The DemystifySci Podcast

Economics Has Lost Touch with Reality (Part 1) - Steve Keen & Bob Murphy, DemystifySci #384

Nov 30, 2025
Guest
Bob Murphy
Guest
Steve Keen
Join economists Steve Keen and Bob Murphy as they delve into the intricacies of money and banking. Keen, a critic of neoclassical theories, and Murphy, an advocate of Austrian economics, passionately debate how banks create credit and the blind spots in mainstream economic models. They discuss the failures of past economic predictions and critique central banking's influence on financial stability. As the conversation unfolds, the duo highlights the chaotic dynamics of economic systems, hinting at more revelations to come.
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INSIGHT

Banks Are Missing From Macro Theory

  • Mainstream economics omits banks and credit from core macro models, making them blind to real financial mechanisms.
  • Both Steve Keen and Bob Murphy argue this omission prevents accurate crisis prediction and policy design.
INSIGHT

Models Claimed Success Right Before Crash

  • Neoclassical DSGE models proclaimed victory just before the 2007–08 crisis and failed to foresee it.
  • Steve Keen uses that timing to illustrate how models claiming comprehensiveness can be disastrously wrong.
ANECDOTE

Bernanke's Public Forecasts Missed The Crisis

  • Ben Bernanke repeatedly underestimated the housing-led financial crisis in 2007–08 despite public reassurances.
  • Peter Schiff was mocked then but had warned about housing overvaluation earlier.
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