use as a useful predictive tool, but maybe we could lump some income groups together and produce a somewhat useful line. So why don’t we try that with the low paid, as someone who has worked all my life in low paid occupations I feel I am qualified to to investigate this!!!

    Let’s start with my own personal labour supply line, we can imagine for a moment that I am a typical low paid worker even though the concept of a typical low wage worker is a difficult one. First we need to set some parameters, obviously the min amount of labour I can supply is 0 at least in theory but the the theoretical max of 24 hours per day is physically impossible, the real max supply of labour depends on many factors not least of which is the nature of employment, hard physical labour makes more demands on the body meaning I need more time to sleep and eat and so on, but let’s leave that to one side for the moment. The minimum amount of sleep I need is 5 hours a day plus some time for eating, basic shopping washing etc, we could call it 8 hours which leaves a theoretical max labour supply of 16 hours a day(in practice I would never consider working so many hours per day unless in exceptional circumstances, but I have been in exceptional circumstances and worked 16 hours a day for short periods of time, I will come back to that later) 16 hours a day is 112 hours a week, at this point some will be horrified at the idea but we should remember that this length of working week was common in Victorian times and still today is common in many countries, every time you put your clothes on in the morning you should spare a thought for young girls in “developing countries” who quite possibly are working such long hours making your clothes, but I digress and I need a new paragraph.

    So we now know that my min labour supply is 0 and the max is 112, so we can put that on the left hand scale of our graph and on the bottom scale we can put hourly wage, now in the neoclassical model the labour supply line would gently curve from the bottom left hand corner to the top right hand corner bulging slightly to the left, but my labour supply line is nothing like that( please bare with me I will get to the point soon) mine resembles a an inverted bell curve, starting close to the top left hand corner and dipping down to one third of the way down before gradually sloping upwards to the top right hand before dropping away again. Why should my personal labour supply line be so different from the accepted theoretical line? Well let’s start at the beginning of my labour supply line, obviously I would not be prepared to work many hours for no pay, but even if the pay was extremely low say £2 pounds per hour or maybe less it would be better than starving( in practice starving in the UK is not an option at this time but the way things are moving I wouldn’t rule it out within my lifetime) so I would be prepared to work 112 hours a week for very low wages but I wouldn’t be happy about it!!!!!!! What about 3 pounds an hour, I think here I would want to cut my hours to the minimum nessarry for survival, working 112 hours a week is agony and having a Sunday afternoon off would make life bearable, what about 4 pounds an hour, I’m pretty sure that I would(if I could because remember at this point the employer has enormous power over me because I’m so close to going hungry) chose to reduce my hours further because the luxury of time would be more valuable to me than any luxury I could buy with the extra money. This would continue in a straight line until I reached the point where I was working 72 hours a week, why 72 hours you ask? Because that is my maximum tolerable working hours( this I know from experience but of course this will be different for each individual) from then on the line would be a more gradual slope as I would desire other luxuries as well as time, perhaps a pint of beer for instance but the line would still slope down because while 72 hours is tolerable its not pleasant for any extended period of time, but when I get to the point where I’m working 60 hours a week the line flattens out, 60 hours a week is my maximum acceptable working week, at this point good food and homely comforts become more important than leisure time and my labour supply line could even be flat for a while, but as we move along the bottom hand scale(hourly wage) I come to another tipping point where time to enjoy my hard worked for luxuries becomes more important than having more luxuries, I think about the £10 an hour mark, from here the amount of work hours I am willing to supply drops very fast(for example in Norway I earn much more than £10 an hour and I’m not prepared to work more than 40 hours a week, in the UK i have never got close to earning £10 a hour and never been willing to work less than 50 to 60 hours a week) until it reaches about 40 hours a week which is the maximum amount of hours I WANT to work per hour, from this point on the amount of extra wages needed to induce me to work more hours rises very quickly so its almost impossible to get me to work longer hours on a regular basis until the hourly wage reaches £25 pounds an hour, from that point on the amount of labour I’m prepared to supply goes up very fast and the line rises very steeply until at £100 an hour I would be working a hundred hours a week(you may laugh but that’s what I’m like) after that the line would dip down again until it disappeared off the bottom right-hand corner(so if I was earning a million pounds an hour I would only work one hour a week) that’s my personal labour supply line.

    But would that labour supply line differ much from other low paid workers, I believe not, while some of my line can be explained by personal preferences most is determined by physical, emotional and psychological limitations which are common to all, for example the need to eat and the need to rest and possibly the need or desire to spend time with your children. Now most of you are thinking ” well this is obvious” but to economists particularly neoliberal economists its not, all the textbooks show a supply curve sloping upwards, that as hourly wages rise so does the amount of hours supplied to the market place, this is the basis of modern(well we call it modern but it started in Victorian times) economic theory and what neoliberal economic policies are based on, I hope by now I have made a convincing case that this is wrong. But so what? Why does this matter? How does this make the case that low wages cause unemployment?

    The answer is simple when wages are low the supply of labour increases to such an extent that there is not enough work for everyone, remember at £2 an hour I have little choice than to work 112 hours a week if I am to survive but at £10 an hour I’m happy to work only 40 hours a week, so at an hourly wage of £2 one person is employed but at a wage of £10 nearly three people will be employed. “Hold on a moment” the neoclassical folk say ” what about the demand curve, there will be nobody willing to pay £10 an hour so there will be more unemployment” so let’s look at that in my next post, sorry but I need a break

    hope you dont mind me posting this but i was quite pleased with myself and so far no one has offered a counter arguement. i have also been thinking about the implications of the labor supply curve i described, you can see that any signiuficat wage increase among the low paid would be self reinforceing and lead to a real shortage of labour, i have actually experianced this in 1989 when i was working on the building sites in london, in one year my hourly wage went up by 50%, i think that it would be worthwhile to investigate what i call sudden wage rebound and something which i think could happen if we really had a free labour market which i call “acrelarating labour supply collapse”

  16. George says:

    I’m late to the party here, but just catching up on some of Steve’s posts.

    I wanted to note that “effective demand” is the term used by Smith in [i]Wealth of Nations[/i] to describe the money demand for a commodity (as opposed to “absolute demand,” which is how much of a good is actually desired by the population, regardless of their ability to pay).

    I just think that’s cool – especially given the general lack of command (on the part of “professional” economics) of the history of economic thought that Steve likes to mention.

  17. George says:

    Actually that’s not quite right. “Effectual” demand in Smith is the quantity of the product demanded at it’s “natural price.” He is sometimes a little slippery about the distinction between this and the quantity demanded at the market price.

    Still cool, though, methinks.

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