Health Warning! 'Realism' virus afflicting mainstream economists

Some papers that are remarkably critical of mainstream economics have been published recently, not by the usual suspects like myself, but by prominent mainstream economists: ex-Minneapolis Fed Chairman Narayana Kocherlokata, ex-IMF Chief Economist Olivier Blanchard, and current World Bank Chief Economist Paul Romer.

I discuss these papers in a tongue-in-cheek introduction to another key problems of unrealism in economics--the absence of any role for energy in both Post Keynesian and Neoclassical production functions.

I also address Olivier Blanchard's desire for a "widely accepted analytical macroeconomic core", explain the role of credit in aggregate demand and income, and identify the countries most likely to face a credit crunch in the near future. I gave this talk to staff and students of the EPOG program at the University of Paris 13 on Friday September 23rd.

[floridaman]

I've watched your lectures for six years professor. This is your best yet.

[Achrononmaster]

Prof Keen getting better with age. Delicious talk. Much appreciated from a physicist and science nerd. :-)

[Ken-S]

The last 2 charts are interesting. The make me having a few question in my mind to go further: "Prof. Keen, What about including the public debt? Is there more country will be in the danger zone?" Thanks for sharing as you always did.

[Ballosopheraptor]

At 31:00 I'm having trouble understanding how the bottom equation on the slide is linear... isn't the last term d*(something with d in the denominator)?

[Achrononmaster]

Why do the production function exponents have to sum to unity? I can see how for a micro situation if Capital increases then Labour should proportionately decrease, but why would this hold macroeconomically? If so, it would surely only hold over a small time period, no?

[jdlc]

hmmmm compounding of debt given deflation overwhelms the reduction of workers share in output.

[ewmism]

Mr Keen, the irony is you don't need to be a Professor to realize we're in it deep.

[plucky]

IMF warning about private debt in Australia and China made the mainstream news today. You will have to stop calling yourself an "anti-economist". As you have noted your thoughts are becoming mainstream. The South Australian economy feels like it fell of a cliff about three months ago although I have no statistics to support that view. I have seen stats that show the rate of growth in credit card debt in Australia has been falling for about four years. However, growth in property debt is continuing to grow in Melbourne and Sydney strongly. Published stats by ABS and others claim that property prices are still rising.

The parliamentary questioning of the big four banks finished up today. I noted that all the banks stressed the importance of the banking system to Australia. It got me to thinking about Hank Paulson and TARP! Congratulations on an important piece of work although I currently dread to think about the implications.

[stevenh]

Congratulations, you have re-discovered the costing factor of waste/wasted energy which is a major overlooked economically disequilibrating aspect of “the Gap” in C. H. Douglas’s Social Credit. And as thermo-dynamics shows us that energy is entropic there is no scientific way to balance the economic/productive system….except by implementing policies that are non-entropic-costless, which in a monetary economy means an additional, balancing and gracious gift of money to the individual and a reciprocally gifted discount to prices at the very end of the entire economic process at retail sale that enables the system to become free flowing as well. Just continuously apply your own call for “a modern debt jubilee” which is wisely and philosophically aligned with the concept of Grace as in Gifting and relevant to the current debt overhang….and your iconoclastic theoretical efforts will bring you into agreement with Douglas and be worthy of a Nobel. Perhaps you could posthumously acknowledge Douglas in your acceptance speech.

And it’s true you can’t reform away the inherent problems of either capitalism or socialism, but you can transform them away into a third more unified and workable profit making system of monetary Distributism by utilizing strategically implemented gracious policies that align with and more deeply, directly and continuously effect your already stated policy goal of “a modern debt jubilee”.

[inaciotasse]

About the debt jubilee proposal, do you mean the government takes out a loan and injects money or do you mean the government creates and injects special debt free money?