Steve Keen’s Debt Watch

Though the basic ideas of the Monetary Circuit are brilliant, when it came to turning these into a model of the monetary circuit, the Circuitists made numerous errors that were the result of them not knowing how to model a dynamic process. I outline these errors and then introduce the basic tool of dynamic modelling, the differential equation.

Excellent wide-ranging interview by Peter Switzer (www.switzer.com.au) on Sky Business News about the financial crisis, who predicted it and how, and what the prospects are for the global and Australian economies and the Australian housing market.

Given how appallingly bad neoclassical economics is, an alternative economics that is at least roughly capable of reproducing the actual performance of the economy is badly needed. One of the best studies of the empirical data about the economy was ironically undertaken by the two neoclassical economists who developed Real Business Cycle theory, Kydland and Prescott. This lecture reports their findings, focusing on the conclusion that "credit should play a larger role" in future analysis of...

One year after the start of the greatest economic crisis since the Great Depression, the editor of the American Economic Review: Macroeconomics claimed that "the state of macro [theory] is good". How could be be so deluded? Macroeconomics has been distorted by appalling scholarship and a misguided belief that macroeconomics and microeconomics should be consistent. The best critics of this, ironically, are given by the authors most responsible for the state of macroeconomics, John Hicks and...

In this second half of the lecture, I outline the Fractal Markets Hypothesis and the Inefficient Markets Hypothesis (IEH). The IEH suggests precisely the opposite investment strategy to the EMH on how to maximize returns on the stock market: invest in low volatility, high Book to Market stocks.

The Fractal Markets Hypothesis and the Inefficient Markets Hypothesis are two of several attempts to provide a realistic theory of how finance markets actually behave. In this first half of the lecture, I explain what a fractal is, and discuss their basic characteristics.

I took part in an "IQ Squared" debate with that title, on the affirmative side. The title is a play on a favourite saying of Australian politicians back in the country's "White Australia" days, and the immigration surge it caused ironically led to Australia becoming one of the world's most multi-cultural nations. My speech, which focuses on the "Human Ecological Footprint" measure of the impact humanity has on the biosphere, starts at the 40:40 mark. Other speakers are Australian...

The CAPM and EMH stick to the neoclassical script of believing that the economy and finance markets are stable, at or near equilibrium, and on this basis argue that "you can't beat the market". But there is an alternative view, far more aligned with the actual data, that says that markets are chaotic, far from equilibrium systems, and for that reason it's very hard to beat the market.

Eugene Fama was an enthusiastic promoter of CAPM and the Efficient Markets Hypothesis, arguing that despite their absurd assumptions, the data supported the theories. But was this a fluke, the result of the narrow data range he used--from 1950 till 1966? He has since disowned the theory in 2004, stating that "the theory has never been an empirical success", and that "most applications of the theory are invalid". But somehow these honest statements don't seem to have made it into the finance...

CAPM appeared to fit the statistical evidence for a the period prior to its development, enabling its supporters to champion it and leading to it taking over the profession? But was this just a fluke, resulting from the short time period considered by the statisticians? It has since been challenged by Behavioral Finance, but it seems that this school has also misunderstood John von Neumann's work. Once objective probability is used as he intended, rather than subjective probability, all the...