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-   -   Replace All Economists with Engineers - Steve Keen (https://forums.azbilliards.com/showthread.php?t=169348)

jsp 12-28-2009 06:58 AM

Replace All Economists with Engineers - Steve Keen
 
Part 1: http://www.youtube.com/watch?v=wMw1cEZ1UAM

Part 2: http://www.youtube.com/watch?v=D8InLpfrvAs

Part 3: http://www.youtube.com/watch?v=TmXej4oGt88

Dr. Steve Keen is an Australian (not "Austrian") economist and who is one of the very that actually predicted the Global Financial Crisis. He is unique in the sense that he actually trashes his own profession and almost everyone in it, saying that mainstream economics ("neoclassical economics" as he labels it) is complete bunk and the economists who perpetuate it are dangerous. I've been following Steve Keen's debt deflation blog for a while, and his theories and ideas are definitely not mainstream.

His above interview conducted by Engineer.net shows his view that economics should be approached more from an engineering perspective. I also find it interesting what he says about the FIRE (Finance, Insurance, Real Estate) economy and how it has dominated the world economy the past few decades, but that the FIRE economy generates no real wealth. Instead, real wealth is created from engineering, industry, manufacturing, etc, and that we should dump the vast majority of the people in the FIRE sector in the trash.

LAMas 12-28-2009 08:35 AM

A great find.:smile:

In engineering, we say, "Those that can engineer, do and those that can't have to manage".

Engineers are motivated by tangible creation and successful invention and are judged by accomplishments,

What have the managers of the world given to society and economics -flux?:(

jsp 12-28-2009 09:28 AM

What Keen has stressed is that the economy is a very dynamic system, not a static one. He criticizes the economists who view the economy as almost always in equilibrium, when it most certainly isn't. Therefore, differential equations (or system dynamics) should be the tool used to model such a dynamic system, and he ridicules the economists who have such a sparse knowledge of the mathematical tools that nearly all engineers have learned/used at some time or another.

Here's a little snippet from his blog that highlight what he feels as the "three neoclassical myths" of mainstream economics...

Quote:

...Just three key neoclassical myths suffice to explain why they do not understand the dynamics of our credit driven society. They believe that:

(1) The nominal money supply doesn’t affect real economic output;

(2) The private sector is rational while the government sector is not; and

(3) That they can model the economy as if it is in equilibrium.

The first myth means that they ignore money and debt in their mathematical models: most neoclassical models are in “real” terms and completely omit both money and debt. So since debt doesn’t even turn up in their models, they are unaware of its influence (even though their statistical units do a very good job of recording the actual level of debt).

The second myth means that they are quite willing to obsess about government debt, but they implicitly believe that private debt has been incurred for sensible reasons so that it can’t cause any problems.

The third myth means that they ignore evidence that indicates that the economy is very far removed from equilibrium, and they misunderstand the effect of crucial variables in the disequilibrium environment in which we actually live.
http://www.debtdeflation.com/blogs/2...lling-the-gfc/

cuesblues 12-28-2009 09:39 AM

Engineers
 
I think that Steven Keen was just looking for a platform and found Engineer.net who decided to interview him.
I have worked closely with many engineering firms since the 70's and it wasn't until the 90's that I realsized they were even trying to be a profit center.
The idea of putting our ecomonic future in the hands of engineers even made Eric Travenier P.E. who I am sure is a fine engineer and the interviewer on Engineer.net cringe a little.
Steve Keen continually refers to the engineering community after WWII when there were many large engineering firms run by intelligent common sense engineers, focused on building our post war infrastucture.
Take a look at these firms today, they are not doing well, most are either out of business, bought out, merged, and are just like any large corporation where the stockholders are more important that the clients and employees.
Bechtel is one of the only firms still in tact from that era.

Like I tell engineers everyday, "it's not going to work".

LAMas 12-28-2009 10:00 AM

Engineering firms have been infiltrated by business managers

chefjeff 12-30-2009 08:15 AM

Jsp, one thing that had better be integrated into any economic evaluation is individual liberty.

This simple concept holds the key to maintaining a working economy. Not a controlled economy, a working economy.

Trying to control it, even by specific genuises, fails as the individual acts for himself always. No one can know these actions beforehand or their aggregate results.

That's the trump card of the Austrians, btw, integrating individual liberty.

Jeff Livingston

avmaster 12-30-2009 08:41 AM

Quote:

Originally Posted by jsp (Post 2194357)
Part 1: http://www.youtube.com/watch?v=wMw1cEZ1UAM

Part 2: http://www.youtube.com/watch?v=D8InLpfrvAs

Part 3: http://www.youtube.com/watch?v=TmXej4oGt88

Dr. Steve Keen is an Australian (not "Austrian") economist and who is one of the very that actually predicted the Global Financial Crisis. He is unique in the sense that he actually trashes his own profession and almost everyone in it, saying that mainstream economics ("neoclassical economics" as he labels it) is complete bunk and the economists who perpetuate it are dangerous. I've been following Steve Keen's debt deflation blog for a while, and his theories and ideas are definitely not mainstream.

His above interview conducted by Engineer.net shows his view that economics should be approached more from an engineering perspective. I also find it interesting what he says about the FIRE (Finance, Insurance, Real Estate) economy and how it has dominated the world economy the past few decades, but that the FIRE economy generates no real wealth. Instead, real wealth is created from engineering, industry, manufacturing, etc, and that we should dump the vast majority of the people in the FIRE sector in the trash.

I couldn't agree more... back in the 80's these corporations began using the "bean counters" as the heads of business, VP's in charge of Nuclear Power Generation, etc., this has been an unmitigated disaster...........

berlowmj 01-01-2010 12:06 AM

Marxist political economy 3 volumes
 
Quote:

Originally Posted by jsp (Post 2194575)
What Keen has stressed is that the economy is a very dynamic system, not a static one. He criticizes the economists who view the economy as almost always in equilibrium, when it most certainly isn't. Therefore, differential equations (or system dynamics) should be the tool used to model such a dynamic system, and he ridicules the economists who have such a sparse knowledge of the mathematical tools that nearly all engineers have learned/used at some time or another.

Here's a little snippet from his blog that highlight what he feels as the "three neoclassical myths" of mainstream economics...


http://www.debtdeflation.com/blogs/2...lling-the-gfc/

You make a good case for Marx's analysis of capitalism, because his dialectical interpretation clearly distinguishes him from economists with a "static" interpretation.

DaveK 01-01-2010 12:42 PM

Before I agree, how much do these economists make ?

Dave

PS, a funny story : I took Econ 101 at summer school, in a class full of Arts & Science types. One day the intructor hands out a sheet, a matrix with some fields filled in and the goal is to figure out the rest. He says to the class "if anyone completes this in 10 minutes or less and gets them all right I'll buy them a case of beer" ..... MOTIVATION ! :thumbup: I handed in my sheet first, about 7 or 8 minutes later. The instructor, a grad student, goes through my paper and starts frowning. After a few minutes he looked at me from his desk (everyone else was still working) and he says "you're an engineer, aren't you". I had to nod yes and take the mans fine compliment (he bought a round for my table a few weeks later when I ran into him at the pub).

jsp 01-02-2010 07:16 AM

Quote:

Originally Posted by chefjeff (Post 2197894)
Jsp, one thing that had better be integrated into any economic evaluation is individual liberty.

This simple concept holds the key to maintaining a working economy. Not a controlled economy, a working economy.

Trying to control it, even by specific genuises, fails as the individual acts for himself always. No one can know these actions beforehand or their aggregate results.

That's the trump card of the Austrians, btw, integrating individual liberty.

Jeff Livingston

I found this little blurb in one of Keen's published economics papers entitled "The coming depression and the end of economic delusion" (here, p.135).
Therefore, although I differ with the Austrian school of economics in both my underlying analysis of capitalism and my preferred solutions to this crisis, I concur with them that government intervention has made this crisis far worse than it would have otherwise been. Where I differ from them is that, while they would see such a system as a nirvana, I would still expect a Minskian financial cycle that culminated every 20–30 years in a financial crisis like those that peppered the nineteenth century. They just wouldn’t be as big and as systemically threatening as the one that misguided, neoclassically inspired government regulation has given us this time.
For now, I agree with Keen's assessment. Though, if we were to reach "nirvana" according to some Austrians such as Rothbard who believe all fractional reserve banking should be abolished (not all Austrians believe this), then I feel this would solve the boom-bust cycles. However, the question then becomes would we want to live in such an economy? Karl Denninger has argued how fractional reserve banking comes with both benefits and drawbacks, and that he believes the pros more than outweighs the cons. The main disadvantage in an economy allowing FRB is that recessions/deflation are absolutely mandatory in order for the economy to purge all the malinvested debt accumulated over time. If government intervention prevents them from happening (as the case with this country the past several decades), then we'll have a complete disaster like what we're just beginning to experience.

chefjeff 01-02-2010 04:12 PM

Quote:

Originally Posted by jsp (Post 2202465)
I found this little blurb in one of Keen's published economics papers entitled "The coming depression and the end of economic delusion" (here, p.135).
Therefore, although I differ with the Austrian school of economics in both my underlying analysis of capitalism and my preferred solutions to this crisis, I concur with them that government intervention has made this crisis far worse than it would have otherwise been. Where I differ from them is that, while they would see such a system as a nirvana, I would still expect a Minskian financial cycle that culminated every 20–30 years in a financial crisis like those that peppered the nineteenth century. They just wouldn’t be as big and as systemically threatening as the one that misguided, neoclassically inspired government regulation has given us this time.
For now, I agree with Keen's assessment. Though, if we were to reach "nirvana" according to some Austrians such as Rothbard who believe all fractional reserve banking should be abolished (not all Austrians believe this), then I feel this would solve the boom-bust cycles. However, the question then becomes would we want to live in such an economy? Karl Denninger has argued how fractional reserve banking comes with both benefits and drawbacks, and that he believes the pros more than outweighs the cons. The main disadvantage in an economy allowing FRB is that recessions/deflation are absolutely mandatory in order for the economy to purge all the malinvested debt accumulated over time. If government intervention prevents them from happening (as the case with this country the past several decades), then we'll have a complete disaster like what we're just beginning to experience.

Great questions and my answer is the same as for other things: Let the market, not the govt, for money and banking decide. And the ONLY way to have that happen is with maximized liberty which means you-know-what and on that, I think we mostly agree.

How are you protecting yourself against deflation, if you don't mind my asking?

Jeff Livingston

jsp 01-03-2010 07:58 AM

Quote:

Originally Posted by chefjeff (Post 2203050)
How are you protecting yourself against deflation, if you don't mind my asking?

Cash is king during deflation. I sold all my stock assets and I'm sitting in cash. I'd like to have at least 2-3 years of living expenses in cash in the event I lose my job.

Though, I haven't sold an ounce of the silver bullion I bought last year. I'm keeping it as a hedge if the deflationists could be all wrong and hyperinflation is around the corner. I doubt it, but it's better to be safe than sorry.

The thing people SHOULD NOT be in is real estate. Sell anything that isn't the roof over your head NOW!

jsp 01-03-2010 08:04 AM

Quote:

Originally Posted by berlowmj (Post 2200850)
You make a good case for Marx's analysis of capitalism, because his dialectical interpretation clearly distinguishes him from economists with a "static" interpretation.

Keen does admit that Marx is one of his "foundations" for his economic theory (along with Minksy, Goodwin, Schumpeter, Sraffa, and Keynes). Of course, that doesn't automatically make him a "commie" as many of our right brethren would reflexively believe. One can acknowledge Marx's analysis of capitalism, as an economist, without buying into his "cures" for it.

jsp 11-15-2010 12:14 PM

I just want to bump up this thread on Steve Keen.

If you have about 1.5 hours to kill and you want to be educated by a REAL economist on how our credit-based (or debt-based) economy REALLY works, sit back and watch this video here...

http://www.debtdeflation.com/blogs/2...t-money-fails/

Tying this back to the OP, any engineer would appreciate the way Steve Keen goes about modeling our capitalistic system. No room for ideology when it comes to engineers mathematically modeling a system.

Slide Rule 11-15-2010 02:40 PM

Agreed
 
Quote:

Originally Posted by jsp (Post 2709980)
I just want to bump up this thread on Steve Keen.

If you have about 1.5 hours to kill and you want to be educated by a REAL economist on how our credit-based (or debt-based) economy REALLY works, sit back and watch this video here...

http://www.debtdeflation.com/blogs/2...t-money-fails/

Tying this back to the OP, any engineer would appreciate the way Steve Keen goes about modeling our capitalistic system. No room for ideology when it comes to engineers mathematically modeling a system.

Thanks for the bump. When you started the thread back in January, I had not heard of him. I had an interesting conversation with a younger brother who was aware of Keen's work. I agree with Steve Keen that engineers look at problems, data and other information with a trained eye.

As for the comments about Business Degree people running companies, I had a similar experience with my company. Very basic, do the right stuff was lost on him and many other business types. Engineers should have a dominate role in management, say 20 to 30 percent, but not to the exclusion of other needed skills.

I checked the links in thread #1. They still work and are quite interesting for someone contemplating some time.

I will no doubt expend 90 minutes to watch this. Comments in 3 or 4 days, as I probably will not do it in one sitting. If you don't get a comment, I would appreciate you giving me a prod.

Thanks for the bump and the later link.


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