How Economists Got Climate Change Wrong

Steve Keen, economist and author, joins Decouple host Dr. Chris Keefer to explain how modern economics has catastrophically misunderstood the role of energy in our world and underestimated the risks of climate change through oversimple models. In this in-person conversation, we discuss the evolution of economic thinking since feudalism, the shortcomings of prevailing economic models, modern monetary theory, the role of state capitalism in funding large infrastructure projects, and much else.

Episode title on podcast apps: "A Heterodox Economics Lesson"

Listen to Decouple on:

Chapters:
00:00 Introduction
05:12 History of economics in stages
14:20 Physiocracy
21:57 Classical economics
30:25 Energy blindness
36:18 Neoclassical economics
41:33 Utopianism in economics
44:40 Monetary theory
57:53 Climate change economics
1:22:07 State capitalism
1:25:49 What is money?
1:35:38 The future of economics amid climate change

[bélalugrisi]

Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.
- Kenneth Boulding

[EricMeyer]

I remember sitting through an entry level l, very neoclassically focused economics class in college thinking "this is a set of assumptions being taught like scientific theory." We need guys like Steve to write the textbooks!

[Flaser]

It's so good to finally listen to a proper scholar of economics who distinguished models (plural!) from reality and is willing to actually the address their issues and strengths.

[dariomartinez]

Happy to see economists challenging climate change only due to human actions. Also, talking about human actions, you don't need to be an economist to talk about economics. Ludwig von Mises in this book "Human Action" (1949) said ""Economics must not be relegated to classrooms and statistical offices, nor left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of man's existence."

[RichHornerCheeseAndJamSandwich]

“We have a finite environment – the planet. Anyone who thinks that you can have infinite growth in a finite environment is either a madman or an economist.“

[GETJUSTICEU]

25:19 One of the earliest manufacting industries was spinning cotten and wool into yarn, weaving it into fabric and sowing into clothing. All this was achieved by labour and hand operated machines. Many thousands of years passed before the first water and wind powered mills were invented. The energy needed for labour comes from eating vegetables or meat. Human and animal energy is not from eating coal, or drinking crude oil.

[MaytownMichael]

I watched as much as I could stand, but your guest does not possess a serious critique of economics, as it has evolved and continues to evolve. Economists have developed dynamic models and sophisticated theories of the roles of money in a market economy. The subjective theory of value is not in conflict with theories of production, but rather is complementary to those ideas. And whatever Adam Smith's blindspots may have been, neoclassical economists certainly accounted for natural resources as a critical determinant of productivity. Just read the Wikipedia article on the concept of the production function to get a sense of how much your guest is leaving out of his stylized account of history. Economics has much more breadth of thought and debate than he is acknowledging.

[Ln-cqzu]

Can I just put a shout out for those chairs. Labour and energy pulled together to create maximum comfort and beauty, for a 3 hour podcast.
inside a building sheltered from climate! 😂

[THECHOSENONE]

wow Steve has such a deep understanding of energy and economy, he has tied together so many scattered ideas I've encountered over the years into a cohesive narrative. I am truly impressed and grateful to have found him on this channel.

[the_Kurgan]

I wish I had a dollar for every time I've been mislead by a model.

[Hughesbayou]

Value comes from need and desire and perception of utility. If I need shoes that's the first thing, but then I need and want to have them be comfortable and finally I have different ideas as to what I'm willing to be seen wearing. Those are the main categories that determine what I'm willing to pay. But then there are utilities like fuel and electricity that everyone uses and are fairly inelastic. The price is set by the seller who needs to get more than they pay for them. There are so many factors. Supply and demand works differently for different products.

[waywardgeologist]

1:24:35 ouch. We just went through a similar money printing thing with Covid. What did we get, inflation, a decrease in the standard of living for the average citizen.

[wbwarren]

Thank you for your comment about Peter Zeihan! I think you were spot on. He has insight in some areas and a lot of over confident bullshit in many other areas as well.

[andrewholliday]

Hugely confident in alarmist climate models but dismissive of economic models. Maybe he's half right.

[maambomumba]

Consider bringing on an economist from the Austrian school of thought, if you haven’t already. Someone like Saifedean Ammous, Tom Woods, Robert Murphy, Mark Thornton, Thomas DiLorenzo, Patrick Newman etc.

Thanks

[xenocampanoli]

The problem with authoritarian solutions, of course, is they are always themselves short sighted, tend to depend on mendacity, and they tend to lose control of the scale of their mendacity, and thus of management that was the object of the authoritarianism. I think going back to the proposed limits to growth solutions is the only real option. Given we are committed to a crash now does not mean the 1975 solution is not an option, but rather that our short term objective needs to focus on preserving knowledge, and attempting transparency through the horrors of the crash to whatever extent is possible.

[jonmce]

Considering that economists cannot even come particularly close to predicting current economics predicticting something so catastrophic as large scale climate change is ridiculous. All that can be said is that changes that effect codes for building all infastructure and buildings that have temperature varients in them will require large modification or replacement, when climate seriously effects crop growing, and when it will cause large scale migration the consequences will be extremely serious and not beneficial except for perhaps the northern countries.

[TixNBurrsRanch]

I read all of Zeihan and watched his videos in fascination, until I realized he told Americans, the petrochemical industry, and climate deniers that it will all just be great -- for them. Meanwhile, moving from metropolitan Texas to a retreat high in the Front Range.

[roobs]

This was a fascinating interview, great interviewer. With a fascinating conclusion: "Because economists with different views are ineffectual at convincing people we need fascism to have their views enforced."

[stefanbernardknauf]

Great great interview, Chris. Steve deserves a Nobel, and likely he'll get it... When it's too late.
Again, a nice Christmas gift for your listeners, thanks a lot!
Merry Christmas & all thé best in 2025!