Incor­po­rat­ing energy into pro­duc­tion func­tions

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In my last post on my Debt­watch blog, I fin­ished by say­ing that the Phys­iocrats were the only School of eco­nom­ics to prop­erly con­sider the role of energy in pro­duc­tion. They ascribed it solely to agri­cul­ture exploit­ing the free energy of the Sun, and specif­i­cally to land, which absorbed this free energy and stored it in agri­cul­tural prod­ucts. As Richard Can­til­lon put it in 1730:

The Land is the Source or Mat­ter from whence all Wealth is pro­duced. The Labour of man is the Form which pro­duces it: and Wealth in itself is noth­ing but the Main­te­nance, Con­ve­nien­cies, and Super­fluities of Life. (Can­til­lon, Essai sur la Nature du Com­merce in Général (Essay on the Nature of Trade in Gen­eral)

Quesnay’s famous but neglected “Tableau Economique” there­fore described the agri­cul­tural sec­tor as “the pro­duc­tive sec­tor” and man­u­fac­tur­ing as “sterile”—see Fig­ure 1.

Fig­ure 1: Quesnay’s “Tableau Economique”, first drafted in 1759, two decades before Watt’s steam engine

This was a jus­ti­fied asser­tion at the time, given that the Phys­iocrats wrote before the Indus­trial Revolution—and in par­tic­u­lar the wide­spread exploita­tion in man­u­fac­tur­ing of stored solar energy in fos­sil fuels– and orig­i­nated in France, which was then over­whelm­ingly a rural nation.

Smith, who was influ­enced by the Phys­iocrats and wrote in Britain when indus­try was start­ing to exploit fos­sil fuels (specif­i­cally coal) on a grand scale, could have cor­rected this over­sight. But rather than fol­low­ing the Phys­iocrats’ lead on energy, Smith instead saw labour—not energy—as the font of wealth (which he described in the same terms as Can­til­lon: the “con­ve­nien­cies of life”), and ascribed the increase in pro­duc­tiv­ity over time to “the divi­sion of labour”:

The annual labour of every nation is the fund which orig­i­nally sup­plies it with all the nec­es­saries and con­ve­nien­cies of life which it annu­ally con­sumes, and which con­sist always either in the imme­di­ate pro­duce of that labour, or in what is pur­chased with that pro­duce from other nations…

The great­est improve­ment in the pro­duc­tive pow­ers of labour, and the greater part of the skill, dex­ter­ity, and judg­ment with which it is any­where directed, or applied, seem to have been the effects of the divi­sion of labour. (Smith 1776, An Inquiry into the Nature and Causes of the Wealth of Nations)

Eco­nom­ics thus lost the Phys­iocrats’ focus on energy, and instead descended first into the “Labour the­ory of value” and then into the Neo­clas­si­cal (and Post Key­ne­sian) notions of “pro­duc­tion func­tions” in which energy played no role at all.

The abid­ing weak­ness of all schools of eco­nom­ics, ever since the Classicals—including today’s Neo­clas­si­cal and Post Key­ne­sian schools, which are nor­mally at pains to point out how supe­rior one is to the other—is this fail­ure to acknowl­edge the key role of energy in pro­duc­tion. In this brief note, I want to record some spec­u­la­tions about how mod­ern math­e­mat­i­cally-inclined eco­nom­ics, with its use of pro­duc­tion func­tions, might be made as energy aware as the Phys­iocrats were two and a half cen­turies ago. For the sake of non-math­e­mat­i­cal read­ers, I’ve put the equa­tions in an appen­dix at the end of this post.

Post Key­ne­sian mod­els typ­i­cally see Out­put (Y) as a func­tion of Cap­i­tal (K) with a fixed ratio (v) between Cap­i­tal and Out­put, and a fixed ratio (a) between Out­put and Labour (L) (see Equa­tion 1).

When they go fur­ther than “corn econ­omy” mod­els, they employ a so-called “Leon­tief pro­duc­tion func­tion”, in which the ratio between cap­i­tal and labour is fixed in each indus­try, though it varies between indus­tries.

Neo­clas­si­cal econ­o­mists crit­i­cise this approach because it ignores the sub­sti­tutabil­ity of cap­i­tal and labour in pro­duc­tion, which they embody in their core con­cept of an “iso­quant” which alleges that the same level of out­put can be pro­duced by very dif­fer­ent com­bi­na­tions of labour and cap­i­tal. Post Key­ne­sians nor­mally respond that this sub­sti­tutabil­ity is a chimera, and con­tinue using this “fixed coef­fi­cients” model of pro­duc­tion any­way.

Neo­clas­si­cals typ­i­cally see out­put as a func­tion of cap­i­tal and labour where one can be smoothly sub­sti­tuted for the other. Their canon­i­cal model is the Cobb-Dou­glas Pro­duc­tion Func­tion with con­stant returns to scale (Equa­tion 2).

Neo­clas­si­cals tout this model’s fit to empir­i­cal data as a strength; Post Key­ne­sians note that this is sim­ply the result of account­ing iden­ti­ties, since this “pro­duc­tion func­tion” can be derived by manip­u­lat­ing the iden­tity that Out­put equals Wages plus Prof­its under con­di­tions of a rel­a­tively con­stant (or slowly vary­ing) dis­tri­b­u­tion of income (see Anwar Shaikh’s bril­liant paper “The Hum­bug Pro­duc­tion Func­tion”).

In this “he said/she said” bat­tle, both sides ignore the shared weak­ness that their mod­els of pro­duc­tion imply that out­put can be pro­duced with­out using energy—or that energy can be treated as just a form of cap­i­tal. Both state­ments are cat­e­gor­i­cally false accord­ing to the Laws of Ther­mo­dy­nam­ics, which—in strong con­trast to so-called “Eco­nomic Laws” like the “Law of One Price” and the “Law of Demand”—can­not be bro­ken. As Sir Arthur Edding­ton once put it:

The law that entropy always increases holds, I think, the supreme posi­tion among the laws of Nature. If some­one points out to you that your pet the­ory of the uni­verse is in dis­agree­ment with Maxwell’s equa­tions — then so much the worse for Maxwell’s equa­tions. If it is found to be con­tra­dicted by obser­va­tion — well, these exper­i­men­tal­ists do bun­gle things some­times. But if your the­ory is found to be against the sec­ond law of ther­mo­dy­nam­ics I can give you no hope; there is noth­ing for it but to col­lapse in deep­est humil­i­a­tion. (Sir Arthur Stan­ley Edding­tonThe Nature of the Phys­i­cal World (1915), chap­ter 4)

Arguably there­fore, the pro­duc­tion func­tions used in eco­nomic theory—whether spouted by main­stream Neo­clas­si­cal or non-ortho­dox Post Keynesians—deserve to “col­lapse in deep­est humil­i­a­tion”.

This unac­cept­able state of affairs has inspired a num­ber of eco­log­i­cally ori­ented econ­o­mists to attempt to come up with pro­duc­tion func­tions in which energy plays a cru­cial role. One such model is the LINEX (“LIN­ear-Expo­nen­tial”) or KLEC (“cap­i­tal-labor-energy-cre­ativ­ity”) model used by Kum­mel, Lin­den­berger, Ayres and col­leagues. At a basic level, this treats out­put as a func­tion of labour, cap­i­tal, energy and time—effectively adding Energy as a third input to the Cobb-Dou­glas model (Equa­tion 3).

While this is an improve­ment on the basic Cobb-Dou­glas model, it still implies log­i­cally that the con­tri­bu­tion of energy to pro­duc­tion could be nil: just set its expo­nent ? to zero. This is still in vio­la­tion of the Laws of Ther­mo­dy­nam­ics: we need a pro­duc­tion func­tion in which energy plays an essen­tial and irre­ducible role.

A poten­tial way to achieve this is to accept that the whole idea of “labour” and “cap­i­tal” with­out energy is a farce: labour with­out energy is a corpse, and cap­i­tal with­out energy is a sculp­ture.

Why not acknowl­edge this by, as an ini­tial abstrac­tion, treat­ing labour and cap­i­tal as both being means to har­ness energy to do work, and treat­ing out­put (Y) itself as work? Then we start from treat­ing Labour and Cap­i­tal as means to har­ness the energy they con­tain: EL for the energy flow that a worker can har­ness in a day, and EK for the energy flow that a machine can har­ness in a day (Equa­tion 4).

The type and amount of energy that a worker or a machine can embody (as flows of energy at a point in time) are of course vastly dif­fer­ent: the for­mer is lim­ited to food, and has a bio­phys­i­cal max­i­mum (say, 5000 calo­ries per day) whereas the lat­ter can be the Sun itself directly, agri­cul­tural prod­ucts, fos­sil fuels, or nuclear energy, and has risen from triv­ial lev­els before the Indus­trial Rev­o­lu­tion to truly astro­nom­i­cal lev­els today.

Unpack­ing this fur­ther, we also need to acknowl­edge that not all the energy embod­ied in labour or cap­i­tal can be used for work. Energy avail­able to do work (these days called “exergy”) is the rel­e­vant fac­tor, rather than the total energy embod­ied in labour or a machine; the effi­ciency with which that avail­able energy is har­nessed is also a vital ingre­di­ent.

So rather than sim­ply show­ing the energy embod­ied in labour and cap­i­tal, we need to mul­ti­ply it by the ratio of avail­able energy (exergy, with ExL for labour and ExK for machin­ery) to energy, and by the effi­ciency with which that exergy is har­nessed . Then, using L to sig­nify the num­ber of work­ers and K (how­ever imper­fectly) to sig­nify the num­ber of machines, we get Equa­tion 5, which treats out­put as a func­tion of labour, cap­i­tal and energy.

Rear­rang­ing Equa­tion 5, we can derive the basic Cobb-Dou­glas for­mu­la­tion for labour and cap­i­tal, times energy inputs. This is super­fi­cially like the Kummel/Ayres LINEX for­mu­la­tion, but it has the advan­tage that the energy con­tri­bu­tion of either labour or cap­i­tal can­not be set to zero with­out set­ting the con­tri­bu­tion of the related “fac­tor of pro­duc­tion” also to zero, since they have the same expo­nents (see Equa­tion 6). Energy there­fore plays a cru­cial role in pro­duc­tion using this for­mu­la­tion: if the energy input is zero, then so is out­put.

It may also tran­spire that the avail­able energy embod­ied in machin­ery, and the effi­ciency of its exploita­tion, is the major expla­na­tion for the “Solow Residual”—the appar­ent para­dox that, despite econ­o­mists see­ing out­put at any point in time as a func­tion of labour and cap­i­tal, the vast major­ity of the change in out­put over time comes not from an increase in the amount of Labour or Cap­i­tal employed, but from the rel­a­tively unspec­i­fied A(t) term in the stan­dard Cobb-Dou­glas func­tion.

With this term replaced by two energy related terms—one of which has a def­i­nite max­i­mum (since there is only so much exergy that a human body can exert in a day, and this can com­fort­ably be treated as a con­stant), the other of which has gone from that of a water wheel in pre-Indus­trial times to that har­nessed by the Spacex Fal­con Heavy today—the “Solow Resid­ual” may turn out to be the expo­nen­tial increase in energy and exergy input into pro­duc­tion over time (see Fig­ure 2).

Fig­ure 2: US Energy con­sump­tion over time

This energy-aware model of pro­duc­tion is just a first step in prop­erly inte­grat­ing energy and the eco­log­i­cal effects of using energy into eco­nom­ics. It does not as yet con­sider the dif­fer­ent types of energy resources, the impact of energy use upon energy resources and the ecol­ogy, or the min­ing (not “pro­duc­tion”) costs of energy in terms of energy itself (the “Energy Return on Energy Invested” or EROEI). But it is nec­es­sary to have a model of pro­duc­tion in which energy plays an essen­tial role to be able to con­sider these issues about the via­bil­ity of our energy usage prop­erly.

Equations

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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.
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  • twowith­inthree­thati­sone

    Just to fol­low up. I don’t tilt at wind­mills like point­ing at fraud­u­lent or unnec­es­sary costs that there is often no way one can prior-ly per­ceive or effec­tively police except to make mod­ern mar­kets, which are inher­ently cost infla­tion­ary actu­ally work and so true costs become more appar­ent. Rather I advo­cate every­thing that Dr. Keen has shown to be invalid about neo-lib­eral eco­nomic the­ory AND a new eco­nomic par­a­digm whose poli­cies will enable the mere “this for that” cur­rent par­a­digm that appar­ently you and nearly every­one is still stuck in.…to actu­ally and sta­bly work. That is inno­v­a­tive and inte­gra­tive. Think a new thought. It’s healthy and stim­u­lat­ing, and as I’m sure Dr. Keen would agree is extremely hard for the ortho­dox to even coun­te­nance let alone actu­ally do. 

    Finally, icon­o­clasm is a great value, but good sci­ence is always open to new ideas and fac­tors, and the sig­na­ture of sci­en­tific break­throughs has always been a valid inte­gra­tion of the sci­en­tific method and an aspect of con­scious­ness like curios­ity, the abil­ity to visu­al­ize and/or the eth­i­cal impulse that actu­ally arises from self aware­ness and hence the real­iza­tion that oth­ers are essen­tially aware also and so wor­thy of every right and con­sid­er­a­tion as one­self. So let us visu­al­ize such a valid, work­able and eth­i­cal eco­nomic phi­los­o­phy and its reflec­tive poli­cies.

  • twowith­inthree­thati­sone

    As Min­sky and Dr. Keen say: “The fun­da­men­tal direc­tion of cap­i­tal­ism is up.” What that means is busi­nesses will try to price what­ever the mar­ket will bear.…and ALSO that the lower bound of cost, espe­cially in an increas­ingly FIXED cap­i­tal inten­sive mod­ern econ­omy, will dynam­i­cally be upward as well…because the cost account­ing con­ven­tion that all costs must go into price is valid and always in force.

  • twowith­inthree­thati­sone

    Actu­ally, I don’t need to ref­er­ence any data, espe­cially data that would prob­a­bly only be end­lessly and obses­sively con­tended any­way, all I really have to do is cite a con­ven­tion because a convention.…is a valid and uni­ver­sally applied rule.

  • Tim Ward

    Some ref­er­ences, books and arti­cle col­lec­tions:
    Econ­o­mists and the Pow­er­ful: Con­ve­nient The­o­ries, Dis­torted Facts, Ample Rewards
    by Nor­bert Häring, Niall Dou­glas
    ISBN-10: 0857284592
    ISBN-13: 978–0857284594

    Killing the Host: How Finan­cial Par­a­sites and Debt Bondage Destroy the Global Econ­omy
    by Michael Hud­son
    ISBN-10: 3981484282
    ISBN-13: 978–3981484281
    Arti­cles:
    http://neweconomicperspectives.org/category/michael-hudson
    http://michael-hudson.com/

    The Best Way to Rob a Bank is to Own One: How Cor­po­rate Exec­u­tives and Politi­cians Looted the S&L Indus­try
    by William K. Black
    ISBN-10: 0292754183
    ISBN-13: 978–0292754188
    Arti­cles:
    http://neweconomicperspectives.org/category/william-k-black

    Direct quote from twowith­inthree­thati­sone “Actu­ally, I don’t need to ref­er­ence any data, espe­cially data that would prob­a­bly only be end­lessly and obses­sively con­tended any­way, all I really have to do is cite a con­ven­tion because a convention….is a valid and uni­ver­sally applied rule.”

    No sci­en­tist, math­e­mati­cian, econ­o­mist, engi­neer, or pro­fes­sional from var­i­ous fields, would ever accept that, nor would rep­utable peo­ple behave in such a man­ner. Twowith­inthree­thati­sone pre­tends to have a new par­a­digm, and will not show any data for it, and uses false state­ments attempt­ing to sup­port it. No one would ever accept that. Twowith­inthree­thati­sone is not pro­vid­ing a real ref­er­ence, (cita­tion) to a ref­er­eed jour­nal, rec­og­nized text­book or any­thing, for the alleged con­ven­tion. Twowith­inthree­thati­sone asserts that the alleged con­ven­tion is uni­ver­sal, and never not in effect, but it demon­stra­bly breaks down under var­i­ous cir­cum­stances, and there­fore can­not be true, because it is not uni­ver­sally true, nor is it ‘never not in effect’. It is false. There is no such con­ven­tion. No rec­og­nized ref­er­ence exists for it.

    Direct quote from twowith­inthree­thati­sone: “As Min­sky and Dr. Keen say: “The fun­da­men­tal direc­tion of cap­i­tal­ism is up.” What that means is busi­nesses will try to price what­ever the mar­ket will bear….and ALSO that the lower bound of cost, espe­cially in an increas­ingly FIXED cap­i­tal inten­sive mod­ern econ­omy, will dynam­i­cally be upward as well…because the cost account­ing con­ven­tion that all costs must go into price is valid and always in force.”

    Pro­fes­sors Min­sky and Keen have also writ­ten about defla­tion, stag­na­tion, debt defla­tion, and eco­nomic crashes. From Pro­fes­sor Keen’s arti­cle Oct 4, 2016 in Forbes, quotes: “This is not a com­plete model either of course: it omits gov­ern­ment spend­ing and bank­ruptcy for starters—which is why the col­lapse into a cri­sis, once it begins, does not slow down” and “Minsky’s key con­clu­sion about cap­i­tal­ism that it is “inher­ently unsta­ble””. Under var­i­ous of the con­di­tions writ­ten about by pro­fes­sors Min­sky, Keen and oth­ers, the alle­ga­tions of twowith­inthree­thati­sone do not apply. Twowith­inthree­thati­sone also fails to point out the dif­fer­ence between price tak­ers and price mak­ers in the econ­omy. Most eco­nomic agents, price tak­ers, have no abil­ity to force prices into the econ­omy. Twowith­inthree­thati­sone fails to point out how costs can fall under var­i­ous con­di­tions, defla­tion and crashes for exam­ple. Twowith­inthree­thati­sone is using an appeal to author­ity (the quote), to sup­port decep­tive mis­lead­ing rea­son­ing includ­ing false logic and a false state­ment, (the alleged account­ing con­ven­tion) to draw false con­clu­sions in an appar­ent attempt to direct atten­tion away from desta­bi­liz­ing infla­tion­ary pres­sures, that are the sub­ject of the false state­ment by twowith­inthree­thati­sone far­ther above, direct quote: “I don’t tilt at wind­mills like point­ing at fraud­u­lent or unnec­es­sary costs that there is often no way one can prior-ly per­ceive or effec­tively police”. It appears that Twowith­inthree­thati­sone is attempt­ing to direct atten­tion away from unnec­es­sary costs, (monop­oly fees, eval­u­a­tion fraud, rent extrac­tion, spu­ri­ous fees tolls charges penal­ties, etc), and down play their sig­nif­i­cance, when in fact they are major prob­lems desta­bi­liz­ing the econ­omy, as detailed in the books and arti­cles by pro­fes­sors Hud­son and Black referred to above. The state­ment is false, because econ­o­mists know very well how to effec­tively per­ceive and police unnec­es­sary costs, as those authors detail. Accord­ing to twowith­inthree­thati­sone, point­ing to those unnec­es­sary costs is tilt­ing at wind­mills, which pro­fes­sors Hud­son and Black dis­prove. This quote from twowith­inthree­thati­sone “busi­nesses will try to price what­ever the mar­ket will bear “ is not where the prob­lems come from. Direct­ing atten­tion to real prob­lems is tilt­ing at wind­mills, accord­ing to twowith­inthree­thati­sone

  • twowith­inthree­thati­sone

    Actu­ally a lot of heat but no light. The cost account­ing con­ven­tion I cite that all costs must go into price is an actual one. Go to any accoun­tant and he will con­firm it that it is indeed an account­ing rule. Under­stand­ing its enforc­ing effect and the fact that in an econ­omy with con­tin­u­ally increas­ing fixed cap­i­tal costs along with depre­ci­a­tion and waste, the rate of flow of total costs will exceed the rate of flow total indi­vid­ual incomes alone should bring insight.

    As I have men­tioned a cou­ple of times I agree with most if not all of Dr. Keen’s research so far as the dis­e­qui­li­brated nature of mod­ern economies as well as his de-bunk­ing of neo-lib­eral eco­nom­ics. I agree with Michael Hudson’s cri­tiques of finance. So I cite their researches.….which sim­ply are re-dis­cov­er­ies of C. H. Douglas’s the­ory Social Credit. So there, if you require ref­er­ences and cita­tions, I cite them to con­firm most of what I say.

  • Tim Ward

    Apolo­gies to all. I apol­o­gize to you twowith­inthree­thati­sone, for my mul­ti­ple errors. I apol­o­gize to twowith­inthree­thati­sone, to pro­fes­sor Keen, and all read­ers (who under­stand­ably avoid my posts now) for for my mis­takes and the tremen­dous nui­sance I’ve been. 

    I didn’t ask an accoun­tant, nor con­sult a text. I real­ized I don’t know what cost and price are, they are not what I think. 

    And I don’t under­stand this quote from twowith­inthree­thati­sone five posts above: “Rather I advo­cate every­thing that Dr. Keen has shown to be invalid about neo-lib­eral eco­nomic the­ory ” To me this means twowith­inthree­thati­sone advo­cates poli­cies shown to be invalid. Now I’m think­ing noth­ing I read means what I think.

  • twowith­inthree­thati­sone

    The prob­lem is we hear noth­ing but a bunch of tight assed con­ser­v­a­tivism, chilly tech­no­cratic Austrian/libertarianism and tired old lib­er­al­ism. These mind­sets by them­selves all amount to a lot of author­i­tar­ian, non-inte­gra­tive and ortho­dox bull shit. Try tak­ing the par­ti­cles of truth in each, combining/integrating them and throw­ing out the cul­tur­ally ingrained false­hoods they also all con­tain, add even a mod­icum of grace while com­ing into a new men­tal unit of time and the power of humans to self actu­al­ize could swiftly begin a cul­tural quan­tum leap toward san­ity and civil­ity. Inte­grate this inte­gra­tive approach into an equally inte­gra­tive and open minded sci­en­tific method and you’ll have the sig­na­ture of sci­en­tific break­through. Wis­dom is the inte­gra­tive process itself. The world has a cry­ing need for Wis­dom. Let us have it.

  • twowith­inthree­thati­sone

    Yes, that should have been re-worded as I advo­cate Dr. Keen’s de-bunk­ing of neo-lib­eral eco­nom­ics. Hav­ing said the same thing sev­eral times here and a cou­ple of times on this thread I would have thought it would have been prop­erly under­stood any­way, but score one for sar­casm and irrel­e­vant to the dis­cus­sion gram­mat­i­cal cri­tique.

    Seri­ously though, you should ask an accoun­tant whether all costs hav­ing to go into price is a con­ven­tion or not. He may not under­stand the eco­nomic sig­nif­i­cance of that con­ven­tion just as most macro-eco­nomic the­o­rists who Dr. Keen him­self has declared could get their degree with­out so much as tak­ing an ele­men­tary course in account­ing prob­a­bly won’t either, espe­cially an appar­ently “bean count­ing” one like cost account­ing. But some­times the lit­tle things are actu­ally big and the abstract trip over them.
    like cost account­ing

  • Tim Ward

    There’s no mys­tery here. I learned twowithinthreethatisone‘s phrase ‘con­ven­tion that all cost must go into price’ ages ago, worded com­pletely dif­fer­ently. So dif­fer­ently that twowithinthreethatisone‘s phrase is an alien con­struct. It is obvi­ous why 90% com­plain or dis­agree with twowithinthreethatisone‘s posts, think it’s pro­pa­ganda or are bored with them. Far from accept­ing twowithinthreethatisone‘s eco­nom­ics, I fun­da­men­tally dis­agree with them, now that I really know what twowith­inthree­thati­sone is writ­ing about, and I’m nei­ther an Aus­trian, nor neo-lib­eral, nor tech­no­cratic. So apolo­gies for the con­fu­sion.

  • twowith­inthree­thati­sone

    Okay. How was it worded?

    It is obvi­ous why 90% com­plain or dis­agree with twowithinthreethatisone‘s posts, think it’s pro­pa­ganda or are bored with them. ”

    Obvi­ous? Did you take a poll to get that con­clu­sion, or is it sim­ply a smear tac­tic meant to ostra­cize and induce a reac­tion by an under­stand­ably busy Dr. Keen? Is this a dis­cus­sion or an attempt at inval­i­da­tion and long dis­tance inter­net psycho-analysis…which is the only thing less accu­rate than neo-lib­eral eco­nomic the­ory?

    Let us have a dis­cus­sion. So do you agree with what Dr. Keen has said about DSGE? Then we agree on much. Do you agree that a debt jubilee is a gift and so is aligned with grace as in gift­ing which I assert is the con­cept upon which a new eco­nomic phi­los­o­phy and aligned poli­cies needs to be based?

  • Tim Ward

    I found my old notes, deliv­ered by a finance prof. Should have looked there first. Good exam­ples (instead of my unin­for­ma­tive ones) and a direct state­ment that effec­tively states advanced cap­i­tal­ism can­not oper­ate with the rule twowith­inthree­thati­sone states. All costs do not have to be in price.

  • twowith­inthree­thati­sone

    You’re right. Just ask Bill Black the guy who took down Charles Keat­ing and invented the word “con­trol fraud” which is dis­hon­est account­ing that rips off ven­dors and investors and pays upper man­age­ment incred­i­ble prof­its. Actu­ally many, many small busi­nesses com­mit account­ing fraud.…because its the only way they can stay in busi­ness in an econ­omy that is chron­i­cally short of spend­able indi­vid­ual income. 

    All costs must go into price if you’re hon­est. Oh, and by the way your state­ment “.…advanced cap­i­tal­ism can­not oper­ate with the rule twowith­inthree­thati­sone states” is com­pletely cor­rect. That’s why mon­e­tary grace which is a cost­less gift is the answer to advanced finance capitalism’s dilemma.

  • Bhaskara II

    Pro­fes­sor Keen,

    Pleas block.

    Here is twowith­ingth­ree.… quot­ing Hum­mel.

    http://www.debtdeflation.com/blogs/2016/08/19/incorporating-energy-into-production-functions/comment-page-1/#comment-44564

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