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Steve Keen

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271

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2022-07-17

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2022-07-17

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1. “Can perceive a potential demand, but you don't first of all, you don't know whether that demand is going to work. Secondly, you don't know who your competitor is going to be, whether somebody's going to be ahead of you or behind. If there's a fadule overinvest, all this stuff is the real nature of capitalism. And that's what we're trying to capture. The dynamic non-equilibrium monetary... Violence and creativity of capitalism. That's what we should be analyzing. And the post Keynesian school has gone in that orientation. There have been, in my opinion, inhibited by learning their mathematics from neoclassical economists, so they don't have enough of the technology of complex systems. There's only a really tiny handful of people working in complex systems analysis in post-Keynesian economics. But that is to me the most interesting area.”

   2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

2. “Really disturbed it by talking about fundamentally that uncertainty determines our decisions about the future. So when we consume, you know, you know, if you like Pfizer or whatever drink we want to have, you know, the current situation. But to invest, you must be making guesses about the future. But you don't know the future. So what do you do? You extrapolate what you currently know. And he said, this is a terrible basis on which to plan for the future. This is the only thing you can do where there is no possibility of solid calculation. So investment is therefore subject to uncertainty. And therefore you will get volatility out of investment. You will get fads, of course, booms and slumps coming out of that as people extrapolate forward the current conditions. That's the normal state of a capitalist economy. And Schumpeter argued that that's what gives it its creativity as well. The fact that you”

   2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

3. “No equilibrium, it's unstable. And as a mathematician, it's easy to work for stability analysis. You work out what the Jacobian is, you work out the Lyoponov exponents in a complex system, you're used to the idea that equilibrium is unstable. But economists get schooled into believing that everything happens in equilibrium and they don't learn stability analysis. So all that stuff is missing. So onto the schools of thought, treating the economy as an equilibrium system, which was what the Klasnioclassical school did, is what Keynes disturbed”

   2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

4. “And that's where you'll find reading Schumpeter, the insight that the school of thought that I come from that says money is essential. Money actually adds to demand. And we'll talk about that later on. So that's the neoclassical school that ends up being subjective theory of value. Non monetary As though everything happens in barter and focusing on equilibrium, as though everything happens in equilibrium. Or if you get disturbed from equilibrium, you return back to it again. And that mindset describes capitalism as most interesting feature is that it reaches equilibrium. Now what planet are we on to believe that? Because if you look at the real world, the real exciting world of capitalism in which we live change is by far the most obvious characteristic of it.”

   2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

5. “And then if we double the price, nominal price of coconuts and double the nominal price of bananas and double your income, what happens? And the correct answer is I know nothing, sir. You know, you stay at the same point of tangency between what your budget is and which particular utility curve gives you the maximum satisfaction. So that gets ingrained into them. And they think anybody who worries about money suffers from money illusion. You are therefore ignorant of the deep insights of economics. Everything money actually matters. So you have an entire theory of economics, which presumes we exchange through barter. I'll swap you that Microsoft surface for should I take two of those for one of these. We do this bartering type arrangement. In fact, that only works if money plays no creative role in the economy.”

   2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

6. “On money because you're an economist. Well, in fact, economists learn literally in the first few weeks at university that money is irrelevant. They say money illusion. So they represent people's tastes using what they call indifference curves. And they're like isoquants on a weather map. If you look at an isoquant, it shows you all the points of the same pressure. So you can be here or you can be in Denver and the air pressure can be the same if you're in the same weather unit. So you just draw a cell that links together. Well, they do the same thing with utility and say lots of bananas and very few coconuts can give you the same utility as lots of coconuts and very few bananas and you draw basically a like a hyperbola running down and linking the two and they'll say well that's that's your utility that describes your tastes and then we have your income and given your income you can buy that many bananas completely or that many coconuts or a straight line combination of the two”

   2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

7. “Which led to the neoclassical school coming along as a defense of capitalism, but they defended it using the ideas of the subjective theory of value so that value does not reflect effort, it's the satisfaction individuals get from different objects that determines their value, marginal utility. It's the marginal cost that determines how much they sell for. Capitalism equilibrates marginal cost and marginal utility. the concepts of equilibrium and marginal this and marginal that became the neoclassical school and that's still the dominant school now 150 years later so that's the one that everybody learns and when you first learn economics if you don't have the critical background that i managed to acquire that's what you think is economics the marginal utility equilibrium oriented analysis of mainstream economics and for example they ignore money people think economists you must be an expert”

   2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

8. “That led to Marx, and Marx is probably the most brilliant mind in the history of economics, the only other competitor I'd see is Schumpeter, possibly Keynes. But in my terms of ranking of intellects, Marx, Schumpeter, Keynes, in terms of the outstanding capacities to think. But Marx then turned that classical school, which was pro-capitalism and anti-feudal, into a critique of capitalism.”

   2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

9. “Now that led to the classical school of thought, and that said that all value comes from labor, that value is objective, so it's the amount of effort you put in, that the price two things will exchange for reflects the relative effort that's involved in the manufacturing. So this computer takes two hours to make and this bottle takes two minutes to make, then this is worth 60 times as much as that. They didn't talk about marginal cost it was absolute cost effectively. They didn't talk about utility as a subjective thing they ridiculed subjective utility theory.”

   2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

10. “Comes from the soil, that's the free gift of nature. That's literally the phrase they used. And we then distribute the free gift of nature around and we need carriages, which was the manufacturing term they used at the time, as well as wheat. So to make the carriages, we take what's been taken from the soil and we convert it to a different form. But there is no value added in manufacturing. So Smith looked at that and said, Well, I'm from Scotland. And we've got Industries, you know, when we make stuff and it's machinery. And he said, No, it's not land that gives it the source of value, it's labor.”

    2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

11. “School of economics, which comes out of Adam Smith. And Smith coming from Scotland. Looked at what the physiocrats said and what the physiocrats argued was that agriculture is the source of all wealth and the manufacturing sector is sterile. That's literally the term they use to describe the manufacturing sector.”

    2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

12. “I actually find it interesting at school which went extinct about 250 years ago. That's where I'd like to start from. And they're called the Physigocrats. And the name itself implies where their knowledge came from because if you go back far enough in history, we didn't do autopsies. But when you started doing autopsies, they found wires, they found tubes, etc., etc. And they started seeing the body as a circulation system. And they played the same sort of logic to the economy. And they became out of an agricultural economy, which was France, and they saw that the wealth came effectively from the sun. So they saw all wealth comes from, they said the soil, but what they really mean is the soil absorbs the energy of the sun. One seed plants, a thousand flea seeds come back. There is no surplus. We are simply mining what we can find out of the natural economy. That's where we should have stayed and developed from that forward. We then went through the class.”

    2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

13. “Differential equations, but they don't learn stability analysis. So they simply assume equilibrium is stable and they work in equilibrium terms all the time. And it is the technical level, it's an incredibly complicated way of modelling the world using entirely the wrong tools.”

    2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

14. “A difference equation is like you can do in a spreadsheet. You'll have this is without even 90, this is the value for 9091, 92, 93, 94. So you have discrete jumps in time. Whereas the differential equation says there's a process moving through time. And you will have a rate of change of a variable is a function of the state of itself another variables and rates of change of those variables. And that is what you use when you're doing an aggregate model. So if you're modeling water, for example, or fluid dynamics, you have a set of differential equations describing the entire body of fluid moving through time. You don't try to model the discrete motion of each molecule of H2O. At the aggregate level, you use differential equations for processes that occur through time. And that's economics. It occurs through time. You should be using that particular technology. But some economists do learn.”

    2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

15. “And difference equations, if you've done enough mathematics as you have, you know difference equations are useful for individual level processes. If you're talking about autonomous hydro and it'll go from state t to t plus one t plus two and so on. But not when you're talking at the aggregate level. There you use differential equations to measure it all. Economists have been using difference equations. So there's like a book, I think it's by Sargent and one other called Advanced Methods in Economics using Python, two volume set. It's about close to 2,000 pages and four of those pages are on differential equations. The rest is all difference equations. So they're using entirely the wrong mathematics to start with.”

    2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

16. “In terms of the tools we use, we should be using the tools that engineers use, frankly. And that sounds ridiculously simple because you would expect that economists are using up-to-date techniques that are common in other sciences where you're dealing with similar ideas of stocks and flows and interactions between the environment and a system and so on. And that's fundamentally systems engineering. And that's what we should be using as the tools of economics. Now, if you look at what economists actually do, the sophisticated stuff involves difference equations.”

    2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

17. “Life is incredible, and we're humans don't respect it enough, we trash it. And that's what's economics, I think, has played a huge role in that. So I actually regard my discipline. I would never call it a profession, let alone a science, my discipline has probably helped bring about the termination The feasible termination of human civilization”

    2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

18. “We're the most elaborate Construction on the planet. And that's not what we've done, we've denigrated the planet itself. We don't have respect for the fact that life itself is an incredible creation. My ultimate, if I had to see how humanity is going to survive, what we're putting ourselves through, then we'd have to come out of it as a species which sees its role as preserving and respecting life.”

    2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

19. “The microphones, you know. Might be doing drum beats and stuff like this, but we wouldn't be having the sort of conversation we have. So I would explain how they came about, that was the economics should be doing, and it's not.”

    2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

20. “Soul of economics Really is to explain how do we manage to build a civilization that elevates us so far above the energy and consumption and knowledge levels of the base environment of the earth. Because if you think about, and this is actually working from a work I've learned from Tim Garrett, who's one of my research colleagues as an atmospheric physicist, and his idea is that we have these, we exploit these high-grade energy sources from the sun itself to coal, nuclear, et cetera, et cetera, which means we can maintain a level of human civilization well above what we'd have if we were just still running around with rocks and stones and spears. So it's that elevation above the base level of the planet, which is human civilization. And if we didn't have this energy we were exploiting, if we didn't use the environment to elevate ourselves above what's possible in the background, then you and I wouldn't be talking about the...”

    2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source

21. “Should be able to understand how human civilization comes about and how it can be maintained. And that's not what it's been at all. So we have a discipline which has the right name and the wrong soul.”

    2022-07-17 · Lex Fridman Podcast · #303 – Steve Keen: Marxism, Capitalism, and Economics · IDENTIFIED FROM THE TRANSCRIPT · source