Steve Keen on how Modern Monetary Theory addresses economic dilemmas
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- Опубліковано 22 тра 2024
- In this follow-up to his previous interview ( • Steve Keen on how to m... ), self-proclaimed economic "heretic" Dr. Steve Keen shares more of his economic modeling software, Minsky, and demonstrates how it can simulate economic variables. He examines economic trends in light of COVID-19, its eventual negative impact on the United States through corporate debt, how the deficit now differs from what we managed during World War II, and the promise of Modern Monetary Theory. Honorary professor and Distinguished Research Fellow for the Institute for Strategy, Resilience, and Security at University College London, Dr. Keen talks with Dr. Jed Macosko, academic director of AcademicInfluence.com and professor of physics at Wake Forest University.
See Dr. Keen's profile at academicinfluence.com/people/...
See additional leaders in economics at academicinfluence.com/article...
Minsky modeling software at SourceForge: sourceforge.net/projects/minsky/
I think the best explanation for inflation that I've seen has been from Anwar Shaikh. Inflation is a factor of the purchasing power in the economy and the growth utilization rate. Or, to break it down into something understandable, it is determined by a complex balance between:
1) Savings vs Investments
2) Taxes vs Government Spending
3) Imports vs Exports
Each of those factors impacts growth and purchasing power in it's own way, and they also have impacts on each other. I know there are many points of agreement between Keen and Shaikh, so it's not hard to see where Keen's models aligns with that structure.
After WW2 as a result of war time necessity, many more women entered the work force. Secondly, war time innovation created a greater spirit of entrepreneurship which brought into being many more categories of manufacturing and product innovation. These two factors lead to a greater post war rise in productivity and consumption. Adding to this was the post war baby boom which also lead to higher consumption. Therefore the post war economic boom between 1950 and 1970 was driven firstly by increased productivity and secondly that was matched by increased consumption demand. Wages during this period tracked production output pretty closely. What is interesting is that post 1970 wages started to drop in relationship with production and the with that the introduction of easier credit terms. Was that shift accidental or by design? I say the latter, as shareholders and investors share of profit in way of dividends has grown dispreportionately in relation to the share of wages. Since the mid 1970's onwards we have seen the decline of the real growth of the middle-classes in almost every developed economy and a widening gap between capital and asset value accumulation by a very small exclusive group of winners verses a disturbingly rapid growth of disenfranchised workforce made up of non-contract workers, gig workers and short hours workers - all who have zero safety net should their working life be disrupted. The capitalist system has evolved into a "winner take all" game in which mega corporations accumulated vast political and economic power and inversely the ordinary joe has far less power of their destiny. Therefore I 100% agree with Steve Keen that a competely new revision of capitalism needs to be envisioned.
Share the wealth. in a better way.
Dr. Michael Hudson has a more straight forward economic explanation
from 2600BC and still going strong. . . .
Poor Marx, did not "see" that financial capitalism would screw it up.
Oil / Industrial production / GDP / personal prosperity will be decling from now on . . .
Club of ROME model is still predicting the present very well.
Microprocessors were a miracle from the mid 80s on. hundreds of thousands of times more sensing
It was am amazing time to be an electrical engr
Good stuff, very accurate however, capitalism isn't the problem, it's the few who realized they could use those dividends to buy a government and enrich themselves. Mission accomplished! Bankers and a few of their customers now own the world and enforce their rule with propaganda, the CIA and the military. Domestically, the FBI and other regulatory apparatuses. Vote Libertarian 💯 and all will be revealed 🔥🔥🔥 😉
MMT and foreign trade. Have you modelled the trade deficit in Minsky. Mosler did a verbal description of it in one of his talks so I am interested in a Minsky model refuting or supporting his approach.
See Q E here tinyurl.com/y2kxorjk 11 AUG 2020
Thermodynamics 2.0
tinyurl.com/yykalqj7 or ua-cam.com/video/rn68Llfayl0/v-deo.html .
Steve Keen @ P A T R E O N . . . . . . . . . . . . . . . . Find the open source software MINSKY
www.patreon.com/ProfSteveKeen . . . . www.patreon.com/hpcoder .
Not yet: it's quite a complicated thing to do properly, though Minsky could now do a decent "quick and dirty" model with two currency systems. I just haven't had time to do it myself. The outcome would be an increase in both domestic currency and capacity utilization in the exporter and a dimunition in the importer.
@@ProfSteveKeen But that would be correct only under a neoliberal type of government thinking neoclassically! Under and MMT lens the importers would have the policy space to choose to maximise their employment, to bring all domestic workers to bear, regardless of export earnings. Export revenues do not constrain a currency issuer. It is a government's choice to allow critical domestic industrial capacity to decline, the neoliberal wrong choice.
Thank you, @achrononmaster Bijou Smith, for this super informative comment! I agree that MMTs (modern monetary theorists) don't get to rebut what Prof. Keen says in either of our interviews. It would have been great to have interviewed Prof. Keen as part of a panel! But your comments help, as do some of the other interviews I did that are at: academicinfluence.com/interviews/economics
At about 25 minutes Steve sounds like some of Richard Werner’s proposals and his description of what Japan did with its windows on lending into the economy.
No, don't slander Richard Werner!
@@henningwitte2118 werner is much better imo
38:18 was the most interesting part of the conversation. We need to stop talking about economics like we do in the first part of the conversation and switch the conversation to entropy. Doing so eliminates endless partisan bickering and replaces it with “shut up and calculate”. If we do this then we will become a level 0 civilization.
Super interesting concepts of incorporating debt into macro models. It should be mainstream. I do have one question: at 19:50 mins, how do we calculate that the excess of 3.5BN in government spending translates into 3.5BN in reserves? even if they are all deposited into a bank account, the fractional reserve system would capture only ~10% of that amount. Unless I am missing something? total money growth over time?
Keen's model is a farce and proven so because banks are not required to have reserves in some countries and in the US the reserve ratio is presently zero so it is total ineffective. Keen should know but obviously doesn't ( or maybe just deliberately avoids addressing it) that in his own country, Australia, there has not been a need for banks to have reserves for the last forty years.
It seems to me that the interviewer's analogy with the throwing a party in your house and turning on the air conditioner ignores a fundamental difference. The home air conditioner generates more net heat than it moves out of the home interior, but it gets away with that trick because it cools the home by dumping the waste heat outside. It physically moves heated air out of the house. You can't get rid of waste heat from earth's atmosphere by pumping the air out into space in the same way that hot air inside a house can be swapped for cooler air by dumping the heat into an external heat sink. It has to radiate away, and the rate at which it does so is determined by the composition of the atmosphere, meaning that if you increase the blanketing effect of carbon or if you increase the heat being generated even without increasing the blanketing effect the heat will increase either way. Of course, right now we're doing both, increasing the heat trapping by dumping carbon into the atmosphere AND increasing the amount of waste heat we're generating by expanding industrial activity.
Love Steve Keen!
So do we!
30:50 euro is also a foreign currency so every country with the euro is currency user
Laffer had already heard about MMT from Walter Moser. I always wondered if Laffer knew that MMT principals would make it look like his BS Laffer curve works.
I think the Laffer curve works from a conceptual standpoint. There is going to be some level of taxation beyond which the taxes start having a detrimental effect.The problem comes when you try to apply it to real world economic models. There are so many variables that can alter the curve that it becomes absolutely useless.
Any economist that wishes to use the Laffer curve can just put in whatever variables they want and get the curve they want. I've seen estimates that put the tipping point of the US curve at 30%, and I've seen others that put it at 70%. And that's not even getting into where the country actually lies on the curve!
As Anwar Shaikh once said, "The great thing about economics is it is seldom affected by the facts."
Steve, Have you modelled taxation as government revenue using Minsky? MMT folks say that tax is NOT govt revenue for currency issuing nations.
Yes. See www.patreon.com/posts/41295202.
"Why, then, does the national government need taxes? Ruml (1946b, 268) highlights four
reasons:
(1) as an instrument of fiscal policy to help stabilize the purchasing power of the dollar;
(2) to express public policy in the distribution of wealth and of income as in the case of
the progressive income and estate taxes;
(3) to express public policy in subsidizing or in penalizing various industries and
economic groups; and
(4) to isolate and assess directly the costs of certain national benefits, such as highways
and social security. "
Found in : papers.ssrn.com/sol3/papers.cfm?abstract_id=3734445
Herb, MMT theorists say that sovereign currency issuing governments with a free floating currency and no foreign borrowings can always spend before they tax, as long as there are unutilised resources to employ. Therefore MMT gives you a lens to see, explain and understand macro-monetary reality. Such governments can always run a deficit, by spending beyond what they tax. They never say that you don’t have to tax or that tax isn’t important. Taxes in MMT take money out of an economy to ensure inflation is controlled, or to redistribute income and wealth or stop certain behaviours like, smoking, polluting etc. Tax is collected by sovereign governments but never spent in REALITY to fund any specific public good or service. Sovereign governments actually spend into the economy to provide public goods or services by computer keystroke via their central bank not via actual collected taxes.
*That's correct taxes don't fund spending, spending funds taxes. Federal taxes control inflation and drive currency.*
Apparently the adoption of written records was a social philosophical problem sometimes back in the days of Oral Memory traditions, it's a mystery now because the Babylonians and others before then kept records, but maybe they were more objective and "religious" because of ritual repetion as a substitute for the randomness of living according to some Calendar Covenant with the fickle fingers of the Weather.
So purely in speculation, was the Greek objection a conflict over fiat promises of contracted exchanges, religion based conservatism, or rigorous balanceing of necessities by slavery, willingly or not to reset indebtedness to the Administration.., like now.
So a Debt Jubilee or consolidation is not a MMT Provisioning concept, as has been pointed out, more like the Observable constant of civil works maintenance.., and the continuance of Eternity-now flash-fractal logarithmic condensation In-form-ation Thermodynamics.
There are actually super computers around modeling how nukes can be made better. It's hard to believe that that's all they've been doing 24/7.
It proves that IQ may not be the best measure of intelligence :)
I would really, really like to hear Prof.Keens view on how the clash between neoliberal and MMT policies will interplay in the restructuring of the global, military balance etc.
If Russia is playing the MMT-card, they will not suffer too much by the sanctions, boomeranging on Western societies, causing political tension. If both Russia and China är using MMT, they lack nothing....but democracy.
These are great questions. I will send them to Prof. Keen (who is now in politics!) Please spread the news about our UA-cam channel far and wide. Thanks!
@@AcademicInfluence Thank you...
...and i surely will :) !
@@alexanderholthoer8972 Thank you! BTW, Prof. Keen wrote back to my query in less than 20 min. Here's what he said:
On your question below, running an economy using knowledge of MMT means you can generate the domestic demand you need, but that doesn’t compensate for not having the physical resources or productive capacity you need. Russia can’t produce chips, for example, and many other vital inputs for a modern economy. No amount of MMT can compensate for that.
China, OTOH, can produce virtually everything (chips are its only weakness, and they’re about to address that), so the combination of state money creation power and huge manufacturing capability means they’ll sail through the crisis. The one problem they face is environmental.
@@AcademicInfluence Thank you.
So combining Russian&Chinese powers would be a very powerful alliance against Europe, hanging on to neoclassical ideologies, with dwindling natural resources, outsourcing their defence to Western military forces. Those military forces are not doing to well inside a neoclassical straightjacket and being dependent on the Chinese stuff...
OH, and then there is the climate crisis to address?
Shouldn´t we dive right into a MMT-based war economy?
@@alexanderholthoer8972 Yes, I think that is what Professor Keen would recommend. Keep up the great work and thinking about all of this stuff. We need more thinkers who are thinking outside the box.
Because money is a means of measuring pulsed flow and velocity/rate of flow amplitude, it is just another identification technique for interpretation of wave-particle reciprocation-recirculation temporal superposition identification of thermodynamical time-timing frequency-amplitude scalar vector-values of relative-timing in the Universal Bio-logical Recursion of logarithmic condensation-coordination numberness, Holographic Principle Perspective Imagery Nucleation values.
The instantaneous problem to recognise is the same mechanism as any nuclear power supply, ist fit for purpose and where does the exhaust empty out, does it accumulate in ways that go counter to the primary purposes for which it was designed to operate.
Ahh, Steve Keen looks like he upgraded his microphone.
Still some echos. Interesting idea of banks investing for equity.
Yes, Cathryn, it was one of the more impressive microphones that any of my guests have had! Nadia Brown also had a nice one :)
@@AcademicInfluence I've seen Steve in other interviews. He's trying, at least, and I think he's slowly getting better with his set up. He could do with a camera upgrade too perhaps.
@@cathrynm I agree about the camera upgrade. But people say that audio quality is more important to most people than video. So, it's probably good he started by upgrading his mic!
all that is left for MMT proponents to do is to decide how many angels dance on the had of a pin.
38:08 "...a 2.3% growth rate (conveniently chosen to represent a 10× increase every century), we would reach boiling temperature in about 400 years." dothemath.ucsd.edu/2012/04/economist-meets-physicist/
, yes boilingpoint of water and 400 years (but not 2500). Interesting stuff. Great interview!!
But that's 4 centuries, they will most likely discover some new technology to become more heat efficient or just dump everything into space.
@@aa2339 Yes, and in 25 centuries we need the energy of the milkyway....
@32:00 Steve is kinda wrong. MMT is correct, and Steve misquoted the MMT econs. Imports are absolutely a *_real_* _benefit_ and exports are absolutely a *_real cost._* MMT also would say *_your exports pay for your imports_* (in terms of keeping your exchange rate stable). When you export you give away real goods and get nominal currency units in return, conversely with imports where you gain something of real value and lose nominal units. The PROBLEM with trade imbalance occurs in three main ways that MMT fully recognizes (and I think actually agrees with Keen) which is that,
(1) if a government allows foreigners to use their currency you gave them to purchase your land or buy-off your corrupt politicians then they can influence your country destroying your sovereignty. But a wise government would simply not allow that, they'd restrict what can be for sale to foreigners. Steve disagrees I think(?) because he thinks governments are not so wise! He does not trust a government like Australia's to prevent foreigners from buying Aussie land and Aussie MP's. But in reality Australians are not really that stupid, they do have restrictions on what is for sale to foreigners, just perhaps not tight enough. Capital controls can also be used to prevent unwanted financial flows or currency attacks, as Iceland used post-2008.
Second PROBLEM: (2) is that reliance on imports can undermine domestic supply capacity. MMT does not dispute this as Keen seems to think. But the MMT point is that this would be a discretionary choice of government, the wrong choice, and needless, a purely dumb-headed neo-liberal choice. Government spending to keep critical industrial capacity domestically available is a choice and does not hinge upon trade policy and is not undermined by trade deficits. In fact many countries probably HAVE to import steel, cotton, lithium and whatnot, to keep critical domestic capacity going. The capacity of the government to invest in critical domestic industry is simply unconstrained by export revenues, if the real resources exist domestically, the government can run the required industry regardless of trade balance, like the capital controls it's just a political choice.
Then (3) what about poor countries who need imports, but to pay for them they'd have to export something to keep the currency exchange rate under control. That is a big problem, and MMT agrees with Keen that in such cases the poor country must be given international assistance and maybe even zero interest rate loans, and certainly should never be expected to get into debt to the IMF to afford vital imports. If they use exports to pay for their imports like MMT says is the norm, they could be giving away real goods that their domestic sector actually needs, all just in order to import something critical like fuel or food they cannot domestically grow. Those situations are not typical MMT scenarios for developed nations, when such circumstances arise they require international cooperation, maybe a Bancor system, and debt forgiveness --- these are all trade equity issues MMT econs routinely discuss and agree are vital and go beyond the sound-bite, "Exports are a real cost, imports a real benefit," the sound-bite is true, but carries hidden nuance. Personally I think Prof Keen is very unfair in claiming MMT'ers dismiss such nuances. Take Mosler for example, trade equity is not his wheelhouse, but I bet he'd agree with most of what I've written here.
Have on Randall Wray or Warren Mosler, they will debate Steve on trade issues quite well I think. There'll be more agreement than not.
I would like to add to the idea that exports are a real cost.
Sometimes not so much because there are goods and services that scale very well due to technology and other things. That is to say the marginal cost of production stays low despite volume sales such as information, knowledge like media such as music, shows, books, data, movies, games, software.
Financial services. Increased assets under management doesn’t translate to a proportional increase in cost.
Tourism (to an extent), think of all the famous monuments that generate lots of money, and it doesn’t cost that much to maintain.
Transit fees, air space fees, container storage, leasing territory for military bases and headquarters.
How anyone could take you seriously is a joke itself. You are so confused about the whole economy and the divisions between government and private sector.
Your recent utterances are indictive of that when you recently said on an MMT macro trader site ""even if you have the private sector protecting itself then that is government ". !!
What a great illustration of your bias and confusion. To you everything is government even if it is not.
At about 38 minutes Steve says that if we keep up the rate of warmth the temperature of the Earth would exceed the boiling point of water. That made me think about Venus and made me wonder if that is where human life originated and look what happened there? I used to say we started on Mars and look what happened there but Hey maybe our ancestors were on both planets and two different races arrived on earth and mingled their DNA producing a human species. I could see a great science fiction series on Netflix about this! We have so many ancient and even modern legends about this (e.g. Superman, pyramids, etc.). And then there is the whole star gate series. Just playing around in my imagination!
*Wow that's very logical and possible. When you mentioned life originate on venus I thought that's dumb, thought about and you're absolutely right, more than possible.*
The reason we can't air condition the earth by expelling to space the waste heat being generated after 400 years of economic growth at 2.3%/year is that you need to gather the waste heat and this requires a lot of energy. This additional energy then adds to the waste heat that you need to radiate into space. How are you going to send the energy away? Will you use lasers? After another 100 or 1000 years the lasers will be making the earth glow like a star.
comment 3.
30:00 -
34:41 - Ronald Reagan
37:05 - Paper titled EXPONENTIAL ECONOMIST MEETS FINITE PHYSICIST by
comment 2.
20:00 -
comment 4.
40:00 -
comment 1.
10:00 -
I see Keen still uses the argument that monetary economics doesn't incorporate banks, debt and equity in modelling, but that's not true; the ECB for example now incoporates debt into a vast array of their papers. Still arriving at bizarro conclusions, mind you, but they do incorporate it. It took them a criminally long amount of time (I think 2017 is when they started) however. I think he is increasingly bitter that the Minsky software he developed will (and I don't mean this to be rude) remain as an obscure, antiquated modelling tool. Perhaps this is why he's pivoting towards criticising environmental/ecological economists now -- for example, he has a hard-on for Nordhaus at the min.
The war bonds thing is interesting. Can banks just swap reserves straight for other assets? I thought reserves were 'stuck in the system'? And supposing the government did this -- would war bonds be limited to individuals rather than corporate interests buying them? Those things would get absolutely gobbled up by the financial sector if they had a positive yield in the current topsy-turvy debt market. Meanwhile, the direct stimulus (30% of GDP increase in the example Keen gives)would lead to massive inflation in consumer goods that wouldn't be sucked out at will because the consumer is the benefactor AND the beneficiary of the bond (NOT the case in WWII/I).
Also, if one were to go down that route, why not just issue people with tokens that they can only spend locally? Just get consumption and domestic spending up in the most brute force manner possible. Or why not give everyone €100,000 and just use the war bond issuance a legal obligation to buy? If everything can be answered at fiscal level there isn't really much point for a monetary policy/central bank to exist. Just make the government a huge 'bank' and dish out wealth equally. I say this only half-facetiously, but it does remind me of that saying 'if something sounds too good to be true, it probably is'.
M I N S K Y improves & will only add power and features
Steve Keen is not bitter. He is disappointed that Nordhaus cannot understand mathematics & those that publish his papers cannot understand mathematics & has correctly directed Anger
The ECB uses debt and private debt NOW, not when Keen and other MMT people were talking about it in the early 2000's, but the ECB uses it now, post 2008 GFC, because of people in the heterodox tradition.
Of course you are right . But what Keen says an why he says it is his insistence on ONLY a central government having power to create more debt (Treasury securities etc). He petends it is economics but to be improved economics based on a scientifically reasoned understanding rather than politics it has to be universally correct. His spiel contains No such powers to state or regional government puely because their chosen actions might undermine a central governments power. It is Not economics he talks about but the politics of leftism and centralism that failed in every other country at huge human cost over the last century.
An example of his other claimed financial concepts is the idea that government deficits are a saving for the private sector. He does this by ignoring the debt obligation that accompanies increased money supply that flows from government deficit budgets funded by the Federal reserve. They are the sole burden of the private sector to pay off with interest on maturity. There can be no budget deficit funded by government debt that taxpayers don't have to fund simply because governments don't have funds to pay their own debts.
You miss the whole point of MMT. Banks and loans are irrelevant. Society (the government) should be the source of the money to create a business or buy a house - and the government doesn't have to pay interest to itself. Banks become just storefronts for the government and advisors to make sure the money will be spent wisely.
You are in denial of the reality that government does not know when or how to spend the appropriate amount of money. Most times they don't care because politicians decide on what is spent and they do it on the basis of promising things that the electorate in their seat wants and is willing to vote for no matter what the relevance to the whole economy actually is.
LOL @ governments being a reliable institution for wise resource allocation.
Yes, as soon as they destroy the price mechanism with controls and subsidies, they'll have such great insight. hahaha
I Respect Dr. Keens Ideas on Economics. Is very refreshing to hear them, but on "Climate Change" I have to disagree with him. We are not warming. Its going to get colder and cause weather Instabilities. Under current Agricultural practices its going to cause food shortages because of those instabilities. This will also cause higher energy consumption in order to keep dwellings warm. I will get pilloried for saying this but I am not alone in that assessment.
Thank you for this comment! I am so sorry you get pilloried. People should be allowed to say what they think the data indicate without worrying about getting pilloried. Hopefully, you will survive the abuse you are receiving!
@@AcademicInfluence Thank You. Like others such as myself--We will Survive and Succeed in spite of the criticism.
The interviewer seems to struggle with understanding what he is being told. Right wing bias I think.