The naivety of the UK economic debate

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I was inter­viewed by Chris Menon from Every Investor last week and asked to com­ment on the eco­nomic poli­cies of the two major par­ties in the UK elec­tion. Chris’s intro­duc­tion to the inter­view is below; click here to see the inter­view itself.

In an exclu­sive inter­view with Every Investor, Pro­fes­sor Steve Keen from Kingston Uni­ver­sity has warned that politi­cians who pro­mote aus­ter­ity eco­nom­ics are naïve.

The econ­o­mist, who was one of the few who pre­dicted the Great Reces­sion, warned last year that the US and UK economies wouldn’t make a sus­tain­able recov­ery due to the prob­lem of high lev­els of pri­vate debt – pub­lic debt being more a symp­tom than a cause of this eco­nomic malaise.

Keep It Simple And Complex, Stupid

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My last post sup­port­ing the use of non­lin­ear mod­els (“You Do Need A Weath­er­man”) gen­er­ated some thought­ful responses, mainly along the lines of this post by Ari Andri­copou­los enti­tled “A View on the Eco­nomic Model Debate from a Non-economist (but some­one who builds mod­els for a liv­ing)”. The basic argu­ment is that a full non­lin­ear model of any sig­nif­i­cant eco­nomic process would be too com­pli­cated, and that it was bet­ter there­fore to stick with tractable lin­ear mod­els, while keep­ing in mind that the real world is nonlinear:

You Do Need A Weatherman

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I’ve just come back from the annual Insti­tute for New Eco­nomic Think­ing con­fer­ence in Paris, where the Pres­i­dent of INET Rob John­son is infa­mous for open­ing every ses­sion he chairs with an apt set of lyrics from the 1960s. I’ve aped Rob here by mis­quot­ing one of Bob Dylan’s great lines “You don’t need a weath­er­man to know which way the wind blows”. In fact, you do.

Click here to read the rest of this post.

Bernanke-Summers Debate II: Savings Glut, Investment Shortfall, Or Monty Python?

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A Twit­ter fol­lower accused me of being “a lit­tle nasty” with my last blog post (see Fig­ure 1). He was right, and I don’t apologize.

I’ve spent 40 years try­ing to high­light just how lim­ited the dom­i­nant ideas in eco­nom­ics are. But even I didn’t fully appre­ci­ate how tiny the intel­lec­tual gene pool behind these ideas was.

Then, as I started to write a post on the eco­nomic issues in the Bernanke-Summers debate, I re-read Sum­mers’ orig­i­nal sec­u­lar stag­na­tion post and real­ized that, not merely were the ideas com­ing from a sin­gle per­spec­tive, most of the major pro­po­nents of these ideas came not only from the same Uni­ver­sity (MIT), and even the same sem­i­nar (Class 14462, con­ducted by Stan­ley Fisher).

The Inbred Bernanke-Summers Debate On Secular Stagnation

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Ben Bernanke has recently started blog­ging (and tweet­ing), and his open­ing top­ics were why inter­est rates are so low around the world, and a cri­tique of Larry Sum­mers’ “sec­u­lar stag­na­tion” expla­na­tion for this phe­nom­e­non, and for per­sis­tent low growth since the finan­cial cri­sis. Sum­mers then replied to Bernanke’s argu­ment, and a debate was on.

Click here to read the rest of this post.


Demonstration of Minsky at UK System Dynamics Conference

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The UK Chap­ter of the Inter­na­tional Sys­tem Dynam­ics Soci­ety invited me to speak about my Min­sky soft­ware at its annual con­fer­ence on March 26. This is my talk, where I poked some fun at econ­o­mists and their igno­rance of sys­tem dynam­ics. The Pow­er­point file and Min­sky files used are down­load­able from here–see below the video.

Pow­er­point File

Use “right-click” and “Save as” to down­load these files, oth­er­wise your browser will fill up with XML code (since Min­sky saves in XML format):

Min­sky Sim­plest Bank­ing File

Min­sky For­mat­ting File

Min­sky Loan­able Funds file

The Fed Has Not Learnt From The Crisis

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The Finan­cial Cri­sis of 2007 was the near­est thing to a “Near Death Expe­ri­ence” that the Fed­eral Reserve could have had. One ordi­nar­ily expects some­one who has such an experience—exuberance behind the wheel that causes an almost fatal crash, a binge drink­ing escapade that ends up in the inten­sive care ward—to learn from it, and change their behav­iour in some pro­found way that makes a repeat event impossible.

Replay: Vincent Browne interview on the Euro in 2012

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A Twit­ter cor­re­spon­dent reminded me of this inter­view from two years ago in Ire­land, where the topic was pre­dom­i­nantly the Euro, the Maas­tricht Treaty, and the like­li­hood of a polit­i­cal break in Europe due to austerity.


The dis­cus­sion has quite a bit of rel­e­vance to what is hap­pen­ing in Greece now–and what may hap­pen in Spain later this year. Hence I thought it was worth re-posting it.