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 640x480 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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