The Great Simplification: Steve Keen “Mythonomics”

August 4, 2022

(Conversation Recorded on June 22, 2022.)

On this episode, we meet with Economist, Author, and Research Fellow at the Institute for Strategy, Resilience, and Security at University College in London, Steve Keen.

Keen discusses how mainstream economics misses the centrality of energy to our economy and to our futures, the naive treatment to the risks of money and debt creation, and the disconnect economic theory has to climate change risks.

About Steve Keen:

Steve Keen is an economist, author of Debunking Economics and The New Economics: A Manifesto, a Research Fellow at the Institute for Strategy, Resilience, and Security at University College in London.

Show Notes & Links to Learn More

PDF Transcript

00:40 – Steve Info + Works

03:30Frank Stilwell

03:50 Theory of the Second Best

05:17Paul Samuelson and paper (1966)

07:30 Neoclassical economics

07:40 Alfred Marshall

09:45Basic assumptions of economics

09:30 Contemporary macroeconomics is applied microeconomics

11:12We are deeply social creatures, and this isn’t accounted for in economics

11:40Theory of supply (rising marginal costs)

12:15In reality, supply has a falling marginal cost (pg 102)

12:35 Alan Blinder + survey on marginal falling costs (pg 22) and vs his textbook

18:30Energy is not included as an input (factor of production)

18:44Computable general equilibrium models

19:02 Rational Expectation Revolution

19:20 Intertemporal equilibrium models

19:21Cobb-Douglas Function

19:24Constant elasticity of production function

20:26When energy is included it is to a very minimized extent

20:41 Working paper by Rudy Backmann looking at energy fall implications in Germany

21:57 – Change in energy and change in GDP is 1:1 (or .99)

22:11 Reiner Kümmel and paper factoring energy into CD Production Function

23:10CO2 at 420 ppm

23:48 Energy consumption/output in roman slaves (pg 558)

24:44A barrel of oil is equivalent to 5 years of human labor (Section 4.3)

25:59Adam Smith

26:03 Physiocrats

26:59Evolution of Labor Theory of Value

28:40Robert Solow

29:30 The assumption is that technology is responsible for our massive growth

30:12Bob Ayres

31:10James Watt – Steam Engine

31:00Energy is the true driver of growth, not technology

32:10Many cheap processes and productions would break down without cheap energy

33:01Second Law of Thermodynamics

35:00 William Nordhaus and work on climate (1991)

37:43Larry Summers

39:44Steve’s paper with Matheus Grasselli and Tim Garrett

40:54Limits to Growth

40:55 Graham Turner and review on Limits to Growth

41:03 Gaya Herrington

41:48Tipping Points

41:592 degree celsius tipping point

42:45Mainstream economics model of money creation is also insufficient

46:00Errors in Economics mathematics

46:21 Nate Hagens Paper

47:22 George Soros, Institute for New Economic Thinking

48:30Steve’s critique of the logic Marxist Labor Theory of Value

49:03Minsky Software, Hyman Minsky

49:25Systems Dynamics

49:41 Veil of money over barter David Andolfatto tweet

51:052% growth is expected every year forever

51:29 Bank of England paper on banks creating money

51:54Interest is not created when money is created

52:40Mainstream economics loanable credit model

54:10Positive vs negative credit and its role in the recession

54:50 Nate’s animated movie on The Great Simplification

55:20Japanese market and JGB’s

55:46Oil depletion

55:55How Russia and Ukraine war affects oil supplies

56:48 EROI

56:57Simon Michaux + TGS Episode

58:20 We need a 70-80% fall in consumption to be within planetary boundaries

*Note from Steve Keen – Arguing that humans alone are consuming 175% of the renewable capacity of the biosphere, cutting that back to leave headroom rather than overshoot implies a 50% fall in consumption–which would take us to 85% (roughly) of the planet being used by humans. To leave roughly 50% of the planet to other species implies another 50% cut. So a 75% fall in human consumption would about get us there.

58:45France and Germany turning back to coal

58:55Australia reopening up coal plants

59:17 Nate prediction that world GDP will fall 30-50% in the decade

1:02:01 UnTax

1:07:04Effects of studying economics on the brain/mindset

1:07:54Brisbon climate dangers

1:08:34California drought and resulting fires

1:09:09We are burning through fossil energies 10 million times faster than they were created


1:10:53AMOC Climate dangers

1:14:42 Food shortage risks

1:16:53 – *James Anderson (correction from Philip Anderson) on climate

1:18:07Richard Tol paper

1:22:05Raised by Wolves

1:23:20 Stuart Kirk Speech


Teaser photo credit: Roman mosaic from Dougga, Tunisia (2nd century  AD), featuring Roman slaves. By Pascal Radigue – Own work, CC BY 3.0, How many Roman slaves does it take to heat our homes?

Nate Hagens

Nate Hagens

Nate Hagens is the Director of The Institute for the Study of Energy & Our Future (ISEOF) an organization focused on educating and preparing society for the coming cultural transition. Allied with leading ecologists, energy experts, politicians and systems thinkers ISEOF assembles road-maps and off-ramps for how human societies can adapt to lower throughput lifestyles. Nate holds a Masters Degree in Finance with Honors from the University of Chicago and a Ph.D. in Natural Resources from the University of Vermont. He teaches an Honors course, Reality 101, at the University of Minnesota.

Tags: building resilient economies, new economics, Steve Keen