This content is an interview with heterodox economist Steve Keen, who argues that mainstream neoclassical and neoliberal economic theories are fundamentally flawed, empirically false, and based on unrealistic assumptions, leading to damaging policy prescriptions.
Mind Map
คลิกเพื่อขยาย
คลิกเพื่อสำรวจ Mind Map แบบอินเตอร์แอคทีฟฉบับเต็ม
The textbooks are teaching a lie.
>> You have taken on the world. Tell me,
Steve, why are you a rebel?
>> Why on earth are economists basing
themselves on theories which were
empirically false? This isn't to our
credit. They're still teaching that
nonsense to students. Now,
>> you you realize this is a con job. This
whole edifice that we were being taught
was underpinned by a series of
assumptions. And if any one of those
assumptions failed,
hang on. Everything I'm being taught
here is rubbish.
Hello and welcome everyone. This is a
podcast with Steve Keen. I've been
looking forward to doing this. Steve and
I have known each other for some time,
over a decade, and I've been reading his
work for longer than that. Many viewers
of this channel will know of Steve's
work and have probably been watching his
own channel where he puts out a lot of
really good material. But this is a
chance for the two of us to talk to each
other, talk about where we've arrived in
the world, how we've arrived in the
world, and I hope it's going to be the
beginning of a number of discussions
between the two of us, which are going
to lead on into things like his program
called Rell, how he developed it and
why, and things like that. And by the
way, if you want to use my proprietary
software, Ravvel, for economic analysis,
too, you get it as a free bonus inside
my 7-week Rebel Economist Challenge,
like over 600 people have already done.
To learn more, apply at steveken.com.
But really, let's come down to why I
know of your work.
>> You are a very notable hetradox
economist challenging the assumptions
which most people comply with. your most
notable book, and it's up on those
shelves behind me, is debunking
economics. I remember reading that way
before I ever thought we'd meet each
other and thinking, "God, this guy's a
geek in the best possible way that I can imagine."
imagine."
And I really like the way he thinks and
works and talks and explains just why
standard classical neocclassical
neoliberal economic thinking is wrong.
And that really is, I guess, the point
to begin to start our conversation. You
have taken on the world. Tell me, Steve,
why are you a rebel?
>> Uh, it's an interesting story. I mean,
if I probably go back a bit because this
I've had a couple of recent fights which
remind me of of some of my past
behaviors as well. The reason that it
that I became a critic of economics was
I copied it in 1961 1971 when I went to
university and they just appointed a new
lecturer from from I think from not for
which university he came from I look it
up Frank Stillwell and Frank uh was had
himself become a critic. He'd been done
a PhD and in the middle of the PhD I
think he himself started to see through
the theory. So when he gave his first
year lectures and he was a brilliant
lecturer his first year lectures he he
covered an issue called the theory of
the second best. Now this is something
which has sort of had its day in
economic theory but I think it it won a
Nobel prize initially for what its
developers Lancaster and I've forgotten
the other I think it's Lipy and
Lancaster. I'm not sure about Lipy but
it's definitely Lancaster and what they
said is that the standard economic
theory says the best possible situation
is perfect competition everywhere. So
you have the if you want to get a wage
the decent wage you want workers to get
what they deserve then what you want to
have is workers competing against each
other for employment and firms competing
each other against each other to hire
workers and no unions and no man no um
uh industrial organizations on the on
the management side but of course that's
the real world we do have trade unions
we do have industrial associations so
what the theory of the second best did
in Frank's hands was he said well let's
take the standard theory of how the wage
is set and you get a upward slope
downward sloping demand curve which
comes from the employers upward sloping
supply curve which comes from the
workers point of intersection is
equilibrium that's the best possible
situation you get uh you get no what
they call dead weight loss of of welfare
uh maximum possible utility for both
sides that's that's your ideal but if
you start uh if you bring in a monopoly
and most people would be aware of this
if you bring a monopoly uh that gives
another line called the marginal revenue
curve as opposed to the demand curve and
that will give you a lower uh wage and a
lower level of employment. If you put in
then on the same thing applies on the
supply curve. If you have a unions
rather than you know disagregated
workers, you get a what's called
marginal social product curve
using straight neocclassical uh
techniques and presuming equilibrium and
so on. It showed that theory showed that
if you abolish either the trade union or
the industrial organization without
abolishing the other, you make social
welfare worse.
And I remember what the pardon the
French, what the what I've learned, the
conventional theory, you know,
everything's perfect, hunky dory. That's
that's the idea we're aiming to. And if
you're two steps from it and you take
one step towards it, you make the system
worse. I thought, this is crazy. There's
got to be something wrong with the
theory. So, I open up my textbook. Is
this theory mentioned in my first year
economics textbook? Not at all. I went
down to the university library and I
found the articles that Frank was basing
his work on. At this stage, I was doing
first year of pure and applied
mathematics. So, it was a breeze for me
to read the mathematics. So, there's
nothing nothing in most neocclassical
work that exceeds a first year
mathematics degree in terms of
mathematical n to read it. Frank was
completely correct. So, why wasn't this
been turning up on the textbooks? And
then I continued going and I I I thought
I'll read the economic journal. That was
that was my idea of the top journal at
the time. And I found an article by a
Marxist Baduri.
Surprised what's a Marxist doing in the
economic journal? That was a bit of a
surprise. Uh because all I heard about
Marxism was all the negative stuff at
this stage of course. And then I found out
out
>> were definitely in the economic journal
at the time. They definitely were.
>> They were. They turned up. Yeah. Turned
up in economic journal. But they would
no way they'd do it today. Including
people like me will never turn up in the
economic journal. Um, but then I found
an article by Paul Samuelson and this
was the title was a summing up and I
might I might actually if if you can do
a bit of editing I might actually bring
up that quote on on screen because it's
incredible because Samuelson involves
was involved in a debate called the
Cambridge controversies and there was no
mention of that debate in my textbook uh
that that it's loan was a a bit of a a
sign but in this article by Samuelson
written in 1966 he conceded defeat He
was defending the orthodoxy and then he
had a uh a debate over the uh the nature
of um of the measurement of capital and
he was quite cons quite confident that
he had solved the problem. He said,
"What we teach students is a parable,
but the parable reflects the fact that
there are fixed ratios of labor to
capital in each technology, but as the
price system changes
as as the interest rates rise or the
cost of capital rises, you lose less
capital and more labor. Vice versa, you
get a nice smooth function out of this
and and it all works well." Well, that
that paper he wrote was then attacked by
a guy called Garini and he showed that
you didn't get straight lines, you got
curves. And this leads to the technical
thing called re-switching. That was a
hell of a shock to Samuelson. He was
blown out of the water by another
mathematical economist. So this is this
is the conclusion he wrote to this
paper. He said pathology illuminates
healthy physiology. He says the critics
merit our gratitude for demonstrating
that re-switching is a logical
possibility. Then goes to say there
often turns to be no unambiguous way of
characterizing different processes as
more capital intensive, more mechanized,
more roundabout. And he finally says,
and this is the final sentence, if all
this causes headaches for those
nostalgic for the oldtime parables of
neocclassical writing, we must remind
ourselves that scholars are not born to
live in easy existence. We must respect
and appraise the facts of life. And I
thought, bravo >> indeed,
>> indeed, >> bravo.
>> bravo.
What is he written in his textbook,
which I had a copy of, not a mention?
And neocclassicals today think they won
that debate, you know. So I realized I
was getting a mendacious education.
Whether the economists who were doing
that were aware of it or not, most of
them just don't know this literature.
They basically think they won all the
controversies. Cam Krugman has said
that. He's categorically wrong. So I
realized that I was being given a
mandacious education.
>> Krugman have histories. Steve, you and
Krugman have history. >> Yes.
>> Yes.
>> Uh so that that that history came came
later. But uh but what what I found was
economics it's superficial treatment of
economics you know supply and dem
intersecting supply and demand Bob's
your uncle intersection where everything
happened uh let's go on to the next
theorem you know uh but if you then say
what's the backstory to the shape of the
demand curve what's the backstory to the
supply curve you drill down and find
that both of those backtories fail and
uh for example the the the supply curve
the theory for the supply curve is that
there's rising diminishing marginal
productivity. Uh you add more workers to
a fixed amount of machinery, you get
less output per worker even though the
workers are identical in quality yada
yada yada. And that then gives you
rising marginal cost. But when you
empirical studies were done, there are
71 empirical studies that have been
done. 71 of them have found the majority
of firms have declining marginal cost.
They don't experience diminishing
marginal productivity at all. Uh and and
it's not just a few firms. It's between
89 and 99% of firms report constant or
falling marginal cost depending on the
survey. So I thought the textbooks are
teaching a lie. So that's why I became a
rebel. I didn't enjoy being lied to.
>> If I get to a point here, Steve,
>> and I sort of recognize your journey.
Obviously, we didn't know each other at
the time. I was 5 years behind you going
to university.
>> I arrived at university and was told at
the time that there was this thing,
perfect competition. There was perfect
information. Everybody knew what the
product was. It was a uniform product.
Everybody was bidding for the same
product. They knew all of all the
suppliers. They knew all their prices.
Therefore, there would be an optimal
outcome and all that sort of nonsense. >> Yep.
>> Yep.
>> And I'd had the advantage of going of
before I went to university
doing some accounting,
>> right? And I had seen small businesses
>> and I turned up at university knowing
damn well that they did not know what
their optimal pricing was.
>> They did not know what their marginal
costs were. They had never thought about
it. They didn't know not know what their
marginal revenues were. They had never
thought about it.
>> But they did know how to strike a deal.
And that was the best thing that you
could say was they did a deal. And at
that stage in life, if this is in the
1970s, I'm quite sure quite a lot of
them were putting a fair amount of cash
in their back pocket because there
wasn't much way to catch them back then.
But the point I'm making is that I
arrived at the same point in my career
realizing, hang on, everything I'm being
taught here is rubbish. First year
undergraduate economics, we had that
same realization. And I think that's
really interesting that at the same
points in our career we realized that
this whole edifice that we were being
taught was underpinned by a series of
assumptions and if any one of those
assumptions failed and you've just
explained a way in which they can fail
and I found other ways in which I
thought they'd failed from a different
route practical experience in a sense
>> I wasn't as academic as you at that
stage Steve I wasn't going off to read
the papers to prove the point but you
were I used my real worldview and came
to the same conclusion We were being
taught nonsense and I think that's where
but as a rebel that's where you were
born wasn't it >> exactly
>> exactly
>> what happened next
>> well I I became a realist like when I
began university I mean I swallowed the
whole thing I was anti- trade union this
actually is almost automatic for being a
neocclassical economist regard trade
unions as distorting the competitive job
market and therefore they should be
abolished and the amount of pressure
that economists have put on to destroy
trade unions over the last 50 years is
huge and they've been successful
uh uh but it it's not supported it's
supported by the superficial level of
the theory where you make all those
crazy assumptions when you say those
assumptions are crazy then you get the
results like I got logically out of the
theory of the second best and like you
got by saying look I haven't seen a firm
that even knows it's marginal cost uh it
becomes you realize this is a con job uh
what why on earth are economists basing
themselves on theories which are
empirically false and assumptions which
are empirically 50 years later, Steve,
50 years later,
>> this isn't to our credit.
>> They're still teaching that nonsense.
>> I know. I know. It's because, and this
is this is what I I realized when I
broke away. I mean, I I I went from
being anti-trade union to the first
thing I did when I got a part-time job
at the end of first year was joining up
to the trade union. Okay. U so I I
realized they were there to protect
workers and it was part of the
bargaining power of workers in what is
actually a bargaining contest. It's not
something about bloody marginal
productivity. So there was a complete
political conversion and at the same
time I've got to say that there were
political circumstances in Australia
that made me more likely to be a rebel.
So I went to university in 1971.
Australia was still involved in the
Vietnam War at the time. I supported the
Vietnam War, but I wondered why I was
being conscripted to fight for freedom.
So as well as attacking the
neocclassical theory, I started reading
as much as I could on the history of
Vietnam. And I finally realized that
what was going on in Vietnam was a war,
anti-colonial war in which America and
Australia were fighting on the wrong
side. And so that also completely
flipped my political views. I met people
from the Palestinian movement at the
time. Uh I'm, you know, that so there's
so many ways which my worldview was
flipped in 1971. And then from that
point on, having been a rebel initially,
uh I was just dissatisfied with what I
was being taught. And then I found that
I wasn't the only one. there was uh
about half the staff were up in arms
about what they'd been done to them by
changing the curriculum and anti the
neocclassical analysis and so I I became
friends with the staff and I finally
organized I think in 1972 or the
beginning of 1973 I organized a
conference on radical economics. It was
an extremely badly organized conference
that was a waste of time. Okay. Uh it
was I learned a lot about conferences by
running a bad one initially. Uh one one
of my favorite sayings is that success
is the first step on the ladder of
failure and vice versa. So having a
failure early on and I damn well knew
how to run conferences after that and I
run several extremely good ones but that
one was very poor but nonetheless there
was other students who turned up and we
found ourselves into it, you know,
chatting about how frustrated we were by
what we're being taught and the
entrangence of the professors about it.
And then in I finally gave up. I thought
I'm I'm just I'm a I'm a weirdo. on the
side of people like Frank and Gavin
Butler and Evan Jones and the staff who
were anti them the the the professors
but there was no chance of changing the
rest of the students and then 72
Australia pulled out of the Vietnam War
at the very end that's why I didn't
become a draft resistor um formally I
was one technically but I didn't have to
run away from the police as a result
because by the time I would have been
arrested for be resisting the draft the
the draft had ended and so had
Australia's involvement in the war And
all this energy that students had had to
fight the Vietnam War was suddenly being
directed at what they were being taught.
And it wasn't just in economics, it was
in Italian. The very first strike in
students at Sydney University was in the
architecture department in 1972, I
think, or early 73. Yeah. So it was
it was a wonderful time to be a student,
I must say. Uh because 71 to 73 were the
absolute peak of the postwar boom. Uh
and so there we all basically thought we
couldn't fail to get a job so we can do
what we want. Uh you universities
>> I remember that really
>> universities were free so you didn't
have to pay fees. Uh you could therefore
you went to learn uh rather than getting
credentialism. You thought a credential
was not a problem. Uh so it was a really
fantastic time to be an active student.
And the the trigger for change in at
Sydney University which then triggered
what I've done in economics since was
two young uh PhD students in the
department of philosophy Liz Jackaran
and Kerthoys wanted to put a course on
what they called philosophical aspect of
feminist feminist thought. So the
department was democratically run at the
time and they voted in favor of the
course but the professor guy called
Anderson uh was an old-fashioned
philosopher and he opposed it and the
vice chancellor Bruce Williams who was
uh an economist from Manchester
University UK he supported Anderson and
finally this philos philosophical philos
philosophy staff said we want a general
strike. So in 1973
something of out of 17,000 students at
the university I think ultimately 8,000
were on strike quite a remarkable time
and then that triggered uh in economics
we had our own meeting about you wanting
to change economics and uh much to my
amazement the bunch of students that I
thought were apathetic were in favor of
a a day of protest over what we're being
taught. So we organized the day of
protest we shut down the the standard
lectures. We didn't shut them down. just
basically said don't turn up. We gave
our own lectures at the time. Uh >> y
>> y
>> it was a huge huge and that led to the
dispute arguing for the creation of a
department of political economy. Now
I've got my own problems about what
political economy turned into. It's more
political science than economics these
days in my opinion. But that that change
that that battle with the professors led
to me uh ultimately becoming a professor
myself and saying I've got to take them
on at the the source of their ideas
which is how economic theory is
developed and that's you know that that
dates me right back 18 years old.
>> So where did you go in your PhD because
you looked at marks in your PhD.
>> No I looked the marks on my master's
thesis. So this this is a bit of
background. I'm I'm a contrarian of
contrarians and this is like my first
response was seeing through
neocclassical economic theory and then
at the end of the uh 1973 when there'd
been successful strikes in all these
departments and education was changed
progressively in each of those
departments um we a bunch of lefties got
together and what a bunch of lefties do
they decide to read KL okay so we had a
KL Marx reading group and this was in
December of 1973 now you know you know
that Sydney is pretty good weather.
Okay, this was a marvelous summer. We
spent the bloody summer in a cold
sandstone building in a in a in the
middle of the main quadrangle at Sydney
University reading Karl Marx and u I
remember walking
>> What did I say earlier? What did I say earlier?
