Steve Keen on Marxism, Capitalism, and the Flaws of Modern Economics

Steve Keen, a prominent heterodox economist, critiques the foundations of modern mainstream economics, arguing that its current methodologies and assumptions are fundamentally flawed and potentially detrimental to human civilization. He posits that the true goal of economics should be to understand how human civilization is built and maintained sustainably, emphasizing the critical role of energy and the environment, a perspective he attributes to biophysical economics and the early physiocrats. Keen asserts that mainstream economics, dominated by the neoclassical school, uses inappropriate mathematical tools like difference equations instead of differential equations for aggregate modeling, and erroneously assumes stable equilibrium, neglecting the inherent instability and complexity of real-world capitalist systems.

Keen traces the historical evolution of economic thought, beginning with the physiocrats who saw wealth originating from the land and sun, through Adam Smith's classical school which attributed value to labor, to the neoclassical school's subjective theory of value based on marginal utility and equilibrium. He highlights Karl Marx as a brilliant critic of capitalism, building on classical ideas, and praises Joseph Schumpeter and John Maynard Keynes for recognizing the dynamic, uncertain, and unstable nature of capitalism. Keen distinguishes Schumpeter's view, which emphasizes money creation by the financial sector to fund entrepreneurial innovation, from the more commodity-money-focused Austrian school, despite Schumpeter's Austrian roots.

A significant portion of the discussion focuses on the nature of money and Modern Monetary Theory (MMT). Keen argues that money is not a commodity but a "creature of Double Entry bookkeeping" and social relations, fundamentally representing liabilities of the banking sector or government. He explains that private banks create money through loans, and government deficits create money for the private sector by increasing bank accounts. This understanding challenges the "money illusion" prevalent in neoclassical economics, where money is considered irrelevant, and underscores that money creation is essential for commerce and economic activity, rather than a zero-sum game.

Ultimately, Keen advocates for a radical shift in economic methodology, urging economists to adopt tools from systems engineering and embrace the reality of complex, unstable, and non-equilibrium dynamics. He stresses the importance of understanding money's true nature and the financial sector's role in its creation, alongside a renewed respect for the planet's ecological limits. His work, including "Debunking Economics," aims to provide a more realistic and sustainable framework for economic analysis, moving beyond the abstract and often misleading models of the mainstream.

the real Foundation of Marxist political philosophy was the economic argument that there would be a tendency for the rate of profit to fall

what is economics or maybe what is or should be the goal of economics well it should be understand how human civilization comes about and how it can be maintained

My discipline has probably helped bring about the termination potential the feasible termination of human civilization

we should be using the tools that Engineers use frankly and that's sounds ridiculously simple because you would expect economists are using upto-date techniques that are common in other Sciences where you dealing with similar ideas of stocks and flows and interactions between the environment and a system and so on and that's fundamentally systems engineering

at the aggregate level you use differential equations for processes that occur through time and that's economics it occurs Through Time you should be using that particular technology

Marx is probably the most brilliant mod in the history of Economics the only other competitor I'd see is Shuma possibly kanes but in my terms of ranking of intellect would be Marx Shuma canes

money is irrelevant they say money illusion so they they they they represent people's uh tastes using what they call indifference curves

there's no equilibrium it's unstable and as a mathematician it's easy to you work with stability analysis you know you work out what the the Jacobian is you work out your leop and of exponents in a complex system you're used to the idea that equilibrium is unstable but economists get schooled into believing that everything happens in equilibrium and they don't learn stability analysis

money is essential money actually adds to demand

an entrepreneur is somebody with a great idea and no money

money is a creature of Double Entry bookkeeping

money fundamentally is not a commodity it's a it's a claim on somebody else that's money is its Essence

a government deficit creates money for the private sector

money creation is a good thing because money creation is what allows Commerce to happen