by Summary:
Both Neoclassical and Post Keynesian economic models have been "energy blind": postulating output from inputs of Technology, Labor and Capital, but ignoring energy (and matter, for that matter...). In this lecture I show how tautological and wrong the Cobb Douglas Production Function is, and that incorporating energy into it does enormous damage to the Neoclassical paradigm. On the other hand, the empirically-based Leontief Production Function only needs to acknowledge that what has been called the "Capital-Output Ratio" is in fact the inverse of "the efficiency with which machinery turns energy into useful work", and Post-Keynesian economic models are now energy-aware.
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Both Neoclassical and Post Keynesian economic models have been "energy blind": postulating output from inputs of Technology, Labor and Capital, but ignoring energy (and matter, for that matter...). In this lecture I show how tautological and wrong the Cobb Douglas Production Function is, and that incorporating energy into it does enormous damage to the Neoclassical paradigm. On the other hand, the empirically-based Leontief Production Function only needs to acknowledge that what has been called the "Capital-Output Ratio" is in fact the inverse of "the efficiency with which machinery turns energy into useful work", and Post-Keynesian economic models are now energy-aware.
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Steve Keen considers the following as important:
This could be interesting, too:
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| Both Neoclassical and Post Keynesian economic models have been "energy blind": postulating output from inputs of Technology, Labor and Capital, but ignoring energy (and matter, for that matter...). In this lecture I show how tautological and wrong the Cobb Douglas Production Function is, and that incorporating energy into it does enormous damage to the Neoclassical paradigm. On the other hand, the empirically-based Leontief Production Function only needs to acknowledge that what has been called the "Capital-Output Ratio" is in fact the inverse of "the efficiency with which machinery turns energy into useful work", and Post-Keynesian economic models are now energy-aware. |
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Excellent explanation of the energy variable, and of the need to reframe our perspective on our relationship to the gifts of nature. Clearly the neoclassical approach has provided a false rationale for the abuses of the rentiers . Rationales that are not only a threat to democracy and equality, but to the planet itsef!
Spot on Joe. That wasn't the purpose of the Neoclassical paradigm when it began, but its blind spots suited the finance sector (and rentiers in general) like a glove. And now it could end up destroying civilisation.
Most interesting. Thank you very much for your work, professor. Started following you for your work on private debt, will continue doing so for your work on energy/ecology/climate economics.