Steve Keen | Can Five Hundred Years of Economic Theory Help Us Predict the Next Financial Crisis?

4 snips

Jun 5, 2017

Steve Keen, a Professor of Economics at Kingston University and author known for predicting the 2008 financial crisis, discusses the evolution of economic thought. He critiques traditional models that ignore irrationality and debt's role in cycles, emphasizing the need for comprehensive frameworks to understand crises. Keen explores the limitations of neoclassical economics and advocates for government intervention over central bank policies. He also outlines strategies for navigating economic instability, reinforcing the importance of accessibility in economic discussions.

Ask episode

AI Snips

Chapters

Books

Transcript

Episode notes

INSIGHT

Physiocrats on Wealth Origin

The physiocrats understood that wealth originates from harnessing solar energy through agriculture.
Adam Smith overlooked energy's role, wrongly emphasizing labor specialization as the sole source of wealth.

INSIGHT

Neoclassical Equilibrium Simplifications

Neoclassical economics modeled markets as systems seeking equilibrium, ignoring banks, debt, and money.
These simplifications were mathematically convenient but unrealistic for modern economies.

INSIGHT

Unrealistic Rationality in Economics

Neoclassical economics assumed hyper-rational agents who can predict market equilibrium despite instability.
This assumption is unrealistic and contradicts the inherent instability proved in economic models.

Get the Snipd Podcast app to discover more snips from this episode

Get the app

In Episode 12 of Hidden Forces, host Demetri Kofinas speaks with economist Steve Keen. Steve is Professor of Economics at Kingston University in London and one of a handful of economists to correctly anticipate the Global Financial Crisis of 2008. Professor Keen is also the popular author of “Debunking Economics,” as well as the timely book, “Can We Avoid Another Financial Crisis?”

In today’s conversation, we tear up the textbook of contemporary economics. We dispense with equilibrium. We embrace irrationality. We internalize economic externalities and drop assumptions about the world that do not comport with the reality of lived experience. We begin our history of economics with the physiocrats, enlightenment thinkers of the early 18th century who concerned themselves with the question: “where does stuff come from?” We move through the classical period of economics, exploring the philosophies of Adam Smith and David Ricardo. We stop to question the assumptions of the Newtonian minded neoclassicists of the late 19th and early 20th centuries, who saw fit to squeeze a complicated world into a set of simple models. Where did our ideas of rational preference, utility maximization, and market equilibrium come from? How have these ideas been debunked by the events, insights, and theories of the last 100 years? What was the role of John Maynard Keynes and his Keynesian revolution? Where did he and the Austrian Friedrich von Hayek meet? Where has the evolution of economics taken us since World War II? What is the role of banking in the economy? How is money created? How does it circulate? What is the role of credit? How might this almost Godly instrument of wealth creation have become a source of global instability and financial distress? Finally, Steve Keen and Demetri explore the landscape of the modern economy. They look at China, with its ghost cities and massive state-directed banking system. They explore Australia, Canada, and South Korea, as possible sources for the next financial crisis and consider possible solutions for society, as well as the individual.

Producer & Host: Demetri Kofinas

Editor: Stylianos Nicolaou

Join the conversation on Facebook, Instagram, and Twitter at @hiddenforcespod