Steve Keen Says Economists Get Everything Wrong (Especially About Climate Change)

Tracy Alloway (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:16)

And I'm Joe Weisenthal.

Tracy Alloway (0:18)

So Joe, one of the themes that we've had in our recent episodes is this idea of the pandemic changing certain perceptions of economics or certain perceptions of how the world and the economy actually works.

Joe Weisenthal (0:35)

Yeah, I mean, I think that's exactly right. Like, you know, we just got in the US, for example, personal income and spending data.

And, you know, the story is that household income replacement was actually extremely effective and successful in the US. And that's not what you expect in a recession. And it's sort of, I think, people sort of opening their minds to like how much of what we take for granted is just policy choices.

Tracy Alloway (1:05)

So, I mean, one of the big things that happened is we had the COVID shock in 2020 We finally had this exogenous shock that economics is kind of obsessed with.

And things didn't necessarily pan out exactly the way that a lot of economists would have expected based on traditional principles of how things actually work. So now, you know, not only have we had an unusual crisis in many respects, but now people are talking about an unusual recovery as well, and whether or not the future economy is going to look slightly different. So with that in mind, and I guess without further ado, we have the perfect person to talk about all of this. An iconoclastic economist, if ever there was one, and someone who thinks slightly differently to a lot of other economists out there, we're gonna be speaking with Professor Steve Keen. He's a distinguished research fellow at the University College London, and also the world's first crowdfunded economist. He has a Patreon account where he posts a lot of materials. You can check that out.

Professor Keen, thanks so much for coming on.

Steve Keen (2:15)

Thank you, thank you for the invitation.

Tracy Alloway (2:18)

So I guess I'm trying to think where to start, because of course your research is quite wide ranging. And if we're gonna talk about the entire state of the current economy, that's a pretty big topic. But maybe just to begin with, talk to us about what surprised you over the past year, or what stood out to you in terms of economic developments.

Steve Keen (2:43)

In some sense, I wasn't surprised, because when the crisis first hit, I get on my Patreon blog that we should have, the government should pump as much money as they can into the economy to make it possible for people to not to have to go to work and still meet their bills and not go bankrupt through the whole process.

And I suppose in one sense that it's not amazing that when a crisis strikes like this, the economic textbook gets thrown out the window, where it desperately deserves to be thrown, by the way.

And the people just, you know, as I know from what Hank Poulsen had to say back when the financial crisis hit, he wasn't going to let capitalism collapse on his watch. So they throw the government money book at the system. Now, of course, that happened back in the great recession as well, but we're very rapidly switched over to, you know, the focus back on balancing the government's books and all this sort of stuff. This time round, the scale of what we've done has been two or three times as big as what happened with trying to reduce the damage from the global financial crisis. And actually a lot of Americans ended up getting a pay rise out of the fact they got 600 bucks a week from the government to meet their bills for a while. And I think what actually has started to soak into people is that, hey, maybe the world financial system doesn't work the way the textbooks told us it works. So I think that's the pleasing thing that I take out of this, that there's more consciousness of that textbook explanation as the Bank of England itself said in 2014 is simply wrong.

Joe Weisenthal (4:14)

Do you think this is a lesson that's actually been learned? Like we can all observe this.

We can all look at household incomes having held up despite the crisis. We can look at the sort of very robust power of fiscal policy. But do you think this is a lesson that will actually be learned? Or do you think it's a lesson that will be dismissed? You know, it's like, oh, that was a weird crisis because it was this exogenous shock. It was a health thing. We have to go back next time in a downturn. We have to go back to the old way.