Steve Keen on the Failings of Economics Posted on December 5, 2011 by Yves Smith This is a short chat with Steve Keen, an Australian economist who is a persistent and articulate critic of the many failings of the discipline. Enjoy! Post navigation ← Links 12/4/11 Alan Grayson on GAO Report on the Fed → Subscribe to Post Comments 5 comments F. Beard December 5, 2011 at 4:16 am Nice little snip. My takeaway – supply and demand curves can not be aggregated. Another Gordon December 5, 2011 at 6:15 am Nor can multiple supply and demand curves. Each curve describes only a single product market and even if they were valid descriptions (which they are not per Steve Keen) they cannot be aggregated to describe how product markets interact in a fantasy equilibrium – a point that neoclassicals gloss over. The parallel in physics is the three body problem. When Isaac Newton formulated the theory of gravity he was easily able to calculate orbits in a two body system – e.g. Earth-Moon or Sun-Earth but the three body system – e.g. Sun-Earth-Moon remains unsolved – and indeed unsolvable because of feedbacks that amplify initial errors. Even today space scientists cannot say for certain that the Solar System is stable over the remaining life of the Sun (although they find a high probability that it is). Fiver December 5, 2011 at 6:15 am I wonder how Keen views the key functional role of modern debt as an accelerant for change of all kinds from the first days of broad consumer debt on. Our current levels of debt were generated by a society well on its way towards destroying the 1 individual with 1 career/employer longevity of mutual obligation, i.e., stable employment of too long duration, to foolishly embrace just in time everything, just shut the door accountability, and just deny the daily erosion of the sort of environment that made 30-yr mortgages, or bonds reasonable as the veritable horizon of our limited ability to think and execute. Anyone who believes today that those financial instruments will be in 30 years what we think they are now is in for a very rude shock somewhere along the way. What is going to replace housing as the asset base, by the way? constantnormal December 5, 2011 at 6:30 am The rest of this interview is linked to at Keen’s blog … http://www.debtdeflation.com/blogs/ rotter December 5, 2011 at 6:36 pm Economics in liberal freemarketsocieties, at least in this one, has become like protestantism. Everyday some new prophet is evangelisng and pronouncing oracles. Some are sincere in thier belief in thier own ontology, but most are just looking for a piece of that pie. I dont mean this to be a criticism of Keen in any way. Im not qualified to make any judgement about what hes saying, not really. But on the whole the phenomenon is just creating noise, not music, heat, not light. Comments are closed. Tip Jar Please Donate or Subscribe!