Marx, Capitalism, and Neoclassical Economics | Steve Keen | Escaped Sapiens #65
Mar 19, 2024
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Economist Steve Keen challenges modern economic theory, criticizes neoclassical economics, explores China's economic transformation, discusses building a sustainable economy on Mars, contrasts subjective and objective value in economic theory, critiques economists for missing the 2007 crisis, examines the interplay of energy, value, and sustainability, and advocates for Universal Basic Income and valuing human life.
Neoclassical economics' flaws lie in subjective value assumptions and inability to create accurate models based on individual preferences.
Economic ideology debates highlight the lack of empirical evidence in capitalism maximizing utility, overlooking historical and societal influences.
Contrasting economic organization in meritocracy and socialism challenges neoclassical economics with Marx's exploitation theory and wealth distribution perspectives.
Theoretical Mars economic system emphasizes cooperation, innovation, and balance between individuality and communal well-being, shaping societal dynamics and predictive model critiques.
Deep dives
Critique of Neoclassical Economics
Neoclassical economics is criticized for its assumption of subjective value, arguing that value is objective and can't be aggregated across different preferences. The theory fails to derive market demand curves due to these assumptions. The inability to aggregate individual preferences makes it impossible to create accurate economic models.
Ideological Struggle in Economics
Economists are seen to be embroiled in an ideological battle over the source of wealth creation and poverty. The dominant neoclassical economics view capitalism as a system that maximizes utility, though it's argued this view lacks consideration of historical and societal evolution. Economics is criticized for being driven by ideology rather than empirical evidence.
Meritocracy and Socialism
The discussion delves into meritocracy and socialism, highlighting the differences in economic organization. Neoclassical economics is challenged by Marx's theory of capitalist wealth generation through worker exploitation. Contrast between capitalism and socialism's organization and distribution of wealth is examined.
Potential Economic System on Mars
A theoretical exploration of an economic system on Mars envisions a collective and innovative society. In this setting, cooperation and innovation are essential for survival, emphasizing a balance between individuality and communal well-being. The unique challenges of living on Mars shape the economic and social dynamics of such a society.
Impact of Economic Modeling on Predictions and Crisis Management
Economists' use of individual models as a basis for societal predictions has been criticized for its limited accuracy and failure to anticipate major economic crises. The 2007-2008 financial crisis serves as an example of economists' flawed predictions, contrasting starkly with a few economists who correctly foresaw the impending chaos due to a deep focus on credit and private debt levels. The inefficient predictive models employed by economists stem from backward-looking data analyses with a lack of consideration for systemic factors, leading to repeated inaccuracies in forecasting financial downturns.
The Importance of Considering Energy in Value Systems
Incorporating energy into economic theories, particularly in defining value, is emphasized as crucial. The idea that energy exploitation fundamentally underlies value creation is highlighted, with a historical analysis demonstrating a strong correlation between global GDP growth and energy consumption. This approach offers a thermodynamic perspective on value, emphasizing the significance of energy in driving economic development and productivity.
Challenges and Solutions in Sustainable Economic Practices
Discussions delve into the necessity of reevaluating societal structures and resource consumption patterns to avert ecological disasters. Prioritizing sustainable energy sources and reorienting production towards services over manufacturing are proposed solutions to address the current environmental crisis. The conversation underscores the need for collective recognition of living within a global system to avoid losing accumulated knowledge and technological advancements, positioning an authoritarian approach aligned with societal interdependence as potentially vital for societal and environmental sustainability.
On this episode of the podcast I speak with UCL Honorary Professor of Economics and ISRS Distinguished Research Fellow Steve keen. Steve famously predicted the 2008 market crash. He is also known for his criticism of modern economic theory, which he views as being inconsistent, unscientific, and empirically unsupported. He is currently working on a new science of economics built upon incontrovertible facts. We discuss the history of economic theory, the problems with neoclassical economics, and the way that our economic theory causes environmental destruction.
►Find out more about Steve's work:
profstevekeen.substack.com/
www.profstevekeen.com
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https://www.patreon.com/ProfSteveKeen or Substack https://
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These conversations are supported by the Andrea von Braun foundation (http://www.avbstiftung.de/), as an exploration of the rich, exciting, connected, scientifically literate, and (most importantly) sustainable future of humanity. The views expressed in these episodes are my own and those of my guests.
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