The Great Simplification with Nate Hagens

Steve Keen: "On the Origins of Energy Blindness”

Feb 7, 2024

Economist Steve Keen explores the origins of energy blindness in modern economic theory, discussing how the massive carbon surplus has been overlooked in describing wealth and productivity. The podcast also delves into the history of economics and the role of physiocrats, the flaws in neoclassical economics, and the neglect of energy in production. The speakers analyze the relationship between energy, technology, and human creativity, and criticize economists' approach to energy and climate change.

01:32:41

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Episode guests

Steve Keen

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Quick takeaways

Mainstream economic theories have neglected the role of energy in production, hindering accurate analysis of real-world situations.

Energy plays a crucial role in driving economic productivity and human welfare.

A more comprehensive approach that incorporates energy into economic theories is necessary to address current challenges and shape a sustainable future.

Deep dives

The Evolution of Economic Theories

The podcast episode explores the evolution of economic theories and their treatment of energy in production. It starts with the physiocrats, who recognized the importance of energy, particularly from land, in generating wealth. However, Adam Smith's work shifted the focus to labor as the source of value. Neoclassical economists continued this understanding, assuming labor and capital as the drivers of production and largely ignoring the role of energy. The Cobb-Douglas production function solidified this perspective, creating a false sense of the contributions of labor, capital, and technology while entirely neglecting energy. Neoclassical economists still adhere to this outdated view, despite its flaws and contradictions with empirical evidence.

Subjective vs Objective Theory of Value

00:34

Evolution of Economic Models

01:54

The Role of Energy in Wealth Creation

01:51

Energy and GDP Relationship for Sustainable Economic Growth

01:47

Introduction

2min

Unpacking the Origins of Energy Blindness

2min

The Origins of Economics and the Role of Physiocrats

11min

The Evolution of Economic Theories

18min

Analyzing the Flawed Study and Questioning Its Results

3min

The Role of Technological Change in Economic Modeling

8min

The Flaws in Neoclassical Economics and the Neglect of Energy

14min

The Neglect of Energy in Production

18min

Energy, Technology, and Human Creativity

5min

10.

The Flaws in Economists' Approach to Energy and Climate Change

11min

On this episode, economist Steve Keen offers a deep forensic history of why modern economic theory has neglected the role of energy in productivity - and why this “Energy Blindness” is now a major blindspot in how our culture views the present - and the future. The massive, temporary carbon surplus we’ve extracted over the last few centuries has resulted in an exponential increase in the standard of living for many. This explosion of global economic growth also happened to coincide with the development of all modern economic theories and formulas, leading to a core misunderstanding in the way our economies are powered. How have technology and innovation been used to cover up the role of a growing energy supply in the last century of rising prosperity? In the midst of discussions between value and labor, where does energy really fit into the equation? Where do we go once we understand the true role of energy in our economy - and will we have the ability to reshape economic policies to be in line with our energy realities?

About Steve Keen

Steve Keen is an economist, author of Debunking Economics and The New Economics: A Manifesto. His new book, Rebuilding Economics from the Top Down, will be released in 2024. He is a Research Fellow at the Institute for Strategy, Resilience, and Security at University College in London. Steve was one of the handful of economists to realize that a serious economic crisis was imminent, and to publicly warn of it from as early as December 2005. This, and his pioneering work on modeling debt-deflation, resulted in him winning the Revere Award from the Real World Economics Review.

Watch on YouTube: https://youtu.be/lrMWSkzrMYg

Show notes, and more info: https://www.thegreatsimplification.com/episode/108-steve-keen

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