My Kingston Inau­gural Lec­ture with slides and data

Flattr this!

I’ve been Head of School at Kingston Uni­ver­sity Lon­don for over 18 months now, but these things do take time: last Wednes­day I gave my inau­gural Pro­fes­so­r­ial lec­ture to an audi­ence of about 200 peo­ple. My screen-record­ing video of the talk is below. Click here to down­load the Pow­er­point slides; Min­sky cri­sis model; Min­sky Loan­able Funds model; Min­sky Endoge­nous Money model; Pri­vate Debt lev­els (6 coun­tries); Pri­vate Credit growth (6 coun­tries); USA Pri­vate Debt change & Unem­ploy­ment; Pri­vate Debt Accel­er­a­tion & Asset Prices.

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.
Bookmark the permalink.
  • Bhaskara II

    Instead of, “Brazil cans car­ni­val as reces­sion bites”, they should invite Pope Fran­cis and have the party any­way!

    http://www.ft.com/cms/s/0/b97905ea-b5db-11e5-8358-9a82b43f6b2f.html#axzz3xTzTGWSN

  • Bhaskara II

    http://im.ft-static.com/content/images/be875529-7675-43d8-b461-b304410398c2.img

    Here is the direct link to the photo in the FT arti­cle if you hit the arti­cle limit.

  • Bhaskara II

    The mul­ti­pli­ca­tion and quo­tient rules can be put in a dif­fer­ent form that derives your iden­ti­ties from the first ones. This is a neat math trick. By using a for­mula for F’/F. One can prove it by using the mul­ti­pli­ca­tion rule and divid­ing it by the term, F. Or use nat­ural log to split prod­uct terms into sums and dif­fer­en­ti­at­ing.*

    Say, F=abc/[de]

    Then the mul­ti­pli­ca­tion rule gives this for, F’/F. [expo­nent –1 for numer­a­tor terms]

    F’/F=a’/a + b’/b + c’/c – d’/d – e’/e.
    Pos­i­tive terms for numer­a­tor terms and neg­a­tive terms for denom­i­na­tor terms.

    Exam­ple using, d=D/Y

    d’/d=D’/D-Y’/Y

    Now you can do it eas­ily for the wages share and debt ratio equa­tions.

    The other equa­tions yield the alpha and beta terms. Because alpha=a’/a and beta=N’/N. Where a is labor pro­duc­tiv­ity and N is pop­u­la­tion. Alpha and beta are the instan­ta­neous growth rate rel­a­tive to the numer­a­tor.

    This is like an instan­ta­neous per­cent change.

    This make jug­gling this kind of instan­ta­n­ious change ratio eas­ier.

  • Bhaskara II

    Much eas­ier proof using nat­ural log. Other way is a lot of work for more terms.

    F= abc/[de]
    ln F = ln a + ln b +ln c –ln d –ln e
    because ln ab=ln a +ln b and ln a/b = ln a-ln b

    Now take the deriv­a­tive, not­ing that, [ln x]=x’/x.

  • Bhaskara II

    Cor­rec­tion:

    Now take the deriv­a­tive, not­ing that, [ln x]´=x’/x.

    Not ´ means time deriv­a­tive.

  • Bhaskara II

    Should have typed:

    Note ´ means time deriv­a­tive.

  • Bhaskara II

    Labor pro­duc­tiv­ity is defined as with this equa­tion, a=Y/L or equiv­a­lently Y=aL.

  • Bhaskara II

    Exam­ples of the othre two equa­tions using the math­e­mat­i­cal tool for F’/F: *

    1. wages_share ? Wages/Output

    wages_share’/wages_share = Wages’/Wages — Output’/Output


    and


    2. Emloy­ment rate ? Employment/Population ? Output/(Labor_Productivity*Population
    ion )

    (Y=aL thus L=Y/a) This cor­rects a type-o at 4m:15s.


    We can now directly derive from the alge­bra equa­tion:

    Emloy­ment rate’/Emloyment rate = Output’/Output — Labor_Productivity’/Labor_Productivity — Population’/Population

    (Again nuber­a­tor terms are + and denom­e­nater terms are -.)

    Also the def­i­n­i­tions of the fol­low­ing expo­nen­tial growth rates are:

    ?=Labor_Productivity’/Labor_Productivity=a’/a

    and

    ?=Population’/Population

    Using those to replace terms above gives:

    Emloy­ment rate’/Emloyment rate = Output’/Output — (? + ?)
    or ?’/ ?=Y_Real’/Y_Real — (? + ?)

    *https://en.wikipedia.org/wiki/Quotient_rule See Alter­na­tive Proof sec­tion.

  • Bhaskara II

    Cor­rected for greek let­ters and defined as sign that did not show. Defined as was replaced with an equal sign.

    Exam­ples of the othre two equa­tions using the math­e­mat­i­cal tool for F’/F: *

    1. wages_share = Wages/Output

    wages_share’/wages_share = Wages’/Wages — Output’/Output


    and


    2. Emloy­ment rate = Employment/Population ? Output/(Labor_Productivity*Population
    ion )

    (Y=aL thus L=Y/a) This cor­rects a type-o at 4m:15s.


    We can now directly derive:

    Emloy­ment rate’/Emloyment rate = Output’/Output — Labor_Productivity’/Labor_Productivity — Population’/Population

    (again nuber­a­tor terms + and denom­e­nater terms -)

    Also the def­i­n­i­tions of the fol­low­ing expo­nen­tial growth rates are:

    alpha=Labor_Productivity’/Labor_Productivity=a’/a

    and

    beta=Population’/Population

    Using those to replace terms above gives:

    Emloy­ment rate’/Emloyment rate = Output’/Output — (alpha + beta) ,
    Emloy­ment rate’/Emloyment rate = Output’/Output — (labor_pro­duc­tiv­ity growth + Pop­u­la­tion growth),
    or ?’/ ?=Y_Real’/Y_Real — (alpha + beta)

    *https://en.wikipedia.org/wiki/Quotient_rule See Alter­na­tive Proof sec­tion.

  • Bhaskara II

    Missed a few, all cor­rected I hope:

    Exam­ples of the othre two equa­tions using the math­e­mat­i­cal tool for F’/F: *

    1. wages_share = Wages/Output

    wages_share’/wages_share = Wages’/Wages — Output’/Output


    and


    2. Emloy­ment rate = Employment/Population = Output/(Labor_Productivity*Population
    ion )

    (Y=aL thus L=Y/a) This cor­rects a type-o at 4m:15s.


    We can now directly derive:

    Emloy­ment rate’/Emloyment rate = Output’/Output — Labor_Productivity’/Labor_Productivity — Population’/Population

    (again nuber­a­tor terms + and denom­e­nater terms -)

    Also the def­i­n­i­tions of the fol­low­ing expo­nen­tial growth rates are:

    alpha=Labor_Productivity’/Labor_Productivity=a’/a

    and

    beta=Population’/Population

    Using those to replace terms above gives:

    Emloy­ment rate’/Emloyment rate = Output’/Output — (alpha + beta) ,
    Emloy­ment rate’/Emloyment rate = Output’/Output — (labor_pro­duc­tiv­ity growth + Pop­u­la­tion growth),
    or lambda’/ lambda=Y_Real’/Y_Real — (alpha + beta)

    *https://en.wikipedia.org/wiki/Quotient_rule See Alter­na­tive Proof sec­tion.

  • Bhaskara II

    https://en.wikipedia.org/wiki/Logarithmic_differentiation

    Under appli­ca­tions sec­tion it coveres prod­ucts and quo­tients.

  • Bhaskara II

    Con­clu­sion:

    The rea­son I men­tioned this math tool, was that it seemed to greatly sim­plify putting together Goodiwn´s, Keen´s cycle mod­els.

    It is quicker and more strait for­ward than using the usual prod­uct and quo­tient rules for deriv­a­tives.

  • Bhaskara II

    Here is an exam­ple applied to Good­win in sec­tion 2.2.

    http://www.systemdynamics.org/conferences/2005/proceed/papers/WEBER196.pdf

  • Postkey

    The eyes of the finan­cial and eco­nomic worlds are now fixed on China, with focus pre­dom­i­nantly on Chi­nese stock mar­kets and the country’s GDP fig­ures. A fas­ci­nat­ing per­spec­tive was pro­vided last week in the leafy bor­ough of Kingston upon Thames. The uni­ver­sity there has recruited the Aus­tralian Steve Keen as head of its eco­nom­ics depart­ment, and it was the occa­sion of his inau­gural lec­ture. Keen was one of the few econ­o­mists to high­light the impor­tance of pri­vate sec­tor debt before the finan­cial cri­sis began in 2008.

    The title of the lec­ture itself was excit­ing: “Is cap­i­tal­ism doomed to have crises?” Judg­ing by the beards and dress style of the audi­ence, many may have expected a Cor­by­nesque rant. Instead, we heard an ele­gant expo­si­tion based on a set of non-lin­ear dif­fer­en­tial equa­tions.

    Pri­vate sec­tor debt is the sum of the debts held by indi­vid­u­als and com­pa­nies, exclud­ing finan­cial sec­tor firms like banks. Keen pointed out that, in the decade prior to the mas­sive crash of 1929, the size of pri­vate debt rel­a­tive to the out­put of the econ­omy as a whole (GDP) rose by well over 50 per cent.

    The increase from the late 1990s onwards meant that debt once again reached dizzy heights. In ten years, it rose from being around 1.2 times as big as the econ­omy to being 1.7 times larger. This may seem small. But Amer­i­can GDP in 2007 was over $14 tril­lion. If debt had risen in line with the econ­omy, it would have been about $17 tril­lion. Instead, it was $24 tril­lion, an extra $7 tril­lion of debt to worry about.

    Japan expe­ri­enced a huge finan­cial crash at the end of the 1980s. The Nikkei share index lost no less than 80 per cent of its peak value, and land val­ues in Tokyo fell by 90 per cent. Dur­ing the 1980s, pri­vate sec­tor debt rose from being some 1.4 times as big as the econ­omy to 2.1 times the size.

    In China, in 2005, the value of pri­vate debt was around 1.2 times GDP. It is now around twice the size. Draw­ing par­al­lels with the pre­vi­ous expe­ri­ences of Amer­ica and Japan, a major finan­cial cri­sis is not only over­due but it is actu­ally hap­pen­ing. And Keen sug­gests there is still some way to go.

    So is it all doom and gloom? Up to a point, Lord Cop­per. High lev­els of pri­vate sec­tor debt rel­a­tive to the size of the econ­omy do indeed seem to pre­cede crises. But there is no hard and fast rule on the sub­se­quent fall in share prices.

    Japan­ese shares fell 80 per cent and have not yet recov­ered their late 1980s lev­els. In the 1930s, US equi­ties fell 75 per cent, and took until 1952 to bounce back. In the lat­est finan­cial cri­sis, they fell by 50 per cent but are even now above their 2007 high.

    Equally, out­put responds to these falls in com­pletely dif­fer­ent ways. In the 1930s, Amer­i­can GDP fell by 25 per cent, com­pared to just 3 per cent in the late 2000s. Japan has strug­gled, but never expe­ri­enced a major reces­sion. Still, Keen’s argu­ments leave much food for thought.”

    http://www.cityam.com/232702/china-is-drowning-in-private-sector-debt-theres-no-telling-how-this-one-will-end?ITO=sidebar-top-comment