[Steve_American]

How Economics Became a Cult -- New Economic Thinking with Steve Keen, 14 min.

At 10:35 mark, Steve explains that mainstream econ. theory took banks, money and debt out of their model, so money was to have no effect on the economy, but banks create money when they make loans, and the borrower borrowed it to spend it, and this spending certainly affects the economy.

When Steve speaks about "Minsky", he is talking about the computer program he created to model money flows in economies.

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[wat0n]

Not true.

Plenty of mainstream books do teach models where money has effects on the real economy.

[Steve_American]

Not true.

Plenty of mainstream books do teach models where money has effects on the real economy.

Steve Keen is a Prof. of econ. Therefore, it must be at least partially true. Or, true is some sense.
I'm pretty sure that the MS econ. does teach that too much money printing will result in inflation. It just only counts Gov. deficits as money printing, and doesn't count bank loans as 'money printing'.

[wat0n]

Bank loans can and do also create money. The money multiplier stuff is econ 101 stuff.

I mean the effects of money supply on economic activity in the short run, at least. That's quite mainstream... Maybe you shouldn't listen to Keen so much?

e.g. you can consult books like this one:

https://jollygreengeneral.typepad.com/f ... n-2009.pdf

That's for an introductory macroeconomics course.

[Steve_American]

Bank loans can and do also create money. The money multiplier stuff is econ 101 stuff.

I mean the effects of money supply on economic activity in the short run, at least. That's quite mainstream... Maybe you shouldn't listen to Keen so much?

e.g. you can consult books like this one:

https://jollygreengeneral.typepad.com/f ... n-2009.pdf

That's for an introductory macroeconomics course.

Prof. Keen correctly predicted the GFC/2008 in 2005.

In 2007 many MS economists were predicting that 2006 would be a great year. Not one AFAIK predicted the GFC.

So, it seems like you should listen the Prof. Keen more.

BTW, I don't pollute my mind with MS theory because it is based on proofs that use false premises, and its economists don't check it against reality, like every real science does. So, it makes very few correct predictions, and that doesn't cause it to rethink its proofs. For example, i predicted that covid would cause inflation, and I was right. But, my prediction was based on shortages and not excess deficit spending.

[wat0n]

So instead of reading about mainstream economic theory yourself, you prefer to listen to people like Keen. Okay.

Also, this

[Unthinking Majority]

Not true.

Plenty of mainstream books do teach models where money has effects on the real economy.

Right, things like quantitative easing, which was used after the 2008 economic crisis.

[Steve_American]

So instead of reading about mainstream economic theory yourself, you prefer to listen to people like Keen. Okay.

Also, this

OK, I looked at the linked article under the "this". It is from 2009. Is that the latest bad prediction Prof. Keen has made in public. If so, then his is a very good record.

OK, I'm going to doble down on my decision not to read much MS Econ theory.
. . . You say Keen is just a man, implying he may be wrong. This is correct.
. . . BUT, the authors or author of that MS Econ. text book are also men and may be wrong.

AFAIK, MS Econ. theory is still teaching that US Gov deficits crowd out money for investments. This is just silly. 1st the Gov. spends and then it sells the bonds. After it spends, it has added the money to the reserves of banks, and then it pulls them back out by selling bonds. That is the money is moved at the Fed. from the bank's reserve acc. to an acc. still at the Fed. that pays interest. How can this crowd out anything? If the Gov. had not spent the money it would not exist, after it has spent the money, all other money is not affected when the bonds are sold, if you agree that all money in the economy is fungible.

Also, it is just silly for MS Econ. theory to teach that our grandchildren will be taxed to pay off the bonds that are being sold now. Are we being taxed now to pay off the bonds that were sold by Reagan 40 years ago? No, we are not. There is no reason to ever pay off the US national debt, because it is also the national savings of the non-gov. sector of the economy. And, the non-gov. part of the economy really likes having those savings.

BTW, if the Fed. stopped trying to control the economy with interest rate changes that don't actually work, the interest on the debt can be 100% controlled by the Gov./Fed at any low interest rate it chooses to sell the bonds at. This is because once a corp. has sold something to the Gov. for dollars, it has limited choices of what to do with them. At some point it or a new holder of those dollars will choose to convert them into interest paying dollars by buying a bond because holding them as non-interest paying dollars is leaving money that could be earned on the table.
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[wat0n]

@Steve_American I have no idea if that's the latest prediction Steve Keen has gotten wrong. But I found it funny at the time.

Anyway, saying mainstream macro doesn't consider the effects of the money supply in the real economy is just wrong. There are some models that don't, but they are not really used for policy.

[Steve_American]

Lurkers, can you see that the fact that basically no poster here will engage with me on my assertion that MS Econ. is a cult is evidence that it is a cult. I assert that that I'm open to being convinced that I'm wrong. However, so far, the cultists don't provide arguments and evidence, they just make assertions. I provide examples of the false premises that MS Econ. uses to prove its conclusions and most importantly point out that in logic even 1 false premise makes the proof useless; and the cultists don't try to show me (ever) that I'm wrong and in logic false premises are OK, or that my examples are not actually false.
. . . It seems to me that making and repeating assertions as evidence that those assertions are true is the sort of thing that cultists do.
. . . I'm told that I should read MS Econ. theory for myself. Do the people who tell me this read actual peer reviewed articles or the recent textbook by MMTers? I doubt it. Why should they think that I need to do what they will not do? They likely have the same cognitive dissidence that I have when I try to read an article, for example, about how ACC theory is totally wrong. I get that.
. . . Cultists are true believers. In this case they were brainwashed in college econ. courses in which they paid money to be taught the truth about reality. They didn't know that what they were going to be taught was not reality. How could they? They were young, and society supported the teaching of that false theory.

I don't know this for a fact. However, my theory is that the MS Econ. professors fine-tuned their lectures to get them to accept the false premises are OK in the case of economics. My theory is that the prof. claimed that a premise is a simplifying assumption and just accept it for now. And then, somewhat later, used the conclusion that they had "accepted for now" and expected to have it justified later, as a true conclusion without actually justifying it later. The prof. slipped it past their questioning it with a slight-of-hand trick.
Another thing the MS Econ. profs. do is hand wave away objections.

In the post that I recently posted about the history of Neoliberalism he says that early neoliberals were all about how the market would do magic things so long as the Gov. regulated the market to make sure that it was competitive. then, later neoliberals undermined the laws and regulations that were keeping the US market competitive. So, now the market is full of corps with monopoly pricing power. There are just 4 or 5 meat packers, just 4 or 5 oil corps, 4 or 5 pharmaceutical corps, 4 or 5 grocery store chain corps, etc. How can an economy with so few choices be competitive? If the market is NOT competitive, then are MS Econ. theories still relevant to the US market? I say, No! This matters a lot in the current period of inflation, corps can raise their prices because they have monopoly pricing power, when there are just a few corps that control that part of the market.
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[wat0n]

No one else is engaging with you because the initial claim of yours was already proven wrong.

[Steve_American]

No one else is engaging with you because the initial claim of yours was already proven wrong.

This may be true in this thread, but not in the others. And even you agreed that MS Econ. theory has factored banks, money and debt out of part of their theory, but then added them in later. You simply asserted that the policy prescriptions by MS Econ-ers that are important are always made based on the conclusions reached after banks, money, and debt were added back in. You provided no examples of this or evidence of this. As such, it is easy to ignore.

Lurkers, this is another example of how he just asserts things with no support, while I give examples and/or evidence. In this case my evidence was in the link and was an assertion made by Prof. Keen. I have no doubt that Prof. Keen would be accepted as an expert witness on econ. in a court of law. So, what he says is admissible in a courtroom and therefore, here.
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[wat0n]

This may be true in this thread, but not in the others. And even you agreed that MS Econ. theory has factored banks, money and debt out of part of their theory, but then added them in later. You simply asserted that the policy prescriptions by MS Econ-ers that are important are always made based on the conclusions reached after banks, money, and debt were added back in. You provided no examples of this or evidence of this. As such, it is easy to ignore.

...Proving, then, it's not a cult as mainstream economists are constantly revising and improving their models.

That's exactly how the scientific process works: Models are being constantly revised and improved based on the data.

[Steve_American]

...Proving, then, it's not a cult as mainstream economists are constantly revising and improving their models.

That's exactly how the scientific process works: Models are being constantly revised and improved based on the data.

With all due respect, the Fed has been raising interest rates for a year.

The cause of the inflation was never high wages or too much money in the economy.
It was 1st shortages caused by shipping becoming a mess and factories being shut down, both because of covid.
Then it was extended because corps were price gouging because they could increase their profits that way.

None of those causes would be affected by raising interest rates.
The main effect of increases in interest rates would damage the bottom of society, while the top was making more profits. And, would not slow inflation very much at all.

Evidence that the increases were not working as expected are that unemployment had/has not increased and consumer spending was/is still strong.

Inflation is coming down because the shortages are ending because shipping is getting straightened out and factories are back in operation. My evidence is =>
https://billmitchell.org/blog/?p=60910 = "US inflation falling fast, while in Australia the top-end-of-town are partying on massive salary increases"

It seems like MS Econ. doesn't learn very fast. The Fed still has not changed its tune.
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[wat0n]

You couldn't even learn that the real effects in changed in the money supply are taught in mainstream undergraduate courses in macroeconomics, even after I posted a very mainstream introductory macroeconomics book, yet you speak about "not learning fast"?

[Steve_American]

You couldn't even learn that the real effects in changed in the money supply are taught in mainstream undergraduate courses in macroeconomics, even after I posted a very mainstream introductory macroeconomics book, yet you speak about "not learning fast"?

Who says they are the real effects?

Did you mean, "...-in- . . of changes -d- in the money supply..."?

I'm not a professional. It isn't my job to learn about MS Eon. theory.

Like I said, i really doubt that you have spent much time reding the works of real MMTers.
How much written by a real MMter have you read.

When you tell me how much, assuming it's enough, and you provide a page number in your book, I'll look at it, if it's free.
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[wat0n]

"of changes"

[Steve_American]

@wat0n,
I'll ask again.
Have the expected effects been observed in real cases. Like in Japan. In the US. In Russia. Etc.
In a science you need to confirm theories with actual observations of reality.

[wat0n]

In the US? Absolutely.

The recent hike in rates has aided in abating inflationary expectations.

In Japan, they tried a Keynesian approach that failed.

In Russia, they didn't even follow the advice by economists to the letter to begin with. No one would advocate for privatizing monopolies without any regulation.

[Steve_American]

In the US? Absolutely.

The recent hike in rates has aided in abating inflationary expectations.

In Japan, they tried a Keynesian approach that failed.

In Russia, they didn't even follow the advice by economists to the letter to begin with. No one would advocate for privatizing monopolies without any regulation.

Just assertions. No details. No dates. Nothing.

I don't agree with any of that, except maybe the part about Russia.