NIESR Macroeconomics of Sustainability Presentation
Steve Keen
December 5, 2019
Steve Keen's Debt Watch
The “Rebuilding Macroeconomics” project established by the UK’s Economic and Social Research Council (ESRC) has funded me to work with Tim Garrett and Matheus Grasselli to derive models of production that are consistent with the Laws of Thermodynamics. This seminar brought together the projects on the macroeconomics of sustainability, and it was my first opportunity to present what Tim, Matheus and I have achieved thus far.
This focuses mainly on my approach, since Tim’s is something I appreciate but lack the (thermodynamics) mathematics to present adequately.
What we have done is introduce energy into both Neoclassical (Cobb Douglas and CES) and Post Keynesian (Leontief) models of production, and see what the consequences of this are. They include:
* Explaining the “Solow Residual”. It is not “Total Factor Productivity”, but the contribution to production from the energy throughput of the “representative machine”. This has gone from ten tons of fuel per day in the time of Stephenson’s “Rocket” steam train, to 10 tonnes per second in the time of Elon Musk’s Falcon 9 rocket.
* Showing that the “capital: output ratio” in Post Keynesian economics is actually the efficiency with which machinery converts energy into useful work.
This talk includes a fair bit of back-and-forth with the audience, who are the convenors and researchers being funded by the sustainability hub. |
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2019-12-05
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