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Neoclassical vs Post Keynesian

Summary:
John Hearn joins in this week for the battle between Neoclassical vs Post Keynesian Economics. John is an economist who is more closely allied to the Chicago and Austrian Schools of Thought. He has written extensively on why governments should balance their budgets, Central Banks should not manipulate interest rates and why private property rights, markets and capitalism are the only way to achieve economic growth, higher living standards and greater equality. John's website: https://myprofessorjohnhearn.org/

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John Hearn joins in this week for the battle between Neoclassical vs Post Keynesian Economics. John is an economist who is more closely allied to the Chicago and Austrian Schools of Thought. He has written extensively on why governments should balance their budgets, Central Banks should not manipulate interest rates and why private property rights, markets and capitalism are the only way to achieve economic growth, higher living standards and greater equality.



John's website: https://myprofessorjohnhearn.org/
Steve Keen
Steve Keen (born 28 March 1953) is an Australian-born, British-based economist and author. He considers himself a post-Keynesian, criticising neoclassical economics as inconsistent, unscientific and empirically unsupported. The major influences on Keen's thinking about economics include John Maynard Keynes, Karl Marx, Hyman Minsky, Piero Sraffa, Augusto Graziani, Joseph Alois Schumpeter, Thorstein Veblen, and François Quesnay.

40 comments

  1. GhostOnTheHalfShell

    Seriously, I'd love to see John trotted through Blatt's book, chapter by chapter. It's stunning to have someone assert models don't work, when he himself is working from a mental model of what is valid. It's 100% an oxymoron.

    Mathematicians spend hours debating definitions and assumptions (axioms) for relevance and clarity. To skip over this process renders whatever is derived from faulting thinking or lax definition as garbage.

    • GhostOnTheHalfShell

      @ProfSteveKeen There is a difference in bonds v taxes, when the bonds mature. I suspect they had a hand in some parts of the post war economy (on top of everything else).

      Housing is considered a singular and primary source of wealth accumulation for average income earners; it notably leaves lower income brackets from this avenue. Why not have a savings account backed by treasuries? The return will be a damn site better. It's better than a single absolutely necessary commodity pressured into inflationary rise (to accumulate that wealth) which millions can be ruined if there is a downturn or popped bubble (see China). Also.. why not have bond purchase as a way to discharge tax and act as a retirement account?

      Full confession: some motivation to apply maximum suffering and outrage to the financial sector.

    • He talks about sticking to rules that work, but how can you know without systemic analysis??

    • GhostOnTheHalfShell

      @Zak Pullen Umm consult an oracle? Religious text? What on e read as a student?

      It’s a question I’d have loved him to have been confronted with: how are the rules he believes in been determined to work? What’s his epistemology? Math, empirical study?

      I think every classical economist should be pressed on this matter. They should be pressed on their math. Blatt demonstrates that a basic model does NOT trend to equilibrium when perturbed. When their math is faulty, how do they claim veracity?

      They should be pressed on the failures (uk/us) of privatization. The free market abounds with failures. It fails to optimize wealth of labor. Allocating resources based on price or economic inertia (oil industry) leads to dysfunction.

      The pillars of capitalism themselves lay in ruin. Everywhere the concentration of wealth, the destruction of competition, of transparency, of responsibility abound. Pillars of capitalism as the IMF calls them are toppled. The economic king is wear no market clothes.

      what is this? what capitalism?

    • ​@GhostOnTheHalfShell​

      "When their math is faulty, how do they claim veracity ?"

      They don't give any importance to reality. Important for them is to maintain the current ideology that allows the greatest concentration of wealth in history.

    • GhostOnTheHalfShell

      @Nathan Neiman On an institutional level, yes. It is important to see them as having no clothes.

      Richard Wolff explains the institutional pressure placed on him to avoid study of the criticism of Capitalism. It was laid out for him. His career would be limited if he did so.

  2. GhostOnTheHalfShell

    Also in the sense that "capitalism" optimizing prosperity as an assumption, this assertion is often attributed to Adam Smith, but this assertion arises in very narrow circumstances which can be seen as an element of the process of feudalism succumbing to market economies and then capitalism. Marx is essentially right by focusing on power relationships, the constant over all history, from Ancient Rome to Feudal Europe. See also Vaush's Coconut Island analogy. Only when individuals have option of refusal, which is obviated without a source of independent sustenance can we even begin to assume 'free exchange' or something like a market.

  3. Michael de Sousa Cruz

    Gotta call it Global Warming.
    Gotta tell people to VOTE.
    Gotta tell people to Run for Office.
    Don’t be afraid to say it explicitly, Ty.

    • GhostOnTheHalfShell

      There is much more to be done outside the election cycle. One of the singular acts we have agency (US/Canada particularly) is changing zoning laws for mixed use nd making our lives car independent.

    • Michael de Sousa Cruz

      @GhostOnTheHalfShell to change zoning laws you have to be in government, both elected and public servants.

    • GhostOnTheHalfShell

      @Michael de Sousa Cruz Terrifying your representatives at city council meetings, talking to your local business owners (I make a case for it in a video “Business Interest”). using the resources and groups organized by strongtowns at those city councils. Government is suppose to represent and serve. We need to tell them. California has attempted to pass relaxation of aping at the state level but nimbyism and certain sector interests work against it. It’s a matter of mind share we all can express.

    • Michael de Sousa Cruz

      @GhostOnTheHalfShell I agree, Be the Boss of your representatives. But also, be the politician that gets bossed! Run for office and win! VOTE too! Especially Congress, since they create the U.S. Dollars and make the rules in the first place. Got to go to the source. Be against trickle down politics as much as we’re against trickle down Mythonomics!

  4. This was a great show, one of my favorites to host, I was honored to moderate both Steve and John in such a respectful debate.

  5. Michael de Sousa Cruz

    Oh my word. John Hearn is awful 😂 this has been horrible to watch. This is awful. Yikes! He’s wacko. And my “cult, thought reform, white power movement rhetoric” meter was going off the hook whenever he opened his mouth. Yikes

    • You were not entertained?

    • Michael de Sousa Cruz

      @Ty Keynes well, I had a gut reaction to your question, I paused, then checked the definition of entertained to make sure, and not even the archaic and obsolete definitions apply… so… No 😉😂 that was infuriating, but I watched it right to the end 🤣😂

      Ty, will you be to give me the quotes from Mosler and Kelton for your blog post. I found your blog post interesting, and I have a notion it’s in response to my comments from last weeks show from Prof Keen, which I do take very seriously. I’m trying to understand from where he and you are coming from, because I understand where Mosler is coming from, and you are both making sense but it seems to me on a different matter, not the one that Mosler proposes in regards to real terms. And not that fake neoclassical “real terms” crap, Mosler’s idea is about the real stuff itself.

      I’d greatly appreciate your help in understanding from where your coming from. Thanks!

    • @Michael de Sousa Cruz Micheal, I wouldn't write a 2000 word blog because you posted something online, and if I did I would devote the entire blog topic on you!

      When Bill Michell says "For an economy as a whole, imports represent a real benefit while exports are a real cost."

      I did not want to pick at any specific MMT academic in the blog for the simple reason I support most of the MMT cause. But ok, Bill is saying you get something real in exchange for money, sure, big deal any economic school can point that out, so what's the point? Well Bill goes on to give one.

      He says "If a nation with its own currency slides into oblivion by closing its manufacturing sector, cutting career public sector jobs and relying on low-paid and precarious service sector jobs for employment creation, then that has nothing much to do with enjoying a positive real terms of trade (that is, running external deficits)."

      No Bill… It has everything to do with running external trade deficits. A domestic nation couldn't shut down it's fixed capital capacity, without trade with other nations, replace its industrial sector base with a service sector. What Bill is trying to do here is say government intervention could support the domestic industrial firms while at the same time importing cheap goods.

      Ok lets run that through very basic first principal logic, say a firm is offered a government grant to open up shop and compete with foreign goods that will always be cheaper so as to simple operate at a constant loss? Why would they do that?

      Why is is a real benefit to import real cheap goods while now earning a "real" lower wage? It's not, so why say imports are a real material benefit? They are not… American's in specific and in aggregate are not working medium paying factory jobs anymore, they work at Walmart with a lower real wage.

      I'm not saying imports are bad or exports are bad, in fact the composition of both are dependent on the real needs of a nation.

      MMT really lacks in the theory of production, (shots fired lol) maybe at best it should defer to Post Keynesians on that specific matter. So in writings coming from the camp, when a short fall of knowledge arises, in areas like this, things are concocted for the sake of just saying something without adding any value to economic landscape. Everyone already knows you get a real product when you import something. That does does not equal a real aggregate benefit, it equals a rather one sided view of things.

      Bill goes on to write this:
      "Exports mean that we have to give something real to foreigners that we could use ourselves – that is obviously an opportunity cost. Imports represent foreigners giving us something real that they could use themselves but which we benefit from having. The opportunity cost is all theirs!"

      The second someone narrows their theory down to "opportunity cost" is the very second they subscribe to a Neoclassical textbook. The world is not guns and butter. Bill know this, he is a smart guy, the question then comes to me, why he would write this? Maybe he should read up on some production functions? Maybe he truly believes imports don't directly effect domestic production? Maybe he has gotten so old he does not care anymore. I have now clue. That said the MMT narrative around the topic is both uninformative, and lacking in causal understanding of real domestic economic production dynamics.

      Micheal, I like the works of MMT, but one only has to step back and look at America, and see people are not happier with foreign imports, so is that not describing the situation in real terms?

  6. Two reasonable men talking sense IMHO

  7. Neoclassical & Post Keynesian Economics

    Any of these agrees with higher risk weighted bank capital/equity requirements against loans to those already perceived less creditworthy than against the assets already perceived or decreed more creditworthy?

    https://subprimeregulations.blogspot.com/2021/04/bank-regulators-please-wake-up-being.html

  8. GhostOnTheHalfShell

    As a matter of comment on the generated questions, let's not use AI? How about a couple questions each from each contestant?

    • @GhostOnTheHalfShell Would had Dan and Mike chime in more as well, the 24 minutes it took for John to plug in an ethernet cable in his computer kind of messed up those opportunities.

    • GhostOnTheHalfShell

      @Ty KeynesI'd have like to have seen assumptions challenged a bit more. Hitchens's razor should have been called out. Assertions made without proof, can be dismissed without proof.

    • @GhostOnTheHalfShell It's called Steve Keen and Friends, not Steve Keen and ambush. Steve seemed to address most of John's…. well, we'll say economics. People will not come on the show if all they see is hot jobs. So I have to balance a number of different forces.

    • GhostOnTheHalfShell

      @Ty Keynes That was the motivation to suggest each side provide questions of the other.

      *ps awe man, I was just ordering a camo outfit. 😮‍💨 my hopes dashed.

    • @GhostOnTheHalfShell lol

  9. Isn't income inequality simply the rate-of-change of wealth inequality? I don't understand how one could be so irrelevant when the other is the most important thing.

    • I found that interesting to, as wealth (stock unit=$) is derived from all past and present income (flow unit=$/time). They are one in the same. The issue that neoclassical models do not handle time well, so in turn they don't really handle or understand flows well. I so wanted to interject during points of the livestream, but I wanted it to be a fair and kind environment for John.

    • @Ty Keynes Thanks, you did a great job. (I'm a controls engineer and big fan of the channel).

      One of the impacts of wealth inequality was only barely missed by John when he mentioned that "anyone who understood" the impact of ZIRP would have been able to make a fortune, because of how it predictably inflated asset prices. That's almost true, but you needed to have wealth at the time in order to profit from it; someone very poor wouldn't have the money available to invest in those assets, and even if they used leverage, their credit rating would have been too low to get a good-enough interest rate to profit. To make money from the asset valuation growth, you had to both understand ZIRP, and be decently wealthy.

      Handling time in a model seems pretty important for understanding debt and borrowing, because there's clearly a time-dependence there: the system will be in different states before the loan is made, while the money is borrowed, and then after it's paid back.

  10. Neoclassical -Out of touch ideologically obsessed and blind.

  11. A great dialogue. Thank you everyone. I learnt something today that I didn’t understand.

  12. The Treasury View is still alive and well in the UK, apparently.

  13. 1:11:54 John says growth is essential because ' more is created with the same resources…by innovators, entrepreneurs etc'- This has never been true anywhere at any time. How could it be? But this one of the lies neo classical economists tell themselves and us. This is one the primary reasons why the climate is collapsing but its thrown out here like some kind of law or fact and worryingly one of the reasons why Im starting to believe meaningful climate action is impossible while these people are anywhere near the levers of power, whether thats government or business.
    This a lie and a very dangerous one and its stuff like this that has driven this distrust of economists.
    I mean, how can anyone take you seriously when you make such an idiotic and easily debunkable lie the foundation of your beliefs (and they are beliefs because the evidence proves the opposite is true.,

    • Neoclassical economics still believes that the Earth is flat and covered by a crystal dome, and let's not forget to mention the magical invisible hand of the market.

  14. 14:15 skip to after here to not waste time on listening to technical trouble…

  15. Political Economy 101

    My question for John is what about Neoliberal policy intervention that tries to make the market work like the free market theory? Such as market design, deregulation, reregulation, removing barriers and rigidities etc, thats gov intervention. Arguably what has cause most of the recent crisis and inequality.

  16. 1:42:22 to 1:43:30 is the only truly interesting part of this debate. Also 1:50:30 to 1:51:33 The last 10 minutes were fairly interesting as well.

  17. im sure the people behind the 'free market" dont believe it themselves im sure the banking aristocracy couldn't care less …we are subject to natural LAW like any other organism and im not aware of "free" anything their …truly" freedom" is living like the Amish or a tribe in Africa and most people in our culture wouldn't last 5 minutes …theirs the pig theirs the knife theirs ya dinner lol…be back to the mcedonalds hatch in a heart beat

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