not a triple crisis IMO

update 20th Sept: For the full dialogue b/w me and steve see comments 13, 18, 21, 22, 25, 26, 28, 30, 32, 55, 56 at Can capitalism save the planet?

I left a comment on Steve Keen's blog in response to his recent talk at the Can Capitalism Save the Planet? forum. I only watched the first 9 minute video on his blog (link). I didn't like his triple crisis scenario that economic crisis, peak oil and global warming will combine to create a disaster by mid Century. This is a departure from Steve who up to now has focused on debt deflation and the instability of capitalism developing the ideas first advanced by Hyman Minsky. In response to another complaint in the thread Steve linked to a pdf (A comparison of Limits of Growth with 30 years of reality) by Graham Turner which argues that the Club of Rome Limits to Growth scenarios are being validated.

My comment is #13:

I had a quick look at the Graham Turner paper you linked to. I don’t believe that a computer model at this stage of their development could accurately predict a catastrophe by mid century.

You promoted a triple crisis view in your talk – economic crisis, peak oil and global warming. Each of those issues has its own complexities and specifics. But the computer modelling aspects of the global warming thesis is not its strong point. I read James Hansen’s book and he does not base his dire predictions on computer modelling -he specifically says they are not reliable enough yet – but relies much more on paleo-climate evidence. In light of this how anyone could say that a computer model will predict trends 100 years into the future is beyond me.

You create a bit of dilemma for those who want to discuss this further. Your blog is about debt deflation but in your talk the triple crisis theme was strong. I think the evidence for capitalisms instability is overwhelming but the other issues require extensive discussion in their own right and in how they connect to the economic crisis.

In your response to johnyh I think the issue you are missing is that there is not a linear relationship b/w the science of peak oil and global warming to the policy actions that might be taken in response to that science. The issue is not so much that the science is wrong (although I don’t think there is a consensus on these issues) but that alarmism at the policy level may not be warranted in response. In that respect I would argue that those issues are quite different from the economic crisis

update 18th September: Steve has replied to me as follows, comment #18:

I agree my talk does create a bit of a dilemma for this blog, so I’ll relax my resistance to discussing global warming here for a short while; but I’ll start by putting my position in perspective, in particular about the role of computer modelling here.

We need a bit of a perspective on what that particular computer model–World 3 and its developments that generated the results in Limits to Growth–were actually doing, and what I have come to agree is a fundamental blindspot in the human psyche (I think Sirius here first put this to me), our inability to grasp the impact of exponential trends.

If there is a fixed resource–say land area–and our use of it is growing exponentially and doubles every ten years, and after 100,000 years we have grown to the point where we are consuming 50% of the land, then in 10 years time it will run out.

If we somehow manage to increase the amount of this resource, or say improve our efficiency of use of it by a factor of four, that will buy us another 20 years. A thousand-fold increase in efficiency will buy us an extra century.

So the model was not as such trying to “predict trends 100 years into the future” as to say that IF exponential trends of usage continue THEN given the feedback between exponential trends and fixed inputs, a crisis will occur sooner rather than later. The models also acknowledged that we could perhaps improve our efficiency of usage of fixed resources (though not as a “magic bullet” but as another exponential trend over time), and that if we did and we reduced other factors as well exponentially (pollution) while reduced some pressures to sub-exponential growth (population), we could probably sustain an indefinitely improving standard of living.

That was written in 1972, and almost 40 years later it is manifestly obvious that we haven’t done any of that (save a continuing tapering in population growth which is still nonetheless growing); if anything we’ve increased the intensity of our exponential loads on the planet.

So the models were not so much a prediction as a warning that we had better come to understand the dilemma of exponential growth on a finite planet sooner rather than later. I don’t think there is much doubt that we have failed to do that, and the “climate sceptic” position, though it’s not consciously trying to refute that proposition, is in effect delaying us coming to terms with it.

My reply back to Steve #21:

Thanks for relaxing the guidelines.

I agree that there are always limits to exponential growth and that not everyone understands exponential growth. However, peak oil is not a problem given that we have long term energy alternatives, such as nuclear. The real problem here is the lack of R&D being devoted to energy alternatives. Nuclear would also solve the problem of excessive CO2 entering the atmosphere.

The real problems here are economic (nuclear is still more expensive than fossil fuels) not environmental.

I tend to agree with John McCarthy (progress and its sustainability) that in the case of energy supply the limit is roughly a billion years since nuclear can supply our energy needs for at least that time and in the case of population it “will eventually be limited by a sense of crowdedness rather than by material considerations”

Bernanke's admission and Keen's critique

Bernanke has admitted that the "recovery" has stalled:

In sum, the pace of recovery in output and employment has slowed somewhat in recent months, in part because of slower-than-expected growth in consumer spending, as well as continued weakness in residential and nonresidential construction
- The Economic Outlook and Monetary Policy, August 27

Steve Keen's analysis (What Bernanke doesn’t understand about deflation) is that although Bernanke has read Irving Fisher (who was burned by the Great Depression but then underwent an intellectual transformation) he didn't understand him fully:

You would think Bernanke, as the alleged expert on the Great Depression—after all, that’s one of the main reasons he got the job as Chairman of the Federal Reserve—had read Fisher’s papers. And you’d be right. But the problem is that he didn’t understand them—and here we come back to the belief problem. The Great Depression forced Fisher—who was also a Neoclassical economist—to realize that the belief that the economy was always in equilibrium was false. When Bernanke read Fisher, he completely failed to grasp this point.

You can read Irving Fisher's analysis of the Great Depression here (pdf, 21pp):
The Debt Deflation Theory of Great Depressions (1933) by Irving Fisher

steve keen: asking why

Steve Keen has successfully completed his Australian house pricing awareness walk from Parliament House, Canberra, to the peak of Mt. Kosciuszko. There are now posts and photos from those who walked with him going up on the walk site. David Lawson who trained in neo classical economics, then worked in Real Estate and has now abandoned those things. Nina Shedrin a former Russian rocket scientist who is worried about her daughter's generation becoming trapped in a house mortage. More to come.

Steve Keen is doing an amazing job of alerting people to problems in the economic system and encouraging them to dig deeper. His personality is described by David Lawson:

After spending time with Steve Keen on his journey from Canberra to the top of Mt Kosciousko, I have come to know him as a man who always asks the question ‘why?’ He thrives on the challenges that life has to offer, both physically and mentally. Clearly an extremely intelligent man, he also has heart of gold, strong morals and a great sense of humour. There is no wonder why he pursues the work he does

Steve Keen walk begins today

Steve Keen's regular blog: Debt deflation
Debunking Economics website
Keen Walk to Kosciuszko

Steve Keen begins his protest walk against Australian house prices, today, starting from Parliament House, Canberra. This arose because he lost a bet in predicting that Australian house prices would fall and they haven't, so far. Read the links above for more detail.

I admire the way in which Steve Keen has turned a bad bet into a good thing, a protest to raise awareness about the state of the Australian economy. He has generated a lot of interest and support with many people joining him on his walk.

I'm interested in Steve's ideas about Minsky, Fisher, Sraffa, Marx etc and have been reading his extensive online publications in trying to deepen my understanding of political economy arising out of the current and ongoing economic crisis.

Steve Keen is the sort of public intellectual we need. He puts his ideas up for public scrutiny and engages in public debate about them through his blog. I have read enough to understand that econometrics which dominates my local university curriculum (and apparently many others) is a narrow subset of what economic study ought to be. Clearly there needs to be a revolution in university economic departments to bring in the theories of thinkers such as Minsky or Marx who predicted that capitalism would always be an unstable system.

steve keen's 2010 prediction for the economy

Steve Keen's concludes his 2009 retrospective with a prediction for 2010:

My expectation is that, some time during 2010, the disconnect between the financial markets’ euphoric expectations and the hard reality of a deleveraging private sector will bring the optimism of both “born again Keynesian” neoclassical economists and the markets to an end. Growth will not resume once the stimulus packages are removed, since deleveraging will then assert itself in the absence of government stimulus. Falling debt will subtract from growth, as it once added to it, and unemployment will start to rise again.

I expect that governments will react to this as they did in 2009–by turning on the stimulus packages once more, while continuing to ignore the private debt levels that caused the crisis in the first place. They will “turn Japanese”, to coin a phrase–since this is the same thing the Japanese government has been doing for two decades since its Bubble Economy burst at the end of 1989.

This process may repeat itself two or three times before serious attention is finally turned to the Ponzi-dominated financial sector’s parasitic impact on the real economy. But for now, the parasites are clearly still in control of the host

Unique visitors to Keen's blog have increased from 15,000 to 50,000 per month during 2009. I'm one of the new ones.

Steve Keen is a prolific Australian economics writer and publishes most of his material, including his university course, on line, see Debunking Economics. He supports a Post Keynesian or Minsky analysis of the economy, that capitalism is a fragile system in its internal dynamic (Financial Instability). One aspect of Keen's work is that he connects Post Keynesian analysis to Marxist dialectical philosophy, arguing continuity between the ideas of Marx and the ideas of Minsky (The Minsky Thesis: Keynesian or Marxian?).

I have bought and am reading the mobipocket eBook version of Keen's book and have recently ordered a couple of books by Hyman Minsky (1919-1996), that have been recently republished in the light of the crisis:

• John Maynard Keynes: Hyman Minsky's influential reinterpretation of the Keynesian revolution
• Stabilizing an Unstable Economy