1
00:00:10,800 --> 00:00:14,200
Speaker 1: Hello, and welcome to another episode of the All Thoughts Podcast.

2
00:00:14,280 --> 00:00:18,720
Speaker 1: I'm Tracy Allaway and I'm Joe. Isn't all so Joe.

3
00:00:18,840 --> 00:00:22,760
Speaker 1: One of the themes that we've had in our recent

4
00:00:22,800 --> 00:00:29,520
Speaker 1: episodes is this idea of the pandemic changing certain perceptions

5
00:00:29,640 --> 00:00:33,159
Speaker 1: of economics or certain perceptions of how the world and

6
00:00:33,200 --> 00:00:36,720
Speaker 1: the economy actually works. Yeah, I mean, I think that's

7
00:00:36,720 --> 00:00:39,640
Speaker 1: exactly right. Like, you know, we we just got in

8
00:00:39,680 --> 00:00:44,960
Speaker 1: the US, for example, personal income and spending data, and

9
00:00:45,080 --> 00:00:48,840
Speaker 1: you know, the story is that income replacement, household income

10
00:00:48,880 --> 00:00:53,360
Speaker 1: replacement was actually extremely effective and successful in the US,

11
00:00:53,880 --> 00:00:57,040
Speaker 1: and that's not what you expect in a recession. And

12
00:00:57,040 --> 00:00:59,360
Speaker 1: it's sort of I think like people are sort of

13
00:00:59,400 --> 00:01:01,560
Speaker 1: opening their mind and to like, how much of what

14
00:01:01,600 --> 00:01:05,400
Speaker 1: we take for granted is just policy choices. Yeah? Absolutely so.

15
00:01:05,720 --> 00:01:07,679
Speaker 1: I mean one of the big things that happened is

16
00:01:07,720 --> 00:01:11,240
Speaker 1: we had the COVID shock in we finally had this

17
00:01:11,480 --> 00:01:16,759
Speaker 1: exogenous shock that economics is kind of obsessed with, and

18
00:01:17,319 --> 00:01:20,679
Speaker 1: things didn't necessarily pan out exactly the way that a

19
00:01:20,720 --> 00:01:24,800
Speaker 1: lot of economists would have expected based on traditional principles

20
00:01:24,880 --> 00:01:28,040
Speaker 1: of how things actually work. So now you know, not

21
00:01:28,080 --> 00:01:31,440
Speaker 1: only have we had an unusual crisis in many respects,

22
00:01:31,440 --> 00:01:34,640
Speaker 1: but now people are talking about an unusual recovery as well,

23
00:01:34,760 --> 00:01:37,640
Speaker 1: and whether or not the future economy is going to

24
00:01:37,680 --> 00:01:41,240
Speaker 1: look slightly different. So with that in mind, um, and

25
00:01:41,280 --> 00:01:44,760
Speaker 1: I guess without further ado, we have the perfect person

26
00:01:45,360 --> 00:01:50,320
Speaker 1: to talk about all of this, an iconic clastic economist,

27
00:01:50,440 --> 00:01:52,560
Speaker 1: if ever there was one, and someone who thinks slightly

28
00:01:52,600 --> 00:01:55,720
Speaker 1: differently to a lot of other economists out there. We're

29
00:01:55,720 --> 00:01:58,920
Speaker 1: going to be speaking with Professor Steve Keane. He's a

30
00:01:59,120 --> 00:02:03,320
Speaker 1: Distinguished Research Fellow at the University College London and also

31
00:02:03,760 --> 00:02:08,320
Speaker 1: the world's first crowd funded economist. He has a Patreon

32
00:02:08,400 --> 00:02:10,600
Speaker 1: account where he posts a lot of materials. You can

33
00:02:10,680 --> 00:02:14,160
Speaker 1: check that out. Uh, Professor Keene, thanks so much for

34
00:02:14,200 --> 00:02:18,320
Speaker 1: coming on. Thank you, thank you for the invitation. So

35
00:02:18,720 --> 00:02:21,360
Speaker 1: I guess, um, I'm trying to think where to start,

36
00:02:21,440 --> 00:02:24,680
Speaker 1: because of course your research is quite wide ranging, and

37
00:02:25,000 --> 00:02:28,000
Speaker 1: if we're going to talk about the entire state of

38
00:02:28,080 --> 00:02:31,799
Speaker 1: the current economy, that's a pretty big topic. But maybe

39
00:02:31,840 --> 00:02:36,120
Speaker 1: just to begin with talk to us about what surprised

40
00:02:36,160 --> 00:02:39,440
Speaker 1: you over the past year or what stood out to

41
00:02:39,560 --> 00:02:45,200
Speaker 1: you in terms of economic developments. In some sense, I

42
00:02:45,280 --> 00:02:48,960
Speaker 1: wasn't surprised because when the crosses first, I get on

43
00:02:49,000 --> 00:02:51,680
Speaker 1: my Patreon blog that we should have, you know, the

44
00:02:51,680 --> 00:02:53,679
Speaker 1: government should pump as much money as they canadate the

45
00:02:53,720 --> 00:02:57,440
Speaker 1: economy to make it possible for people to not to

46
00:02:57,480 --> 00:02:59,400
Speaker 1: have to go to work and still make their bills

47
00:02:59,400 --> 00:03:02,519
Speaker 1: and not go andankrupt through the whole process. And I suppose,

48
00:03:02,560 --> 00:03:05,120
Speaker 1: I suppose in one sense that it's not amazing that

49
00:03:05,160 --> 00:03:07,760
Speaker 1: when a crisis strikes like this, the economic textbook gets

50
00:03:07,760 --> 00:03:10,600
Speaker 1: thrown out the window where it desperately deserves to be

51
00:03:10,680 --> 00:03:13,480
Speaker 1: thrown by the way, um and the people are just

52
00:03:13,639 --> 00:03:16,880
Speaker 1: you know, as I know from what Hank Parlson had

53
00:03:16,880 --> 00:03:19,359
Speaker 1: to say back when the financial crisis, he wasn't going

54
00:03:19,400 --> 00:03:22,680
Speaker 1: to let capitalism collapse on his watch. So they throw

55
00:03:22,720 --> 00:03:24,840
Speaker 1: the government money book at the system. And of course

56
00:03:24,880 --> 00:03:27,480
Speaker 1: that happened back in the Great in the Great Recession

57
00:03:27,520 --> 00:03:30,960
Speaker 1: as well. But we're very rapidly switched over to you

58
00:03:31,080 --> 00:03:33,400
Speaker 1: the focus back on balancing the government's books and all

59
00:03:33,400 --> 00:03:36,000
Speaker 1: this sort of stuff. This time around, the scale of

60
00:03:36,040 --> 00:03:38,240
Speaker 1: obviously done has been two or three times as big

61
00:03:38,520 --> 00:03:42,680
Speaker 1: as what happened with the trying to reduce the damage

62
00:03:42,720 --> 00:03:45,960
Speaker 1: from the global financial crisis and for Actually, a lot

63
00:03:46,000 --> 00:03:48,800
Speaker 1: of Americans ended up getting a pay rise out of

64
00:03:48,840 --> 00:03:50,640
Speaker 1: the fact they got six hundred bucks a week from

65
00:03:50,680 --> 00:03:53,520
Speaker 1: the government to meet their bills for a while. And

66
00:03:53,560 --> 00:03:55,760
Speaker 1: I think what actually has started to soak into people

67
00:03:55,880 --> 00:03:59,440
Speaker 1: is that, hey, maybe maybe the world of financial system

68
00:03:59,520 --> 00:04:01,680
Speaker 1: doesn't work the way the textbooks told us it works.

69
00:04:02,080 --> 00:04:04,600
Speaker 1: So I think that's the pleasing thing that I take

70
00:04:04,640 --> 00:04:07,840
Speaker 1: out of this, that there's more consciousness of that textbook

71
00:04:07,880 --> 00:04:10,760
Speaker 1: explanation as the Bank of England itself set in two

72
00:04:10,800 --> 00:04:15,640
Speaker 1: thousand and fourteen is simply wrong. M Do you think

73
00:04:16,320 --> 00:04:18,720
Speaker 1: this is a lesson that's actually been learned? Like, we

74
00:04:18,720 --> 00:04:21,400
Speaker 1: can all observe this, we can all look at household

75
00:04:21,440 --> 00:04:24,800
Speaker 1: incomes having held up despite the crisis, we can look

76
00:04:24,839 --> 00:04:27,960
Speaker 1: at the sort of very robust power of you know,

77
00:04:28,040 --> 00:04:30,359
Speaker 1: fiscal policy. But do you think this is a lesson

78
00:04:30,360 --> 00:04:32,320
Speaker 1: that will actually be learned or do you think it's

79
00:04:32,320 --> 00:04:34,839
Speaker 1: a lesson that will be dismissed? You know, Oh, that

80
00:04:34,960 --> 00:04:37,400
Speaker 1: was a weird crisis because there was this exogenous shock.

81
00:04:37,480 --> 00:04:39,840
Speaker 1: It was a health thing. We have to go back

82
00:04:39,880 --> 00:04:41,560
Speaker 1: next time in a downturn, we have to go back

83
00:04:41,600 --> 00:04:43,760
Speaker 1: to the old way. I'm already you seeing that happened

84
00:04:43,760 --> 00:04:46,920
Speaker 1: in the literature, particularly amongst the UK politicians of both

85
00:04:47,000 --> 00:04:50,640
Speaker 1: Labor and Tory stripes that both talking about the need

86
00:04:50,680 --> 00:04:52,719
Speaker 1: to balance the books and get you know, fix up

87
00:04:52,760 --> 00:04:55,960
Speaker 1: so our our future generations aren't paying for our blurreds

88
00:04:56,120 --> 00:04:59,919
Speaker 1: during COVID. But I think that the scale of the

89
00:05:00,160 --> 00:05:03,960
Speaker 1: was so big and the public impact so great that

90
00:05:04,640 --> 00:05:07,120
Speaker 1: it's going to take longer for that conventional message to

91
00:05:07,160 --> 00:05:09,279
Speaker 1: be accepted as it was in the past. And I

92
00:05:09,320 --> 00:05:10,680
Speaker 1: think in some ways they're not going to get a

93
00:05:10,760 --> 00:05:14,480
Speaker 1: chance to do that because as soon as was out

94
00:05:14,480 --> 00:05:17,520
Speaker 1: the door and pill sent thing, God, it's not anymore

95
00:05:18,320 --> 00:05:21,080
Speaker 1: said hold my beer, I'm going to set fire to Canada.

96
00:05:21,640 --> 00:05:24,839
Speaker 1: And what's happening right now is making I think, making

97
00:05:24,839 --> 00:05:26,560
Speaker 1: people think that a whole lot of things they took

98
00:05:26,560 --> 00:05:30,000
Speaker 1: for granted do not work the way that they have

99
00:05:30,120 --> 00:05:32,640
Speaker 1: been assured they do. And that includes how economists have

100
00:05:32,680 --> 00:05:36,480
Speaker 1: said that climate change is no big deal. So I

101
00:05:36,520 --> 00:05:38,680
Speaker 1: think COVID was a warm up saying that we have

102
00:05:38,760 --> 00:05:43,839
Speaker 1: to do something to drastically change our impact on the planet.

103
00:05:44,200 --> 00:05:46,920
Speaker 1: And what we did during COVID, so the government's got

104
00:05:46,960 --> 00:05:50,000
Speaker 1: the capacity to finance that, it creates the money when

105
00:05:50,080 --> 00:05:53,240
Speaker 1: it spends. And that's that's the lesson I hope that

106
00:05:53,279 --> 00:05:54,960
Speaker 1: we can get to because we're damn or going to

107
00:05:55,080 --> 00:05:57,200
Speaker 1: need that when we start working out how do we

108
00:05:57,200 --> 00:06:01,120
Speaker 1: address climate change. I only want to talk about climate

109
00:06:01,200 --> 00:06:04,440
Speaker 1: change in detail. But before we do that, can you

110
00:06:04,680 --> 00:06:09,119
Speaker 1: maybe elaborate a little bit on the public debt versus

111
00:06:09,160 --> 00:06:12,919
Speaker 1: private debt issues, so you make a massive distinction in

112
00:06:13,000 --> 00:06:16,880
Speaker 1: your research between public and private debt. So yeah, it's

113
00:06:16,920 --> 00:06:19,880
Speaker 1: it's It is ridiculously simple once you see from the

114
00:06:19,880 --> 00:06:22,600
Speaker 1: point of view an accountant, and of course most economists

115
00:06:23,080 --> 00:06:25,520
Speaker 1: don't do accounting, don't learn about money. I saw Paul

116
00:06:25,600 --> 00:06:28,160
Speaker 1: Krugman has a new master class program out where the

117
00:06:28,320 --> 00:06:31,440
Speaker 1: two crucial slides the economics is about people. It's not

118
00:06:31,480 --> 00:06:34,120
Speaker 1: about money. Well, that's totally wrong. It is about money

119
00:06:34,240 --> 00:06:36,599
Speaker 1: and how money affects people, and how people affect money.

120
00:06:36,960 --> 00:06:38,800
Speaker 1: So when you when you do look at money, you've

121
00:06:38,800 --> 00:06:41,359
Speaker 1: got to look in double entry bookkeeping terms, and you

122
00:06:41,400 --> 00:06:44,320
Speaker 1: see what happens when a bank creates a loan, Well,

123
00:06:44,360 --> 00:06:47,560
Speaker 1: it puts money in your deposit account, which is a

124
00:06:47,560 --> 00:06:50,440
Speaker 1: liability for itself, and it puts an identical amount of

125
00:06:50,440 --> 00:06:53,080
Speaker 1: money in its loan account. Saying you I was that money.

126
00:06:53,320 --> 00:06:56,680
Speaker 1: So it's assets rise and its liabilities rise, and that's

127
00:06:56,680 --> 00:06:59,960
Speaker 1: how credit money is created by banks, and a very

128
00:07:00,000 --> 00:07:02,599
Speaker 1: similar mechanism of flies for the government. When the government

129
00:07:02,640 --> 00:07:05,479
Speaker 1: spends more than it takes back in taxes, the spending

130
00:07:05,520 --> 00:07:08,479
Speaker 1: turns up in private bank accounts. That rise increases the

131
00:07:08,880 --> 00:07:13,200
Speaker 1: liability side of the banking system ledger, and the money

132
00:07:13,400 --> 00:07:17,160
Speaker 1: is is stored in the reserve accounts that the is

133
00:07:17,200 --> 00:07:19,760
Speaker 1: transmitted through the reserve accounts that the banks themselves have

134
00:07:20,080 --> 00:07:22,680
Speaker 1: at the central bank. Well, that means the reserves rise

135
00:07:23,480 --> 00:07:27,120
Speaker 1: when the government spends, it has a deficit, just like

136
00:07:27,280 --> 00:07:31,080
Speaker 1: the loans rise when the private banks create. When they

137
00:07:31,120 --> 00:07:35,080
Speaker 1: create loans, both of them create money, and in that

138
00:07:35,120 --> 00:07:38,120
Speaker 1: sense there is no limit on the amount they can

139
00:07:38,120 --> 00:07:41,280
Speaker 1: both create. The impacts they both have on the economy

140
00:07:41,520 --> 00:07:45,040
Speaker 1: depend upon what are the inflationary impacts? What are the

141
00:07:45,640 --> 00:07:48,000
Speaker 1: impacts of having to pay for that extra debt when

142
00:07:48,000 --> 00:07:50,520
Speaker 1: you buy it as an individual, And when an individual

143
00:07:50,600 --> 00:07:53,080
Speaker 1: borrows money, you can't go to the bank saying look,

144
00:07:53,080 --> 00:07:55,280
Speaker 1: I printed these notes out of my basement. You're you

145
00:07:55,320 --> 00:07:57,080
Speaker 1: mind if I use those to pay my interest bill.

146
00:07:57,440 --> 00:08:01,040
Speaker 1: But in the case that the government the treasury, which

147
00:08:01,080 --> 00:08:05,040
Speaker 1: creates the money by the deficit spending, is the effective

148
00:08:05,040 --> 00:08:09,440
Speaker 1: owner of the central bank, and that means that it

149
00:08:09,600 --> 00:08:13,560
Speaker 1: can in fact pay its interest payments. Effectivities an accounting

150
00:08:13,560 --> 00:08:16,440
Speaker 1: operation between the treasury and the central bank. So the

151
00:08:16,480 --> 00:08:21,720
Speaker 1: government has effectively limitless capacity to create money the limits

152
00:08:21,720 --> 00:08:23,760
Speaker 1: of the impact of that on the economy rather than

153
00:08:23,800 --> 00:08:26,560
Speaker 1: the physical capability of doing it, and rather than the

154
00:08:26,920 --> 00:08:29,640
Speaker 1: death the government creates. And that I'm going to finish.

155
00:08:30,400 --> 00:08:32,800
Speaker 1: I'm getting a very technical here as I know. No

156
00:08:32,920 --> 00:08:35,200
Speaker 1: I'm into it, okay, But if you look, if you

157
00:08:35,200 --> 00:08:37,680
Speaker 1: look at what are reserves, and they think about the

158
00:08:37,720 --> 00:08:40,199
Speaker 1: main assets that banks have their reserves, that are the

159
00:08:40,280 --> 00:08:43,280
Speaker 1: deposit accounts the private banks have at the central bank,

160
00:08:43,640 --> 00:08:46,640
Speaker 1: there are the loans they've made to the private sector,

161
00:08:47,040 --> 00:08:49,439
Speaker 1: and there are the bonds that they have bought, predominantly

162
00:08:49,520 --> 00:08:53,320
Speaker 1: treasury bonds. Now, when the when the government runs a deficit,

163
00:08:54,120 --> 00:08:56,160
Speaker 1: it puts money in the reserve accounts of the banks,

164
00:08:56,280 --> 00:08:59,200
Speaker 1: increases their assets. That puts money into deposit accounts. That's

165
00:08:59,200 --> 00:09:03,080
Speaker 1: where the spending comes from. The public gets extra money

166
00:09:03,120 --> 00:09:06,160
Speaker 1: out of Then the treasury says we're gonna issue bonds

167
00:09:06,200 --> 00:09:08,640
Speaker 1: to sell the bonds to the banks to cover the

168
00:09:09,360 --> 00:09:13,760
Speaker 1: extra debt with money we've created. Well, that is an

169
00:09:13,800 --> 00:09:16,640
Speaker 1: offer that the bonds, when the banks by them, are

170
00:09:16,679 --> 00:09:18,880
Speaker 1: also assets, and how do they pay for them. They

171
00:09:18,880 --> 00:09:22,840
Speaker 1: pay them with the reserves, So the deficit creates reserves.

172
00:09:23,120 --> 00:09:25,440
Speaker 1: And then when the treasury says we're going to sell

173
00:09:25,520 --> 00:09:29,440
Speaker 1: you treasury bonds for that, the treasury bonds an interest,

174
00:09:29,480 --> 00:09:32,800
Speaker 1: which the reserves normally don't do. The treasury bonds can

175
00:09:32,840 --> 00:09:35,800
Speaker 1: be traded, which the reserves can't, but can't be traded,

176
00:09:36,240 --> 00:09:38,520
Speaker 1: so it's an offer that's too good to refuse for

177
00:09:38,520 --> 00:09:41,719
Speaker 1: the banks. And that's why the banks always more than

178
00:09:41,880 --> 00:09:45,000
Speaker 1: by more than the subscribe for all the issues of

179
00:09:45,040 --> 00:09:48,680
Speaker 1: treasury bonds. So there's no way there's any borrowing going

180
00:09:48,720 --> 00:09:50,800
Speaker 1: on from the public in that whole thing. It all

181
00:09:50,840 --> 00:09:54,160
Speaker 1: happens on the asset side of the banking sector, leaving

182
00:09:54,200 --> 00:09:57,840
Speaker 1: the private sector, non bank sector out of it. So

183
00:09:58,160 --> 00:10:00,760
Speaker 1: there's no limit to the amount the money the government

184
00:10:00,760 --> 00:10:03,800
Speaker 1: can create that way and cover by bonds, and that's

185
00:10:03,800 --> 00:10:07,200
Speaker 1: why we saw something like the thirty or of GDP

186
00:10:07,840 --> 00:10:11,920
Speaker 1: increasing in inverted commerce government debt. The government created the

187
00:10:11,920 --> 00:10:15,080
Speaker 1: money that brought the bonds. One thing you mentioned in

188
00:10:15,120 --> 00:10:18,440
Speaker 1: that the Krugman master Class. The idea has claimed that

189
00:10:18,840 --> 00:10:21,400
Speaker 1: economics is the study of people, or that's about people.

190
00:10:21,440 --> 00:10:24,520
Speaker 1: You say, it's about money. Can you explain that further,

191
00:10:24,640 --> 00:10:27,520
Speaker 1: like this idea of like centering money as the sort

192
00:10:27,559 --> 00:10:30,160
Speaker 1: of like key unit of analysis or like where we

193
00:10:30,280 --> 00:10:33,600
Speaker 1: start in the journey, like understand what what is the

194
00:10:33,640 --> 00:10:37,520
Speaker 1: significance of starting with money? Yeah, well, he said, let's

195
00:10:37,520 --> 00:10:39,839
Speaker 1: talk about how Krugman starts without it, first of all,

196
00:10:39,840 --> 00:10:41,959
Speaker 1: and why that ends up. We're using all the huge

197
00:10:42,000 --> 00:10:44,839
Speaker 1: mistakes of mainstream textbooks make and of course come back

198
00:10:44,840 --> 00:10:47,280
Speaker 1: to emphasize the Bank of England and the bonds Bank

199
00:10:47,320 --> 00:10:49,200
Speaker 1: of Both of the textbooks are wrong. This is not

200
00:10:49,280 --> 00:10:52,480
Speaker 1: a raving radical coming out and attacking you know, sensible

201
00:10:52,520 --> 00:10:55,760
Speaker 1: centrist economics. This is institutions and know what they're talking

202
00:10:55,800 --> 00:10:58,120
Speaker 1: about telling economists you've got it wrong. You've got to

203
00:10:58,160 --> 00:11:00,680
Speaker 1: learn the accounting. So what the animos do and you

204
00:11:00,679 --> 00:11:02,559
Speaker 1: can see this improvements work and you can see it

205
00:11:02,600 --> 00:11:05,280
Speaker 1: in Mancu's textbook as they say, well, there's a supply

206
00:11:05,400 --> 00:11:08,360
Speaker 1: of money and that's under government control and that's fixed,

207
00:11:08,520 --> 00:11:11,840
Speaker 1: and then there's a demand for money and that's both

208
00:11:11,880 --> 00:11:14,920
Speaker 1: as individuals demanding money and the government when it runs

209
00:11:14,920 --> 00:11:17,640
Speaker 1: a deficit, all though demands money. So when they show

210
00:11:17,679 --> 00:11:19,880
Speaker 1: the government running a deficit, they have a downward sloping

211
00:11:19,880 --> 00:11:23,040
Speaker 1: demand curve for money. So the more money you demand,

212
00:11:23,120 --> 00:11:25,080
Speaker 1: you demand the hider interest rate you have to pay.

213
00:11:25,480 --> 00:11:28,680
Speaker 1: And the government borrowing gets added onto the demand curve,

214
00:11:28,679 --> 00:11:30,720
Speaker 1: and that drives up the interest rate. And that's why

215
00:11:30,760 --> 00:11:34,600
Speaker 1: they make all the arguments about driving interest government spending

216
00:11:34,679 --> 00:11:38,200
Speaker 1: driving up interest rates, crowding our private spending, causing the

217
00:11:38,240 --> 00:11:40,959
Speaker 1: economy to slow down. That's their analysis. And when you

218
00:11:41,000 --> 00:11:42,520
Speaker 1: do the accounting and you look at it, and I've

219
00:11:42,520 --> 00:11:45,520
Speaker 1: actually built a software package which is really available called

220
00:11:45,559 --> 00:11:49,240
Speaker 1: Minsky available on source forge. I'd love to have people

221
00:11:49,240 --> 00:11:52,160
Speaker 1: in the finance sector as well as academics and students

222
00:11:52,160 --> 00:11:54,320
Speaker 1: downloaded and take a look at it. And it's designed

223
00:11:54,320 --> 00:11:58,000
Speaker 1: to do interlocking double entry bookkeeping tables of the You

224
00:11:58,000 --> 00:12:01,000
Speaker 1: can do it a a corporate six, A company could

225
00:12:01,040 --> 00:12:04,920
Speaker 1: do it of its own books. It's designed for macroeconomics.

226
00:12:04,960 --> 00:12:07,280
Speaker 1: It's there is a free tool and when you when

227
00:12:07,280 --> 00:12:10,000
Speaker 1: you look at what actually happens, what you see is

228
00:12:10,080 --> 00:12:14,520
Speaker 1: that rather than government borrowing adding to the demand of money,

229
00:12:14,720 --> 00:12:17,559
Speaker 1: it actually adds to the supply of money. So all

230
00:12:17,600 --> 00:12:20,520
Speaker 1: the arguments that Krugman and co. Make about how deficits

231
00:12:20,520 --> 00:12:23,320
Speaker 1: are going to create a local expenditure and drive up

232
00:12:23,320 --> 00:12:26,000
Speaker 1: interest rates, when you take what actually happens and then

233
00:12:26,040 --> 00:12:28,440
Speaker 1: put it in their framework, rather than that into the

234
00:12:28,480 --> 00:12:31,240
Speaker 1: demand curve and driving up interest rates, it pushes the

235
00:12:31,280 --> 00:12:34,840
Speaker 1: supply curve out and drives interest rates down. So their

236
00:12:34,880 --> 00:12:37,679
Speaker 1: framework is just completely the wrong framework. And so you've

237
00:12:37,679 --> 00:12:40,520
Speaker 1: got to start from money. And one of the one

238
00:12:40,559 --> 00:12:43,160
Speaker 1: of the essential reasons they don't like talking about money

239
00:12:43,200 --> 00:12:46,600
Speaker 1: is because if you say that bank lending creates money, well,

240
00:12:46,720 --> 00:12:49,000
Speaker 1: nobody borrows for the sheer pleasure of being in debt.

241
00:12:49,040 --> 00:12:51,760
Speaker 1: You're borrowed to spend, so that borrowed money adds to

242
00:12:51,840 --> 00:12:55,080
Speaker 1: aggregate demand. And then when you have people paying debt off,

243
00:12:55,120 --> 00:12:58,000
Speaker 1: that causes a collapse and aggregate demand. So if you

244
00:12:58,080 --> 00:13:01,040
Speaker 1: if you take on board that banks create money when

245
00:13:01,040 --> 00:13:03,880
Speaker 1: they lend, and then see what they does the overall economy,

246
00:13:04,040 --> 00:13:07,280
Speaker 1: the whole macroeconomics has to change. Now they're quite comfortable

247
00:13:07,320 --> 00:13:09,520
Speaker 1: with their I SLM models and their D S G

248
00:13:09,640 --> 00:13:11,680
Speaker 1: A and the A B C s and all this stuff,

249
00:13:12,040 --> 00:13:13,720
Speaker 1: none of which have money, and then none of which

250
00:13:13,760 --> 00:13:16,959
Speaker 1: have banks virtually now I know one or two, and

251
00:13:17,040 --> 00:13:19,360
Speaker 1: they just don't want to change how they have been

252
00:13:19,480 --> 00:13:23,520
Speaker 1: used to thinking, even though reality says they're wrong. Now

253
00:13:23,600 --> 00:13:26,160
Speaker 1: now we have the formal bodies like the Bank of

254
00:13:26,200 --> 00:13:28,520
Speaker 1: England and the BUONUS banks saying they're wrong. So it

255
00:13:28,559 --> 00:13:32,880
Speaker 1: makes a huge difference to understand the accounting. So this

256
00:13:32,920 --> 00:13:36,200
Speaker 1: goes back to the distinction between public versus private debt.

257
00:13:36,280 --> 00:13:39,720
Speaker 1: And you know, the suggestion or the implication I think

258
00:13:39,840 --> 00:13:43,080
Speaker 1: is that public debt is much less of a problem

259
00:13:43,520 --> 00:13:46,800
Speaker 1: um in terms of financial stability than private debt. So

260
00:13:46,840 --> 00:13:49,520
Speaker 1: I'm wondering could you maybe elaborate on that point and

261
00:13:49,559 --> 00:13:53,479
Speaker 1: then put it into context for us in the current environment.

262
00:13:53,640 --> 00:13:57,559
Speaker 1: So we just saw massive fiscal stimulus UM in the US,

263
00:13:57,640 --> 00:14:00,920
Speaker 1: for instance, and at the same time time, I think

264
00:14:01,040 --> 00:14:03,680
Speaker 1: we're starting to see I haven't looked up the number recently,

265
00:14:03,760 --> 00:14:06,040
Speaker 1: but I'm pretty sure we're starting to see private sector

266
00:14:06,120 --> 00:14:09,120
Speaker 1: debt go up UM. So how much of a problem

267
00:14:09,160 --> 00:14:12,360
Speaker 1: is that and how much does the balance between public

268
00:14:12,440 --> 00:14:16,199
Speaker 1: versus private actually matter? Yeah, I think the way to

269
00:14:16,240 --> 00:14:19,000
Speaker 1: think about the private debt and public debt is like

270
00:14:19,040 --> 00:14:21,560
Speaker 1: a sea saw because when you look at the mainstream,

271
00:14:21,600 --> 00:14:23,960
Speaker 1: they treat them as both. Well, they ignore private debt

272
00:14:24,000 --> 00:14:26,360
Speaker 1: because the attitude as well, private debt is an act

273
00:14:26,360 --> 00:14:29,840
Speaker 1: between consenting adults and we shouldn't look inside the financial

274
00:14:29,880 --> 00:14:32,280
Speaker 1: bedroom of the economy. Whatever they want to do is

275
00:14:32,320 --> 00:14:34,840
Speaker 1: okay by us. But our government debt that's a burden

276
00:14:34,880 --> 00:14:37,880
Speaker 1: on future generations. Now, in fact, when you look at it,

277
00:14:38,440 --> 00:14:42,560
Speaker 1: the burden on future generations is when you know, you

278
00:14:42,640 --> 00:14:44,840
Speaker 1: die with a mortgage and your kids have to take

279
00:14:44,880 --> 00:14:47,800
Speaker 1: it on later. So it's private debt that gives that

280
00:14:47,840 --> 00:14:50,920
Speaker 1: burden on future generations of the of the current borrowers

281
00:14:51,360 --> 00:14:54,640
Speaker 1: and private debt. When you borrow money from a bank,

282
00:14:55,440 --> 00:14:58,600
Speaker 1: you can't repay it and notes you invent yourself. Whereas

283
00:14:58,640 --> 00:15:01,440
Speaker 1: with the government, the government, when it spends more than

284
00:15:01,480 --> 00:15:04,560
Speaker 1: it gets back in taxes, can finance that by accounting

285
00:15:04,600 --> 00:15:07,360
Speaker 1: operations between the treasury, which is part of the government,

286
00:15:07,560 --> 00:15:09,720
Speaker 1: and the central Bank, which is part of the government.

287
00:15:10,040 --> 00:15:13,720
Speaker 1: So it is in fact a way of stimulating an

288
00:15:13,720 --> 00:15:16,840
Speaker 1: economy to have deficit spending taking place, as we've seen

289
00:15:16,920 --> 00:15:20,040
Speaker 1: during COVID. Imagine what America would have been like if

290
00:15:20,080 --> 00:15:22,560
Speaker 1: there'd been no increase in the deficit In fact, the

291
00:15:22,600 --> 00:15:27,040
Speaker 1: deficit was what thirty or GDP, So without that spending,

292
00:15:27,040 --> 00:15:28,800
Speaker 1: it would have been a total collapse in the private

293
00:15:28,800 --> 00:15:31,800
Speaker 1: sector of the economy. And when you look at the

294
00:15:31,840 --> 00:15:34,560
Speaker 1: historical record, and I've done some empirical work here, but

295
00:15:34,600 --> 00:15:38,000
Speaker 1: the best work has been done by the philanthropist American

296
00:15:38,040 --> 00:15:41,720
Speaker 1: philanthropist Richard Vague, who was a leading bank when his

297
00:15:41,800 --> 00:15:45,040
Speaker 1: own right and is now he's a formal government position

298
00:15:45,040 --> 00:15:49,600
Speaker 1: in Philadelphia. Richard did research into one and a half

299
00:15:49,680 --> 00:15:54,160
Speaker 1: centuries of financial crises about a hundred and fifty countries

300
00:15:54,200 --> 00:15:57,080
Speaker 1: around the world, and found over the last hundred and

301
00:15:57,120 --> 00:15:59,680
Speaker 1: fifty years have been about a hundred and fifty financial crisis.

302
00:16:00,080 --> 00:16:02,120
Speaker 1: Every last one of them was caused by a runaway

303
00:16:02,120 --> 00:16:04,760
Speaker 1: private debt bubble, and the only way out of it

304
00:16:04,800 --> 00:16:08,360
Speaker 1: was to write that private debt off. So the whole

305
00:16:08,400 --> 00:16:10,880
Speaker 1: focus we health and government debt is just the wrong,

306
00:16:11,360 --> 00:16:15,000
Speaker 1: is just becoming out of bad thinking. And equally, one

307
00:16:15,000 --> 00:16:16,840
Speaker 1: of the things people people, and also what the level

308
00:16:16,840 --> 00:16:20,720
Speaker 1: of government did is it's now DP in America after

309
00:16:20,960 --> 00:16:23,480
Speaker 1: after covid or, private debt was a hundred and sixty

310
00:16:23,560 --> 00:16:26,200
Speaker 1: percent of GDP. So the crazy thing is the thing

311
00:16:26,200 --> 00:16:28,600
Speaker 1: they're telling you not to worry about is not only

312
00:16:28,640 --> 00:16:31,080
Speaker 1: the one you should worry about, but it's substantially larger

313
00:16:31,120 --> 00:16:50,840
Speaker 1: than government dead in most countries around the world. So

314
00:16:51,120 --> 00:16:53,720
Speaker 1: I wanna, you know, talk a little bit more about

315
00:16:54,000 --> 00:16:58,520
Speaker 1: sustainability of government spending and I think it'll actually dovetail

316
00:16:58,600 --> 00:17:02,320
Speaker 1: or lead us eventually into the climate change discussion as well.

317
00:17:02,560 --> 00:17:05,520
Speaker 1: But obviously, and as you noted, one of these sort

318
00:17:05,520 --> 00:17:07,919
Speaker 1: of curbs or you know, where the rubber might hit

319
00:17:07,960 --> 00:17:12,000
Speaker 1: the road with the government capacity to spend is inflation.

320
00:17:12,320 --> 00:17:15,320
Speaker 1: And right now we have some elevated inflation, say in

321
00:17:15,320 --> 00:17:17,920
Speaker 1: the US, but there's a you know, strong argument that

322
00:17:18,000 --> 00:17:20,960
Speaker 1: you know, to use the economists word, that it's transitory.

323
00:17:21,000 --> 00:17:24,800
Speaker 1: But how do you go about thinking more broadly Okay,

324
00:17:24,840 --> 00:17:27,200
Speaker 1: forget you know the data right now, but how do

325
00:17:27,240 --> 00:17:32,720
Speaker 1: you go more broadly thinking about how to conceptualize the

326
00:17:32,960 --> 00:17:37,959
Speaker 1: ability to spend without generating undesirable inflation or actual like

327
00:17:38,320 --> 00:17:41,960
Speaker 1: you know, how to you know, reconceptualizing fiscal capacity, Like

328
00:17:42,040 --> 00:17:44,520
Speaker 1: do we have any sort of way to put numbers

329
00:17:44,560 --> 00:17:46,600
Speaker 1: on this or like how do you go about thinking

330
00:17:46,600 --> 00:17:49,240
Speaker 1: about where those limits are? Yeah, I mean that is

331
00:17:49,280 --> 00:17:52,000
Speaker 1: something which cost because we have a modern monetary theory

332
00:17:52,080 --> 00:17:57,320
Speaker 1: is a description of how current financing occurs. But what

333
00:17:57,359 --> 00:18:00,560
Speaker 1: we've had is a practice with that, with that and ignored,

334
00:18:00,600 --> 00:18:03,200
Speaker 1: and you had constraints on how much money government can spend.

335
00:18:03,400 --> 00:18:06,600
Speaker 1: The whole effective austerity type programs I've had ever since

336
00:18:06,600 --> 00:18:09,880
Speaker 1: the days of Reagan and Thatcher. Now if you say, well,

337
00:18:09,880 --> 00:18:13,720
Speaker 1: we actually understand it, that would mean that the policy

338
00:18:13,720 --> 00:18:16,119
Speaker 1: now becomes to get the maximum level of employment you

339
00:18:16,160 --> 00:18:18,840
Speaker 1: can get. Pology of a job guarantee is part of

340
00:18:18,840 --> 00:18:24,840
Speaker 1: that program. And the issue about inflation is that inflation

341
00:18:25,160 --> 00:18:28,280
Speaker 1: tends to be something which comes out of competition over

342
00:18:28,320 --> 00:18:31,800
Speaker 1: the over the income shares of the economy. When when

343
00:18:31,840 --> 00:18:33,880
Speaker 1: as we look back, the last time there's major inflation

344
00:18:33,880 --> 00:18:37,919
Speaker 1: back in the seventies, you had economy going gangbusters compared

345
00:18:37,920 --> 00:18:41,360
Speaker 1: to what it's done ever since, low level of unemployment

346
00:18:41,640 --> 00:18:45,240
Speaker 1: and high level of capacity utilization, and that means a

347
00:18:45,280 --> 00:18:49,159
Speaker 1: strong demand on raw materials inputs. And you had in

348
00:18:49,240 --> 00:18:52,520
Speaker 1: seventy three, part of course, part of the Kipper War,

349
00:18:53,119 --> 00:18:56,080
Speaker 1: you had the price of all being increased from tots

350
00:18:56,080 --> 00:19:00,200
Speaker 1: fifty a boarrels ten and then you had in eight

351
00:19:00,800 --> 00:19:03,879
Speaker 1: another another boom where the price went from ten dollars

352
00:19:03,920 --> 00:19:06,760
Speaker 1: to forty. Well, that takes money out of capitalist stands,

353
00:19:07,080 --> 00:19:09,639
Speaker 1: means less investment can take place, and you have a

354
00:19:09,680 --> 00:19:13,080
Speaker 1: slump in the economy. Equally, you had low unemployment, so

355
00:19:13,119 --> 00:19:16,600
Speaker 1: workers demand large wage risers, and those wage risers also

356
00:19:16,640 --> 00:19:19,320
Speaker 1: fed through to inflation. So you need this very very

357
00:19:19,359 --> 00:19:23,720
Speaker 1: strong basis in effect in aggregate demand out of a

358
00:19:23,800 --> 00:19:26,960
Speaker 1: strong bargaining position for workers to get hold of the

359
00:19:26,960 --> 00:19:30,040
Speaker 1: extra bargaining power to get from lower unemployment, to get

360
00:19:30,400 --> 00:19:33,000
Speaker 1: bargaining power and demand higher wages, and that's what tends

361
00:19:33,040 --> 00:19:36,480
Speaker 1: to set off inflation. So in that context where we

362
00:19:36,520 --> 00:19:40,080
Speaker 1: are right now, where miles from that happening, because the

363
00:19:40,320 --> 00:19:45,480
Speaker 1: working class unions are being smashed, there's no real bargaining

364
00:19:45,480 --> 00:19:48,119
Speaker 1: power for the individuals until you're in a really really

365
00:19:48,119 --> 00:19:52,760
Speaker 1: tight market. And we're temporarily saying that, but I don't

366
00:19:52,760 --> 00:19:55,199
Speaker 1: think there'll be a sustained flow through of it. But

367
00:19:55,280 --> 00:19:57,160
Speaker 1: if you did get to the stage where you had

368
00:19:57,840 --> 00:20:02,600
Speaker 1: job guarantee very lower unemployment, people who didn't have a

369
00:20:03,040 --> 00:20:05,960
Speaker 1: lost their private sector job would get a lower, lower

370
00:20:05,960 --> 00:20:10,919
Speaker 1: paid but still job guaranteed income. That would potentially increase

371
00:20:10,920 --> 00:20:14,200
Speaker 1: the bargaining power of workers and you could have struggles

372
00:20:14,240 --> 00:20:17,760
Speaker 1: over the distribution of income, which would lead to inflation arising.

373
00:20:18,080 --> 00:20:20,080
Speaker 1: So I think in that situation, you've got to start

374
00:20:20,359 --> 00:20:25,320
Speaker 1: talking about really in national agreements over income distribution, the

375
00:20:25,359 --> 00:20:27,639
Speaker 1: sort of thing that the Swedish government used to do

376
00:20:27,720 --> 00:20:31,160
Speaker 1: back in the sixties and seventies when they dramatically industrialized

377
00:20:31,200 --> 00:20:35,120
Speaker 1: in Sweden by having a sort of agreements between capitalist

378
00:20:35,200 --> 00:20:39,800
Speaker 1: workers and the government about how to develop a Swedish

379
00:20:39,840 --> 00:20:44,399
Speaker 1: society over time. So once once you realize that you

380
00:20:44,480 --> 00:20:47,439
Speaker 1: can have full employment, then you've also got to have

381
00:20:47,960 --> 00:20:52,439
Speaker 1: some agreement about the distribution of income and how money

382
00:20:52,520 --> 00:20:56,120
Speaker 1: is spent. And you know, I'm not going to suggest

383
00:20:56,160 --> 00:20:58,400
Speaker 1: that's going to be an easy thing to do. So

384
00:20:58,520 --> 00:21:01,560
Speaker 1: if we if we actually start getting the government using

385
00:21:01,600 --> 00:21:04,440
Speaker 1: the capacity it has to generate a level of aggregate

386
00:21:04,480 --> 00:21:07,159
Speaker 1: demand that gives you full employment, then we're going to

387
00:21:07,200 --> 00:21:10,080
Speaker 1: have to work out what's the power relationship between workers

388
00:21:10,080 --> 00:21:13,480
Speaker 1: and capitalists in America. And it can't be as extreme

389
00:21:13,480 --> 00:21:15,679
Speaker 1: as it's got to be in the last thirty or

390
00:21:15,680 --> 00:21:18,040
Speaker 1: forty years. Will be to one little caveat there. It

391
00:21:18,080 --> 00:21:20,520
Speaker 1: isn't the industrial work capitalist who have got that power.

392
00:21:20,520 --> 00:21:22,840
Speaker 1: It's the financial system. So we're gonna have to take

393
00:21:22,880 --> 00:21:25,280
Speaker 1: on financial capital, and that always sends it to be

394
00:21:25,280 --> 00:21:26,720
Speaker 1: a lot more fun than you'd like it to be.

395
00:21:28,560 --> 00:21:31,440
Speaker 1: I mean, what are the chances that we actually got

396
00:21:31,440 --> 00:21:34,760
Speaker 1: a real discussion on that issue in the US, and

397
00:21:35,000 --> 00:21:38,600
Speaker 1: what are the obstacles to people taking that on. Frankly,

398
00:21:38,640 --> 00:21:40,720
Speaker 1: I don't think we're going to get that conversation. I've

399
00:21:40,720 --> 00:21:43,040
Speaker 1: got to take my head off to Stephanie Krlton and

400
00:21:43,080 --> 00:21:46,359
Speaker 1: the modern monetary theory people have made been very successful

401
00:21:46,400 --> 00:21:48,800
Speaker 1: and raising this to the stage where Congress even has

402
00:21:48,840 --> 00:21:51,960
Speaker 1: debates about it, and you've seen some Congressman realizing, well,

403
00:21:51,960 --> 00:21:53,920
Speaker 1: they don't have the constraints they thought they had, and

404
00:21:53,960 --> 00:21:57,480
Speaker 1: they're changing their attitudes. But the political pressure back in

405
00:21:57,520 --> 00:22:02,359
Speaker 1: the opposite direction is enormous. So I'm not convinced that

406
00:22:02,359 --> 00:22:05,520
Speaker 1: we're going to get a conscious decision to go about

407
00:22:05,600 --> 00:22:09,600
Speaker 1: doing it. But a bit like COVID before COVID struggling,

408
00:22:09,720 --> 00:22:14,720
Speaker 1: I'd say December twenty of two thousand and nineteen, if

409
00:22:14,720 --> 00:22:16,919
Speaker 1: you ask anybody with the government shod on a deficit

410
00:22:16,920 --> 00:22:19,720
Speaker 1: of of GDP next year, they would have kicked you

411
00:22:19,760 --> 00:22:23,560
Speaker 1: out of the room. That's what the government ran next year. GDP.

412
00:22:24,160 --> 00:22:26,359
Speaker 1: And if you look back at the last time we

413
00:22:26,400 --> 00:22:28,399
Speaker 1: had spending on that scale, I was during the Second

414
00:22:28,400 --> 00:22:32,160
Speaker 1: World War, and the impact of that, you know that

415
00:22:32,160 --> 00:22:34,520
Speaker 1: that was when we realize we're in an existential crisis.

416
00:22:34,800 --> 00:22:37,520
Speaker 1: Was either spend the money or you know, start saying

417
00:22:37,840 --> 00:22:40,880
Speaker 1: highlhead lap. So we spent the money, and nobody discussed

418
00:22:40,920 --> 00:22:43,440
Speaker 1: that there was too much money being spent buying that

419
00:22:43,680 --> 00:22:46,760
Speaker 1: next German tank or or whatever is being constructed with

420
00:22:46,760 --> 00:22:50,399
Speaker 1: with the government money that was being spent on private

421
00:22:50,440 --> 00:22:53,560
Speaker 1: corporations to build tanks rather than cars. So when you're

422
00:22:53,560 --> 00:22:55,960
Speaker 1: face an existential crisis like that, you tend to throw

423
00:22:56,000 --> 00:22:58,439
Speaker 1: the real book out the window. And that's when you

424
00:22:58,480 --> 00:23:01,080
Speaker 1: look at what happened with how people actually involved in

425
00:23:01,119 --> 00:23:04,840
Speaker 1: doing that, People like barns Barnsley Rummel and people who

426
00:23:04,840 --> 00:23:07,600
Speaker 1: are running the Federal Reserve. Back in the night and forties,

427
00:23:07,880 --> 00:23:11,160
Speaker 1: they realize there were no constraints on government spending. There

428
00:23:11,200 --> 00:23:13,159
Speaker 1: was a tag that there's actually a paper called taxes

429
00:23:13,240 --> 00:23:17,240
Speaker 1: or obsolete for government spending by the President of the

430
00:23:17,240 --> 00:23:21,320
Speaker 1: Federal Reserve of New York and nine. So that since

431
00:23:21,440 --> 00:23:23,880
Speaker 1: necessity is the mother of invention, now if you don't

432
00:23:23,920 --> 00:23:27,280
Speaker 1: have necessity ideology comes back in. So I think if

433
00:23:27,440 --> 00:23:30,840
Speaker 1: if we didn't face any future existential threats, there would

434
00:23:30,840 --> 00:23:33,760
Speaker 1: be this pressure to return to the old balance the books,

435
00:23:34,680 --> 00:23:37,159
Speaker 1: government spending as a burden on the future, that ideology

436
00:23:37,160 --> 00:23:39,199
Speaker 1: would come back. But I don't think it's going to

437
00:23:39,200 --> 00:23:43,560
Speaker 1: get a chance. So can I ask the I guess

438
00:23:43,640 --> 00:23:46,439
Speaker 1: the flip side of that question, which is, you know,

439
00:23:46,480 --> 00:23:49,680
Speaker 1: we're talking about physical capacity, and how do you create

440
00:23:49,680 --> 00:23:54,000
Speaker 1: appetite to expand that. How do you actually um tackle

441
00:23:54,280 --> 00:23:59,080
Speaker 1: the private debt problem because you have this massive financial

442
00:23:59,119 --> 00:24:04,280
Speaker 1: sector that is incentivized basically to keep creating debt because

443
00:24:04,320 --> 00:24:07,199
Speaker 1: every time they do that, they earn money. How do

444
00:24:07,240 --> 00:24:10,520
Speaker 1: you go after that? And like, what is the political

445
00:24:10,560 --> 00:24:15,119
Speaker 1: appetite to take that aspect on? I think the political

446
00:24:15,119 --> 00:24:19,119
Speaker 1: apposites on the zero because if you look at politicians themselves,

447
00:24:19,920 --> 00:24:22,760
Speaker 1: the main people they talk to people on the finance sector.

448
00:24:23,000 --> 00:24:26,000
Speaker 1: So eisenhow used to talk about the military industrial complex.

449
00:24:26,200 --> 00:24:30,159
Speaker 1: I talk about the political financial complex. And therefore what

450
00:24:30,280 --> 00:24:34,720
Speaker 1: finance wants is what politicians tend to allow, and finance

451
00:24:34,720 --> 00:24:36,800
Speaker 1: wants to create as much debt as it can because

452
00:24:36,840 --> 00:24:40,240
Speaker 1: that's how they make money literally literally by creating the

453
00:24:40,280 --> 00:24:43,320
Speaker 1: debt but for themselves. Figuratively, the more debt the private

454
00:24:43,359 --> 00:24:46,840
Speaker 1: sector takes on, the more income that the private sector

455
00:24:46,880 --> 00:24:49,680
Speaker 1: has to pay to the financial sector, so that their

456
00:24:49,680 --> 00:24:54,399
Speaker 1: opposition to reducing debt is enormous. But the trouble is

457
00:24:54,400 --> 00:24:56,760
Speaker 1: we've now we've now reached levels of private debt which

458
00:24:56,760 --> 00:25:00,640
Speaker 1: are historic in the history of capitalism. So America. I've

459
00:25:00,640 --> 00:25:03,160
Speaker 1: got data in America going back to eight and thirty four,

460
00:25:03,600 --> 00:25:06,439
Speaker 1: and the level of private debt we've got now is

461
00:25:06,560 --> 00:25:08,800
Speaker 1: greater than the peak level of private debt compared to

462
00:25:08,840 --> 00:25:11,800
Speaker 1: g DP during the Great Depression, which was the previous

463
00:25:11,840 --> 00:25:15,640
Speaker 1: peak driven by a massive deflation between thirty and thirty three.

464
00:25:16,160 --> 00:25:19,159
Speaker 1: So we have this enormous overhang of private debt, and

465
00:25:19,200 --> 00:25:21,800
Speaker 1: what that means is banks are a bit reluctant to

466
00:25:21,920 --> 00:25:24,280
Speaker 1: lend because they now realized there's a possibility they won't

467
00:25:24,280 --> 00:25:27,760
Speaker 1: get repaid, and the non bank public is reluctant to

468
00:25:27,760 --> 00:25:30,439
Speaker 1: borrow because they were already carrying an enormous amount of

469
00:25:30,440 --> 00:25:33,720
Speaker 1: debt even with low interest rate. So that combination means

470
00:25:33,720 --> 00:25:36,520
Speaker 1: you've got very stagnant demand coming from the credit from

471
00:25:36,520 --> 00:25:40,760
Speaker 1: credit when credit is part of a small amount of

472
00:25:40,760 --> 00:25:43,639
Speaker 1: credit demand is a healthy part of a growing economy.

473
00:25:43,840 --> 00:25:46,679
Speaker 1: But if you look at Chaumpado is argued in favor

474
00:25:46,720 --> 00:25:49,360
Speaker 1: of the private banking system. The main argument you made

475
00:25:49,480 --> 00:25:52,920
Speaker 1: was that the banks should be providing money to entrepreneurs

476
00:25:53,080 --> 00:25:55,040
Speaker 1: or they don't, but that's what they should be doing.

477
00:25:55,240 --> 00:25:57,320
Speaker 1: So what we've got is a huge overhanger private debt.

478
00:25:57,359 --> 00:26:00,119
Speaker 1: We shouldn't have left private debt anything like level all

479
00:26:00,160 --> 00:26:02,919
Speaker 1: it's at. I think it should to set. A hundred

480
00:26:02,920 --> 00:26:06,480
Speaker 1: and seventy was the peak when America was during what

481
00:26:06,520 --> 00:26:09,720
Speaker 1: we call the Golden Age of capitalism, between the late

482
00:26:09,760 --> 00:26:13,119
Speaker 1: forties and the the early seventies, the level of private

483
00:26:13,119 --> 00:26:17,639
Speaker 1: debt began at about GDP and something between and seventy

484
00:26:18,000 --> 00:26:22,160
Speaker 1: of GDP. That's money you've borrowed for recent for realistic reasons.

485
00:26:22,200 --> 00:26:25,479
Speaker 1: You've got working capital for companies, you have money for

486
00:26:25,800 --> 00:26:29,240
Speaker 1: households to buy large consumer items. You have some funding

487
00:26:29,240 --> 00:26:32,679
Speaker 1: of entrepreneurs. That's a creative role of the financial sector.

488
00:26:33,040 --> 00:26:35,040
Speaker 1: When you get to the hundred and seventy percent, you

489
00:26:35,040 --> 00:26:39,080
Speaker 1: can regard that is pretty much parasitic behavior. And what

490
00:26:39,400 --> 00:26:42,359
Speaker 1: I proposed, and I've worked, I've done a Minsky model

491
00:26:42,760 --> 00:26:45,800
Speaker 1: of how this could actually work. We need a modern

492
00:26:45,880 --> 00:26:48,800
Speaker 1: debt be We can't just write the debt off because

493
00:26:48,800 --> 00:26:51,359
Speaker 1: they would cause the banking system to collapse. We can't

494
00:26:51,400 --> 00:26:53,840
Speaker 1: just give money to people who borrowed money from the

495
00:26:53,880 --> 00:26:55,840
Speaker 1: banks and say how you're get off with that, because

496
00:26:55,840 --> 00:26:58,640
Speaker 1: people who didn't borrow, people who were frugal, can say,

497
00:26:58,720 --> 00:27:02,080
Speaker 1: you know, that's moral hazard. What what? Where's mine? Or

498
00:27:02,160 --> 00:27:05,320
Speaker 1: My agument is, let's use the capacity of the government

499
00:27:05,359 --> 00:27:09,520
Speaker 1: sector to create private money and use the government government money,

500
00:27:09,520 --> 00:27:13,560
Speaker 1: fear boast money, and use that to replace credit boast money.

501
00:27:13,680 --> 00:27:16,000
Speaker 1: So you give everybody in the country, every adult, the

502
00:27:16,040 --> 00:27:18,720
Speaker 1: same amount of money. If they have debt, they must

503
00:27:18,720 --> 00:27:21,440
Speaker 1: pay that down off their debt. If they don't have debt,

504
00:27:21,720 --> 00:27:25,920
Speaker 1: what I would require is that they by newly as

505
00:27:26,200 --> 00:27:28,760
Speaker 1: corporate shares, where those corporate chairs are used to pay

506
00:27:28,800 --> 00:27:31,760
Speaker 1: down corporate debt. So you could reduce both household debt

507
00:27:31,800 --> 00:27:35,320
Speaker 1: and corporate debt quite substantially. You wouldn't change the amount

508
00:27:35,320 --> 00:27:37,560
Speaker 1: of money, and the economy just changed that rather than

509
00:27:37,600 --> 00:27:40,719
Speaker 1: being mainly backed by credit and private debt, it's now

510
00:27:40,760 --> 00:27:44,680
Speaker 1: mainly backed by FEA and government money creation capability, and

511
00:27:44,800 --> 00:27:48,000
Speaker 1: with that you would dramatically reduce the inequality that we've

512
00:27:48,040 --> 00:27:51,639
Speaker 1: got in society. You'd also stimulate the economy by putting,

513
00:27:51,760 --> 00:27:53,919
Speaker 1: because there's more workers to be receiving the money than

514
00:27:53,960 --> 00:27:58,160
Speaker 1: there are bankers and capitalists getting the same sum per head.

515
00:27:58,480 --> 00:28:01,080
Speaker 1: You'd stimulate the economy of as workers have to spend

516
00:28:01,119 --> 00:28:04,280
Speaker 1: faster than bankers or capitalists, and they'd be, as I've

517
00:28:04,280 --> 00:28:06,720
Speaker 1: modeled it, quite a substantial burst of the economy with

518
00:28:06,800 --> 00:28:10,080
Speaker 1: no additional money creation. So we could do it, and

519
00:28:10,119 --> 00:28:14,119
Speaker 1: I'm certain we won't. Do you have a what's the

520
00:28:14,200 --> 00:28:16,760
Speaker 1: dollar amount, like say in the US, and how do

521
00:28:16,800 --> 00:28:19,040
Speaker 1: you how would one go about driving the rate amount?

522
00:28:19,080 --> 00:28:21,640
Speaker 1: When I when I said whether you, I wouldn't necessarily

523
00:28:21,680 --> 00:28:24,320
Speaker 1: do it in one go because unlike a standard economists,

524
00:28:24,320 --> 00:28:26,440
Speaker 1: I'm not confident in my idea is going to work magically,

525
00:28:26,720 --> 00:28:28,680
Speaker 1: so I'd like to do a test run. But if

526
00:28:28,680 --> 00:28:31,359
Speaker 1: I did the whole caboodle. The model that I did

527
00:28:31,640 --> 00:28:35,080
Speaker 1: was giving every adult American a hundred thousand dollars over

528
00:28:35,160 --> 00:28:38,280
Speaker 1: one year, where a hundred thousand said, if you're in

529
00:28:38,320 --> 00:28:40,280
Speaker 1: debt had to be used to pay debt down. If

530
00:28:40,320 --> 00:28:42,120
Speaker 1: you weren't in debt, you had to buy corporate shares,

531
00:28:42,160 --> 00:28:45,080
Speaker 1: which we used to per cancel corporate debt. Now, that

532
00:28:45,200 --> 00:28:47,760
Speaker 1: worked out to a hundred thousand dollars per person, which

533
00:28:47,800 --> 00:28:50,160
Speaker 1: is about a hundred and ten percent of GDP. And

534
00:28:50,200 --> 00:28:52,880
Speaker 1: if we did it, we'd reduce the level of private

535
00:28:52,920 --> 00:28:55,640
Speaker 1: debt from a hundred and sixty hundred and seventy down

536
00:28:55,640 --> 00:28:58,640
Speaker 1: to sixty sevent of GDP, which is back on the

537
00:28:58,680 --> 00:29:02,120
Speaker 1: sweet spot for the golden capitalism. And that of course

538
00:29:02,320 --> 00:29:06,120
Speaker 1: would mean a shift in the allocation of debt, so

539
00:29:06,160 --> 00:29:09,480
Speaker 1: private debt would fall, government debt would rise. But when

540
00:29:09,520 --> 00:29:12,560
Speaker 1: I modeled it, what the would result I wasn't expecting

541
00:29:12,960 --> 00:29:15,280
Speaker 1: is because this meant there was much more money in

542
00:29:15,320 --> 00:29:18,680
Speaker 1: the hand of workers and middle class people than beforehand.

543
00:29:19,160 --> 00:29:22,080
Speaker 1: The economy went into a boom, and the boom meant

544
00:29:22,080 --> 00:29:24,680
Speaker 1: the debt ratio fell. So we're not worried about the

545
00:29:24,760 --> 00:29:26,880
Speaker 1: level of debt, We're worry about the ratio to GDP

546
00:29:27,440 --> 00:29:30,320
Speaker 1: and the impact of the In my model, the impact

547
00:29:30,360 --> 00:29:33,840
Speaker 1: of this hundred thousand per person was the first of all,

548
00:29:33,920 --> 00:29:36,200
Speaker 1: boost government debt by a hundred percent of GDP and

549
00:29:36,280 --> 00:29:39,120
Speaker 1: dropped privacy the debt by the same amount. But over

550
00:29:39,160 --> 00:29:41,720
Speaker 1: the next ten years or so, the level of debt

551
00:29:41,800 --> 00:29:45,280
Speaker 1: debt dropped back to you had a hundred percent fall

552
00:29:45,360 --> 00:29:48,160
Speaker 1: in the level of total debt from say is that

553
00:29:48,280 --> 00:29:50,880
Speaker 1: the monte about two hundred and six hundred and sixty

554
00:29:52,040 --> 00:29:55,840
Speaker 1: six private debt and a hundred percent government debt. That

555
00:29:56,280 --> 00:29:59,800
Speaker 1: was a reduction in the debt burden. So it's a

556
00:29:59,800 --> 00:30:02,200
Speaker 1: way of doing it that would actually work and stimulate

557
00:30:02,240 --> 00:30:05,800
Speaker 1: the economy. It caused more profits for firms. Even the

558
00:30:05,840 --> 00:30:08,640
Speaker 1: bankers could come out okay because if you sold jubile

559
00:30:08,760 --> 00:30:11,320
Speaker 1: bonds to finance it, the interest rate in the jubile

560
00:30:11,480 --> 00:30:13,360
Speaker 1: bonds could make up with the fact they weren't getting

561
00:30:13,400 --> 00:30:15,760
Speaker 1: interest on the private debt that had been canceled by

562
00:30:15,800 --> 00:30:19,200
Speaker 1: the modern debt tubile. So it's all doable. I justcent

563
00:30:19,280 --> 00:30:23,040
Speaker 1: sure it won't happen. So we were talking about attitudes

564
00:30:23,200 --> 00:30:27,800
Speaker 1: towards UM fiscal spending and how they might be changing,

565
00:30:27,920 --> 00:30:32,400
Speaker 1: but possibly UM not to the degree UM that you'd

566
00:30:32,400 --> 00:30:36,000
Speaker 1: be advocating, Professor Kean. But I know you've been critical

567
00:30:36,400 --> 00:30:40,960
Speaker 1: of the European Union over the years, and I'm curious

568
00:30:41,040 --> 00:30:44,040
Speaker 1: how you feel about it now and whether or not

569
00:30:44,320 --> 00:30:51,080
Speaker 1: you see some attitudes changing towards UM fiscal cohesion. I

570
00:30:51,120 --> 00:30:54,040
Speaker 1: think the European Union was always The European Union was

571
00:30:54,080 --> 00:30:56,600
Speaker 1: a good idea. The Euro was a big mistake, and

572
00:30:56,720 --> 00:31:00,320
Speaker 1: that might aitian. That hasn't changed because the whole logic

573
00:31:00,360 --> 00:31:02,720
Speaker 1: I'm talking about a private and public debt assumes you

574
00:31:02,800 --> 00:31:06,080
Speaker 1: have a treasury and a central bank that can back

575
00:31:06,200 --> 00:31:10,840
Speaker 1: whatever you do with your fiscal policy. Of course, when

576
00:31:11,240 --> 00:31:14,080
Speaker 1: when the country of the European Union joint formed the

577
00:31:14,080 --> 00:31:16,920
Speaker 1: euro they gave that right away, and you have this

578
00:31:17,080 --> 00:31:21,160
Speaker 1: sort of supernational central bank. There's no supernational treasury, there's

579
00:31:21,160 --> 00:31:24,920
Speaker 1: no supernational spending. So in that sense, all those governments

580
00:31:24,920 --> 00:31:28,520
Speaker 1: have turned themselves into effectively being in the same situation

581
00:31:28,520 --> 00:31:31,520
Speaker 1: as a private borrower. And we're seeing how disasters that's been,

582
00:31:31,640 --> 00:31:35,280
Speaker 1: particularly for Greece, but also for Spain and Italy and Portugal.

583
00:31:36,320 --> 00:31:38,640
Speaker 1: There's been a beneficiaries have been the ones who've got

584
00:31:39,000 --> 00:31:41,360
Speaker 1: like Germany. You did very very well, thanks very much,

585
00:31:41,520 --> 00:31:43,360
Speaker 1: out of the fact that countries like Italy could no

586
00:31:43,400 --> 00:31:46,600
Speaker 1: longer devalue their currency when they had a trade deficit

587
00:31:46,640 --> 00:31:49,120
Speaker 1: with Germany. So I'm still a critic of it, And

588
00:31:49,160 --> 00:31:50,960
Speaker 1: of course when you see how it first of all

589
00:31:51,000 --> 00:31:54,600
Speaker 1: handled the COVID outbreak and then the vaccine rollouts, and

590
00:31:54,640 --> 00:31:57,880
Speaker 1: then the idea of providing people with money to enable

591
00:31:57,880 --> 00:32:00,680
Speaker 1: them to pay their financial commitments when they couldn't go

592
00:32:00,720 --> 00:32:04,440
Speaker 1: to work because of COVID. It was it was I

593
00:32:04,480 --> 00:32:06,760
Speaker 1: was going to use the word starting with cluster and

594
00:32:06,880 --> 00:32:11,200
Speaker 1: ending with duck was trying to avoid it. But you

595
00:32:10,880 --> 00:32:14,120
Speaker 1: do nowhere did nowhere near as well as America, which

596
00:32:14,160 --> 00:32:16,400
Speaker 1: is always the model for the European un or even

597
00:32:16,560 --> 00:32:18,800
Speaker 1: UK at that stage, even though the UK managed the

598
00:32:18,800 --> 00:32:23,000
Speaker 1: stuff uprow COVID royally. So I'm no great fan of it.

599
00:32:23,240 --> 00:32:27,480
Speaker 1: What I have seen is again experiences teaching them some lessons.

600
00:32:27,760 --> 00:32:29,680
Speaker 1: All the things they were worried about happening out of

601
00:32:29,760 --> 00:32:33,520
Speaker 1: large levels of government spending haven't occurred. So in that sense,

602
00:32:33,520 --> 00:32:36,400
Speaker 1: there's been a bit more realism creeping into the European Union.

603
00:32:36,720 --> 00:32:38,960
Speaker 1: But it's still one of the first things I would

604
00:32:39,000 --> 00:32:41,320
Speaker 1: do is go back to the Lira, go back to

605
00:32:41,360 --> 00:32:43,840
Speaker 1: the pace, so go back to the mark and just

606
00:32:44,120 --> 00:32:47,320
Speaker 1: use the Euro for internal trade in the European Union.

607
00:32:48,200 --> 00:32:50,440
Speaker 1: But again they seem to be so wet it to

608
00:32:50,480 --> 00:32:56,000
Speaker 1: the idea of this supernational currency that that's again not

609
00:32:56,080 --> 00:32:58,040
Speaker 1: quite as unlikely as a modern that do you believe

610
00:32:58,080 --> 00:33:02,240
Speaker 1: it unfortunately pretty unlikely. You know, before we delve a

611
00:33:02,280 --> 00:33:06,680
Speaker 1: little bit into the climate discussion, and obviously it's you know,

612
00:33:06,720 --> 00:33:08,920
Speaker 1: it's part of this discussion. I want to go back

613
00:33:08,920 --> 00:33:11,280
Speaker 1: to something you said. You know, there's sort of like

614
00:33:11,320 --> 00:33:13,640
Speaker 1: I guess it's like the politics of full employment. Like

615
00:33:13,680 --> 00:33:17,960
Speaker 1: there's that famous essay the Political Aspects of full Employment

616
00:33:17,960 --> 00:33:21,160
Speaker 1: by clerch Key, and he's sort of anticity. You know,

617
00:33:21,240 --> 00:33:23,240
Speaker 1: you said that, you you talked about, Okay, if the

618
00:33:23,280 --> 00:33:25,280
Speaker 1: government were to ever really be in to take a

619
00:33:25,320 --> 00:33:28,720
Speaker 1: permanent fiscal stance where it's always going to maintain aggregate

620
00:33:28,800 --> 00:33:32,240
Speaker 1: demands such that we have full employment somehow, that's when

621
00:33:32,280 --> 00:33:35,400
Speaker 1: the real political fight begins. And of course we're already

622
00:33:35,400 --> 00:33:37,160
Speaker 1: seeing that. I mean we have, like you know, we're

623
00:33:37,160 --> 00:33:40,800
Speaker 1: nowhere near anything resembling full employment in the US right now.

624
00:33:41,040 --> 00:33:44,440
Speaker 1: We always already see major pushback against you I major

625
00:33:44,480 --> 00:33:49,320
Speaker 1: frustration among companies at their ability to hire easily. Right now,

626
00:33:49,920 --> 00:33:52,480
Speaker 1: What what do you see, like how brutal could it get?

627
00:33:52,560 --> 00:33:55,080
Speaker 1: You know, as we get as labor markets get tighter

628
00:33:55,120 --> 00:33:57,720
Speaker 1: and tighter, what do you expect to see or if

629
00:33:57,720 --> 00:34:01,800
Speaker 1: this current person, if this currently currently remarked conditions persist.

630
00:34:02,240 --> 00:34:03,800
Speaker 1: What do you expect to see on the part of

631
00:34:03,800 --> 00:34:07,280
Speaker 1: the sort of like capital class, bosses, etcetera, pushing back

632
00:34:07,600 --> 00:34:10,239
Speaker 1: against these policies. Well, they could will and truly try

633
00:34:10,280 --> 00:34:12,880
Speaker 1: to do that. That's definitely the case. It could be

634
00:34:13,200 --> 00:34:16,279
Speaker 1: quite destructive of the stability you're trying to bring about

635
00:34:16,280 --> 00:34:18,239
Speaker 1: through modern monetary theory to begin with. That's why I

636
00:34:18,280 --> 00:34:20,400
Speaker 1: think you've got to include the idea of an income

637
00:34:20,480 --> 00:34:24,279
Speaker 1: compact at the same time as part of it. It's

638
00:34:24,320 --> 00:34:26,359
Speaker 1: also why I focus on not just looking in terms

639
00:34:26,360 --> 00:34:30,600
Speaker 1: of workers versus bosses, but workers versus bosses versus bankers,

640
00:34:30,640 --> 00:34:34,440
Speaker 1: because we're the real and this is intensive on my

641
00:34:34,520 --> 00:34:39,279
Speaker 1: mathematical modeling of what I call of Minsky's financial instability hypothesis.

642
00:34:39,640 --> 00:34:41,840
Speaker 1: One thing which came out of the model was that

643
00:34:41,920 --> 00:34:44,360
Speaker 1: the rising level of debt where I had had firms

644
00:34:44,360 --> 00:34:47,040
Speaker 1: of borrowing money to actually invest in real factory. So

645
00:34:47,440 --> 00:34:49,839
Speaker 1: it was the sort of borrowing borrowing for the sort

646
00:34:49,840 --> 00:34:52,000
Speaker 1: of reason you'd want to see. But you could have

647
00:34:52,080 --> 00:34:55,320
Speaker 1: such a level of euphoria during a boom that capitalists

648
00:34:55,320 --> 00:34:57,840
Speaker 1: borrow more than they could repact during it. During a slump,

649
00:34:57,880 --> 00:35:00,120
Speaker 1: and you've got this ratcheting up the private deb and

650
00:35:00,160 --> 00:35:02,960
Speaker 1: you finally had a debt crisis. But a side effect

651
00:35:03,000 --> 00:35:06,000
Speaker 1: of this was again was not not built into the models.

652
00:35:06,000 --> 00:35:08,960
Speaker 1: What's called an emergent property is that even though it

653
00:35:09,040 --> 00:35:11,759
Speaker 1: was the firms therefore the capitalists doing the borrowing and

654
00:35:11,760 --> 00:35:14,120
Speaker 1: the workers did no borrowing at all, it was the

655
00:35:14,120 --> 00:35:16,560
Speaker 1: workers who paid for the higher level of private debt

656
00:35:16,920 --> 00:35:20,440
Speaker 1: because increasing the little level of private debt led to

657
00:35:20,480 --> 00:35:24,120
Speaker 1: a falling worker's share of income. So the transfer of

658
00:35:24,200 --> 00:35:27,600
Speaker 1: money wasn't from firms to bankers, it was from workers

659
00:35:27,600 --> 00:35:29,920
Speaker 1: to bankers, and the firms were sitting in the middle.

660
00:35:30,400 --> 00:35:32,480
Speaker 1: So I would want to reduce the power of the

661
00:35:32,520 --> 00:35:35,160
Speaker 1: financial sector and say, if we make the financial sector

662
00:35:35,200 --> 00:35:39,760
Speaker 1: less powerful, less of a burden on both households and firms,

663
00:35:39,800 --> 00:35:43,080
Speaker 1: both workers and capitalists can benefit from that. We've got

664
00:35:43,080 --> 00:35:45,160
Speaker 1: to reduce the size of Wall Street. Wall Street as

665
00:35:45,200 --> 00:35:49,799
Speaker 1: a burden on American capitalism, not a shepherd to the

666
00:35:50,000 --> 00:35:53,200
Speaker 1: golden future. But nonetheless, I can just see if you

667
00:35:53,280 --> 00:35:57,320
Speaker 1: had full employment, and you had the animosity that exists

668
00:35:57,320 --> 00:36:01,040
Speaker 1: now between American workers and American core operations after last

669
00:36:01,040 --> 00:36:03,799
Speaker 1: thirty or forty years, if you gave power to the

670
00:36:03,840 --> 00:36:06,279
Speaker 1: workers by having full employment. There could be a lot

671
00:36:06,320 --> 00:36:08,600
Speaker 1: of we're going to get even now type attitudes amongst

672
00:36:08,600 --> 00:36:10,400
Speaker 1: workers in terms of you know, you want me to

673
00:36:10,400 --> 00:36:12,799
Speaker 1: come and work for you, pay me more money. There

674
00:36:12,880 --> 00:36:16,160
Speaker 1: there could be those those things leading to a conflictual

675
00:36:16,160 --> 00:36:20,080
Speaker 1: approach and then coming back and trying to screw the

676
00:36:20,120 --> 00:36:23,960
Speaker 1: bargaining power of the workers by bringing back unemployment once more. So,

677
00:36:24,360 --> 00:36:27,000
Speaker 1: by no means do I see a rosy future where

678
00:36:27,000 --> 00:36:31,520
Speaker 1: everybody's holding hands and singing coombay are. This could be

679
00:36:32,000 --> 00:36:34,399
Speaker 1: unless it's done sensibly, you could you could have an

680
00:36:34,400 --> 00:36:36,719
Speaker 1: outbreak of political conflict coming out of the change and

681
00:36:36,760 --> 00:36:40,640
Speaker 1: the power balance that appreciating what mm T means about

682
00:36:40,640 --> 00:36:44,280
Speaker 1: government spending and the capacity to generate full employment actually

683
00:36:44,320 --> 00:36:49,440
Speaker 1: means okay. So speaking of non rosy futures, that's probably

684
00:36:49,520 --> 00:36:52,680
Speaker 1: the perfect segue to finally talk about climate change. So

685
00:36:53,400 --> 00:36:56,920
Speaker 1: you have been incredibly interested in this topic and also

686
00:36:57,120 --> 00:37:01,520
Speaker 1: incredibly scathing when it comes to Some other economists work

687
00:37:01,800 --> 00:37:06,520
Speaker 1: on the actual price or cost of climate change, including

688
00:37:06,560 --> 00:37:10,120
Speaker 1: a certain Pulitzer Prize winning economist who's done a lot

689
00:37:10,160 --> 00:37:12,360
Speaker 1: of work in the Pulitzer Prize is close It was

690
00:37:12,400 --> 00:37:14,160
Speaker 1: a work of fiction, but he's actually in a William

691
00:37:14,160 --> 00:37:17,720
Speaker 1: Northhouse Norbel Prize, which itself is a worth of fiction

692
00:37:17,760 --> 00:37:20,400
Speaker 1: because it's not a Norbel Prize. I'm sorry this is

693
00:37:20,480 --> 00:37:23,680
Speaker 1: as a good slips the right line, though I think

694
00:37:23,680 --> 00:37:25,640
Speaker 1: we stick with that. The Pulitzes are great because it

695
00:37:25,719 --> 00:37:28,239
Speaker 1: actually it's a work of fiction. The Norbel Prize and

696
00:37:28,320 --> 00:37:31,160
Speaker 1: Economics is not a Norbel Prize, and what Lord House

697
00:37:31,200 --> 00:37:34,320
Speaker 1: does is by more is fiction than anything related to fact.

698
00:37:36,360 --> 00:37:40,879
Speaker 1: My media bias showing here entirely focused on one day

699
00:37:40,960 --> 00:37:43,680
Speaker 1: Joe Pulitzer for all thoughts. Okay, I have a bunch

700
00:37:43,680 --> 00:37:47,360
Speaker 1: of questions on this, but like one, why your intense

701
00:37:47,400 --> 00:37:51,239
Speaker 1: interest in the space, and secondly, what is it about

702
00:37:51,280 --> 00:37:55,160
Speaker 1: economics in your traditional economics in your opinion, that makes

703
00:37:55,200 --> 00:37:59,400
Speaker 1: it ill equipped to deal with climate change or to

704
00:37:59,480 --> 00:38:03,359
Speaker 1: model it propperately? Well, the first question, I've been fascinated

705
00:38:03,440 --> 00:38:07,160
Speaker 1: by how we actually include the physical reality of production

706
00:38:07,160 --> 00:38:10,760
Speaker 1: and economic models ever since the seventies, when I first

707
00:38:10,760 --> 00:38:12,799
Speaker 1: became a critic of the main stam economics. Of course,

708
00:38:12,800 --> 00:38:15,000
Speaker 1: at the same time Limits to Growth came out, which

709
00:38:15,000 --> 00:38:17,200
Speaker 1: I thought was a superb piece of work. I understand

710
00:38:17,239 --> 00:38:20,200
Speaker 1: system of dynamics, and I was doing working as doing

711
00:38:20,239 --> 00:38:22,200
Speaker 1: mathematical studies at the time, so I thought it was

712
00:38:22,239 --> 00:38:24,920
Speaker 1: superb and then economists trashed the hell out of it.

713
00:38:24,960 --> 00:38:27,120
Speaker 1: And the economist who did most to trash it was

714
00:38:27,160 --> 00:38:30,600
Speaker 1: one William Nordhouse who wrote a paper called Measurement without Data.

715
00:38:31,200 --> 00:38:33,720
Speaker 1: So that was the beginning of my interests. I didn't

716
00:38:33,880 --> 00:38:37,040
Speaker 1: engage in the academic work on it until two thousand

717
00:38:37,120 --> 00:38:40,600
Speaker 1: and sixteen or seventeen, when I was working with some economists,

718
00:38:40,760 --> 00:38:42,880
Speaker 1: a guy called Bob Airs, who's a physicist who has

719
00:38:42,920 --> 00:38:45,359
Speaker 1: been trying to bring energy into economics for a long

720
00:38:45,400 --> 00:38:48,520
Speaker 1: long time. And then we're working with Bob. I was saying,

721
00:38:48,520 --> 00:38:51,200
Speaker 1: how do we bring the role of energy into how

722
00:38:51,200 --> 00:38:53,719
Speaker 1: economists think about production? Because if you look at not

723
00:38:53,840 --> 00:38:57,120
Speaker 1: just the way that neoclassicals do, but even my more

724
00:38:57,200 --> 00:39:00,640
Speaker 1: realistic post Kanzian school of thought, they might output is

725
00:39:00,640 --> 00:39:04,680
Speaker 1: being generated by labor and capital. Now you can't produce

726
00:39:04,760 --> 00:39:07,839
Speaker 1: anything without energy. So the fact that it wasn't there

727
00:39:08,120 --> 00:39:10,520
Speaker 1: just didn't make any sense to me, and it pushes

728
00:39:10,560 --> 00:39:13,040
Speaker 1: how do you bring it insensibly? And what would happen

729
00:39:13,080 --> 00:39:15,480
Speaker 1: if you look at work by Stielets and Solo To

730
00:39:16,040 --> 00:39:18,880
Speaker 1: very mainstream economist back on the seventies, they said, well,

731
00:39:18,920 --> 00:39:21,400
Speaker 1: let's just add energy in as another factor of production.

732
00:39:21,480 --> 00:39:24,279
Speaker 1: You put labor and capital and energy together and you

733
00:39:24,280 --> 00:39:27,080
Speaker 1: get output. Well, yeah, okay, I'm going to throw I'm

734
00:39:27,080 --> 00:39:28,920
Speaker 1: going to throw a hand grenade into a factory and

735
00:39:28,960 --> 00:39:31,640
Speaker 1: see how many widgets I can produce that way. You

736
00:39:31,680 --> 00:39:34,840
Speaker 1: can't just add energy like you put machines or workers

737
00:39:34,880 --> 00:39:37,719
Speaker 1: inside it and work. Walking through Bob's house one day,

738
00:39:37,760 --> 00:39:40,520
Speaker 1: which is full of statues, a little flash of insight

739
00:39:40,560 --> 00:39:43,560
Speaker 1: popped in my mind. Labor without energy as a corpse,

740
00:39:44,040 --> 00:39:47,200
Speaker 1: capital without energy as a sculpture. In other words, energy

741
00:39:47,280 --> 00:39:49,280
Speaker 1: is needed as an input to both labor and capital

742
00:39:49,280 --> 00:39:52,080
Speaker 1: to allow them to do work. Ten minutes later, I've

743
00:39:52,120 --> 00:39:56,480
Speaker 1: done this idea of bringing energy into models of can

744
00:39:56,640 --> 00:39:58,960
Speaker 1: models of production. So I thought, with that done, the

745
00:39:58,960 --> 00:40:01,120
Speaker 1: paper was published in two thousand and nineteen with the

746
00:40:01,440 --> 00:40:03,680
Speaker 1: innocuous title of the Note on the Role of Energy

747
00:40:03,680 --> 00:40:05,759
Speaker 1: and Production, I thought it was time for me to

748
00:40:05,840 --> 00:40:09,200
Speaker 1: engage in this discussion about climate change. And then in

749
00:40:09,239 --> 00:40:12,600
Speaker 1: two thousand and eighteen Northhouse got the so called Nobel

750
00:40:12,760 --> 00:40:15,200
Speaker 1: for it. Well, and my initial reaction was, at least,

751
00:40:15,200 --> 00:40:18,160
Speaker 1: they're giving a Nobel Prize for environmental work. But then

752
00:40:18,160 --> 00:40:19,960
Speaker 1: I thought I'd better read the literature, which is I

753
00:40:19,960 --> 00:40:22,760
Speaker 1: always dive in even if I can't stand near classical economics.

754
00:40:22,760 --> 00:40:26,000
Speaker 1: I still read it, and I couldn't believe the garbage

755
00:40:26,040 --> 00:40:27,920
Speaker 1: I was reading. Quite frankly, I'm not going to be

756
00:40:27,920 --> 00:40:30,480
Speaker 1: polite about this. This is the worst work I've read

757
00:40:30,520 --> 00:40:33,200
Speaker 1: in fifty years, and the fact that it was given

758
00:40:33,200 --> 00:40:37,080
Speaker 1: a Nobel Prize is not a reason to trust the research.

759
00:40:37,360 --> 00:40:39,600
Speaker 1: It's a reason to shut the Nobel Prize down under

760
00:40:39,640 --> 00:40:43,080
Speaker 1: shut mainstream economics down as well. It's that bad. So

761
00:40:43,200 --> 00:40:46,000
Speaker 1: what is it for people who aren't familiar with the

762
00:40:46,080 --> 00:40:48,120
Speaker 1: work once you've daved into it. What are the What

763
00:40:48,200 --> 00:40:50,680
Speaker 1: are the claims that Nordhost is making that you think

764
00:40:50,960 --> 00:40:53,600
Speaker 1: it's so discrediting of the Nobel Prize. Well, the main

765
00:40:54,320 --> 00:40:57,600
Speaker 1: climb claim that he makes is how trivial climate change

766
00:40:57,640 --> 00:41:00,000
Speaker 1: is going to have you have an impact on the economy.

767
00:41:00,320 --> 00:41:02,600
Speaker 1: So in his Nobel Price speech, which people can find

768
00:41:02,600 --> 00:41:05,600
Speaker 1: on the web quite easily, he said that the with

769
00:41:06,120 --> 00:41:09,439
Speaker 1: no abatement of the impact of climate change, just letting

770
00:41:09,440 --> 00:41:12,040
Speaker 1: the economy roll on. If there if there were no

771
00:41:12,280 --> 00:41:15,799
Speaker 1: damages from climate change at all, then you get a

772
00:41:15,800 --> 00:41:19,439
Speaker 1: certain level of GDP if you include the damages from

773
00:41:19,440 --> 00:41:23,800
Speaker 1: climate change on our productive capabilities, a six degree increase

774
00:41:23,800 --> 00:41:27,120
Speaker 1: in temperature would cause an eight point nine fall in

775
00:41:27,200 --> 00:41:30,400
Speaker 1: g d P six degrees temperature. This is that's published

776
00:41:30,440 --> 00:41:32,440
Speaker 1: in the paper in the American Economic Review, one of

777
00:41:32,440 --> 00:41:36,120
Speaker 1: these specialist journals, in two thousand and nineteen, I think,

778
00:41:36,360 --> 00:41:38,719
Speaker 1: and in his Nobel Price speech he actually says the

779
00:41:38,760 --> 00:41:42,439
Speaker 1: optimal temperature changes of four degree increase in temperature over

780
00:41:42,480 --> 00:41:46,480
Speaker 1: pre industrial levels. Now, I just I couldn't believe it.

781
00:41:46,520 --> 00:41:48,759
Speaker 1: How the hell does you reach those results? So I

782
00:41:48,840 --> 00:41:51,680
Speaker 1: dived into his research, and there's a particular paper in

783
00:41:52,719 --> 00:41:55,480
Speaker 1: called too Slower or Not to Slower the Econimics of

784
00:41:55,520 --> 00:41:58,680
Speaker 1: Global Warming or Economics of Climate Change, And in that

785
00:41:58,800 --> 00:42:04,719
Speaker 1: he assumed, simply assumed that seven percent of industry would

786
00:42:04,760 --> 00:42:07,360
Speaker 1: be unaffected by climate change because it happens in what

787
00:42:07,440 --> 00:42:11,800
Speaker 1: he called carefully controlled environments. That he lumped all manufacturing,

788
00:42:12,120 --> 00:42:16,400
Speaker 1: all services, all of government spending. He even lumped mining

789
00:42:16,440 --> 00:42:18,880
Speaker 1: in there. The only thing those things have in common

790
00:42:19,120 --> 00:42:21,840
Speaker 1: is they happen undercover. Except you know, he didn't everythink

791
00:42:21,840 --> 00:42:24,520
Speaker 1: about open cut mining. Obviously, He's simply saying a root

792
00:42:24,560 --> 00:42:26,920
Speaker 1: will protect you from climate change. Well, I'd like the

793
00:42:26,920 --> 00:42:33,160
Speaker 1: people of Alberta and Calgary and Vancouver and Spokane to

794
00:42:33,239 --> 00:42:36,239
Speaker 1: come and have a conversation with William Nordhouse about how

795
00:42:36,280 --> 00:42:38,719
Speaker 1: much of root protects you from climate change. It is

796
00:42:38,840 --> 00:42:42,840
Speaker 1: an absurd assumption. But this, this is what economists do

797
00:42:42,880 --> 00:42:44,759
Speaker 1: all the time. They want to They make what they

798
00:42:44,840 --> 00:42:49,239
Speaker 1: call simplifying assumptions, which actually, if the simplifying assumption is

799
00:42:49,280 --> 00:42:52,840
Speaker 1: a genuine superfyling assumption is false, you have to you

800
00:42:52,880 --> 00:42:57,480
Speaker 1: have a slightly more complicated model if if these assumptions

801
00:42:57,480 --> 00:43:00,560
Speaker 1: are wrong, the whole world is different. And that's the

802
00:43:00,600 --> 00:43:03,160
Speaker 1: sort of assumption they defended simplifying. So you did that

803
00:43:03,239 --> 00:43:06,560
Speaker 1: first of all, he said, simplifying assumption a root will

804
00:43:06,560 --> 00:43:09,480
Speaker 1: protect you from climate change? And then another one he

805
00:43:09,520 --> 00:43:12,920
Speaker 1: did said, well, we can use the current relationship between

806
00:43:12,960 --> 00:43:16,239
Speaker 1: temperature and income across the United States to say what's

807
00:43:16,280 --> 00:43:18,640
Speaker 1: going to be the impact of climate change, as if

808
00:43:18,719 --> 00:43:22,400
Speaker 1: what we're experiencing now in terms of the before climate

809
00:43:22,480 --> 00:43:25,480
Speaker 1: change hit, in the fact that Florida is poorer than

810
00:43:25,520 --> 00:43:28,320
Speaker 1: New York, and New York is richer than North Dakota

811
00:43:28,719 --> 00:43:31,600
Speaker 1: though the temperature differences there. He said, you know, you

812
00:43:31,680 --> 00:43:33,960
Speaker 1: might get an attempt to see increase in GDP if

813
00:43:34,000 --> 00:43:36,520
Speaker 1: you move from North Dakota to New York, and at

814
00:43:36,600 --> 00:43:38,239
Speaker 1: ten per cent fall if you go from New York

815
00:43:38,280 --> 00:43:41,239
Speaker 1: to Florida. That's all that's going to happen. If we

816
00:43:41,280 --> 00:43:44,359
Speaker 1: have a six degree increase in temperature to get us

817
00:43:44,360 --> 00:43:47,719
Speaker 1: from North Dakota to New York and another six to

818
00:43:47,760 --> 00:43:51,880
Speaker 1: get us from New York to miam that is insanely stupid.

819
00:43:52,600 --> 00:43:55,799
Speaker 1: And those assumptions are essential part of coming out and

820
00:43:55,880 --> 00:43:58,959
Speaker 1: saying that a six degree increase in temperature will only

821
00:43:59,000 --> 00:44:01,799
Speaker 1: reduce to PAY by eight points. No interesting, I think

822
00:44:01,800 --> 00:44:05,120
Speaker 1: it was, it'll eliminate our spaces. That's closely to what

823
00:44:05,200 --> 00:44:24,680
Speaker 1: the impact will be. So there's something you said there

824
00:44:24,719 --> 00:44:30,080
Speaker 1: about traditional economics, uh, not dealing that well with the physical.

825
00:44:30,160 --> 00:44:32,600
Speaker 1: And this is also something we've been talking a lot

826
00:44:33,000 --> 00:44:36,920
Speaker 1: about on odd lots like this idea that for instance, UM,

827
00:44:36,960 --> 00:44:40,280
Speaker 1: some classical ideas of the benefits of free trade for instance,

828
00:44:40,280 --> 00:44:44,040
Speaker 1: and competitive advantage don't actually take into account transport costs.

829
00:44:44,040 --> 00:44:48,440
Speaker 1: So in a year like when we suddenly see um

830
00:44:48,840 --> 00:44:53,239
Speaker 1: borders closed and gridlock and shipping and shipping costs going

831
00:44:53,320 --> 00:44:57,120
Speaker 1: up quite a lot, Uh, classical economics isn't well equipped

832
00:44:57,280 --> 00:44:59,680
Speaker 1: to deal with that, or to work around it, or

833
00:44:59,760 --> 00:45:04,200
Speaker 1: to sort of synthesize it. I'm wondering, are you looking

834
00:45:04,200 --> 00:45:06,880
Speaker 1: at that aspect of the economy as well, like this

835
00:45:06,960 --> 00:45:12,120
Speaker 1: idea of things being more complex than traditional economics has allowed.

836
00:45:12,360 --> 00:45:17,279
Speaker 1: Is that something that has proven in your mind? Oh? Well,

837
00:45:17,280 --> 00:45:20,440
Speaker 1: and truly yeah. I mean the whole idea of the

838
00:45:20,800 --> 00:45:23,560
Speaker 1: fact we've got these incredibly long supply chains when they're

839
00:45:23,840 --> 00:45:27,239
Speaker 1: up to a hundred countries involved in manufacturing an Apple iPhone,

840
00:45:27,560 --> 00:45:29,960
Speaker 1: or the Apple iPhone stops being made when cloud cloak

841
00:45:30,040 --> 00:45:33,960
Speaker 1: COVID hits. There's an incredible fragility in the economy we've

842
00:45:34,160 --> 00:45:38,600
Speaker 1: designed to make it incredibly efficient. Efficiency is the enemy

843
00:45:38,640 --> 00:45:42,360
Speaker 1: of resilience. An efficient bear has no fact when it

844
00:45:42,400 --> 00:45:46,120
Speaker 1: goes into hibernation and therefore starts. So you have to

845
00:45:46,160 --> 00:45:50,200
Speaker 1: have buffers. You have to have surplus resources to be available,

846
00:45:50,320 --> 00:45:53,399
Speaker 1: surplus beds, for example, so that when when climb, when

847
00:45:53,520 --> 00:45:56,000
Speaker 1: you go pandemic hits, you've got room and you've got

848
00:45:56,360 --> 00:45:59,360
Speaker 1: root extra intensive care beds. Instead. We've seen the panic

849
00:45:59,400 --> 00:46:01,759
Speaker 1: we've been through because we trimmed it down to the

850
00:46:01,800 --> 00:46:04,480
Speaker 1: stage where there was only slightly more supply than you

851
00:46:04,520 --> 00:46:08,240
Speaker 1: would get from demand in a normal situation, normally doesn't

852
00:46:08,239 --> 00:46:12,920
Speaker 1: exist anymore. So yeah, it's it's incredibly ignorant about the

853
00:46:12,960 --> 00:46:15,360
Speaker 1: physical world. And this is why they can make the

854
00:46:15,440 --> 00:46:20,440
Speaker 1: stupid assumptions they make about manufacturing. All you need is

855
00:46:20,440 --> 00:46:23,239
Speaker 1: a roof to protect you from climate change. Well, if

856
00:46:23,280 --> 00:46:26,520
Speaker 1: you can't get energy, your faculr machine stop turning. If

857
00:46:26,560 --> 00:46:29,520
Speaker 1: you can't get workers, because the temperature where you're living

858
00:46:29,840 --> 00:46:32,520
Speaker 1: is simply incompatible with human life, there will be no

859
00:46:32,600 --> 00:46:36,399
Speaker 1: workers to manage those machines. So there's a there's a

860
00:46:36,440 --> 00:46:39,919
Speaker 1: physical unreality to mainstream economics, and that's why one part

861
00:46:39,920 --> 00:46:43,960
Speaker 1: of another group called the Institute for Biophysical Economics trying

862
00:46:44,040 --> 00:46:48,440
Speaker 1: to say we have to build a physically grounded, biologically

863
00:46:48,480 --> 00:46:51,719
Speaker 1: realistic model of the economy because we certainly haven't got

864
00:46:51,719 --> 00:46:53,840
Speaker 1: it now, and that's why we've let ourselves up the

865
00:46:53,840 --> 00:46:57,839
Speaker 1: climate change guid garden path. Yeah, I want to talk

866
00:46:57,920 --> 00:47:00,279
Speaker 1: more about that because you know, you mentioned and you're

867
00:47:00,320 --> 00:47:03,200
Speaker 1: sort of like the idea of like, okay, capital as

868
00:47:03,239 --> 00:47:06,000
Speaker 1: we know it physical capital without energy is is a

869
00:47:06,040 --> 00:47:07,960
Speaker 1: statue which I thought it was a really nice way

870
00:47:07,960 --> 00:47:10,040
Speaker 1: to put it, and that we can't just think of

871
00:47:10,080 --> 00:47:12,600
Speaker 1: like energy as yet, you know, wrap that into capital

872
00:47:12,640 --> 00:47:14,680
Speaker 1: or just sort of another one of the factors of production.

873
00:47:15,120 --> 00:47:19,040
Speaker 1: What happens when you introduce energy into the equation, So

874
00:47:19,080 --> 00:47:23,600
Speaker 1: as you describe, okay, we need to labor, capital and energy,

875
00:47:23,640 --> 00:47:26,400
Speaker 1: what are the new outputs in sort of like the

876
00:47:26,480 --> 00:47:28,960
Speaker 1: models once you break it out that way, well, once

877
00:47:29,000 --> 00:47:31,440
Speaker 1: you get like, for example, if you know the what

878
00:47:31,480 --> 00:47:34,680
Speaker 1: they call the cab Douglas production function that the mainstream uses.

879
00:47:35,440 --> 00:47:37,680
Speaker 1: One of the mysteries they've had for a long time

880
00:47:37,760 --> 00:47:40,040
Speaker 1: is that that that that attributes output to being a

881
00:47:40,120 --> 00:47:43,960
Speaker 1: factor of your technology times labor times capital. And they

882
00:47:44,000 --> 00:47:47,399
Speaker 1: always thought that, you know, the labor and capital would

883
00:47:47,400 --> 00:47:50,200
Speaker 1: be the main sources of change and apple. But the

884
00:47:50,239 --> 00:47:52,880
Speaker 1: phone is actually technology, and they call it what they

885
00:47:52,880 --> 00:47:55,960
Speaker 1: call the solo residual. Now, when I put my energy

886
00:47:56,000 --> 00:47:58,520
Speaker 1: as an input to labor and capital into that function,

887
00:47:58,800 --> 00:48:01,479
Speaker 1: what I get is that the so called technology, which

888
00:48:01,760 --> 00:48:04,640
Speaker 1: it still is obviously a form of issue of technology,

889
00:48:04,840 --> 00:48:07,279
Speaker 1: is the energy consumption level of the typical machine of

890
00:48:07,280 --> 00:48:10,719
Speaker 1: a particular generation. So if you look at the energy

891
00:48:10,760 --> 00:48:15,040
Speaker 1: consumption of a James what steam engine, that was about

892
00:48:15,040 --> 00:48:17,560
Speaker 1: ten tons of cold per day. If you look at

893
00:48:17,600 --> 00:48:21,680
Speaker 1: the elon Musk's Falcon rocket, that's about effectively ten tons

894
00:48:21,719 --> 00:48:26,080
Speaker 1: of kerosene per second. So that's where the dramatic increase

895
00:48:26,120 --> 00:48:28,759
Speaker 1: and income has come from. We really are benefiting out

896
00:48:28,760 --> 00:48:31,360
Speaker 1: of all of us work as capitalist bank as the

897
00:48:31,360 --> 00:48:35,400
Speaker 1: works are benefiting out of using far more energy for production.

898
00:48:35,680 --> 00:48:37,919
Speaker 1: But what that then gives you is, well, how sustainable

899
00:48:38,040 --> 00:48:40,240
Speaker 1: is that? And when you have energy as an input

900
00:48:40,320 --> 00:48:43,400
Speaker 1: to production, in this sense you also get the necessity

901
00:48:43,440 --> 00:48:47,000
Speaker 1: of both waste energy and waste materials. You can't produce

902
00:48:47,040 --> 00:48:52,280
Speaker 1: output without energy and matter. You therefore can't produce useful

903
00:48:52,320 --> 00:48:57,400
Speaker 1: output without waste energy and waste matter dumping into the environment.

904
00:48:57,760 --> 00:49:00,360
Speaker 1: So you then have a link between the economy and

905
00:49:00,440 --> 00:49:03,480
Speaker 1: your ecology. And of course the question is there's many

906
00:49:03,480 --> 00:49:05,840
Speaker 1: many questions out of it. What is the impact of

907
00:49:05,960 --> 00:49:08,520
Speaker 1: using all that energy and using all that matter on

908
00:49:08,800 --> 00:49:13,200
Speaker 1: the sustainability of the ecosystem And you would be thinking

909
00:49:13,239 --> 00:49:17,000
Speaker 1: about that right from the outset. We have been completely

910
00:49:17,040 --> 00:49:20,440
Speaker 1: blindsided by that over the last fifty years, and in

911
00:49:20,560 --> 00:49:24,440
Speaker 1: the perfectly two generations of humans, we've troubled or quadrupled

912
00:49:24,480 --> 00:49:27,120
Speaker 1: alert on the planet. And that's where we're seeing things

913
00:49:27,160 --> 00:49:30,480
Speaker 1: like the impact of climate change driving up temperature. That's

914
00:49:31,120 --> 00:49:33,120
Speaker 1: carbon dioxide is one of the forms of ways to

915
00:49:33,120 --> 00:49:35,360
Speaker 1: we dump into the environment, and we're now seeing the

916
00:49:35,400 --> 00:49:40,600
Speaker 1: impact of that in an incontrovertible way in Canada right now.

917
00:49:41,120 --> 00:49:44,000
Speaker 1: But you therefore have to think in terms of the

918
00:49:44,040 --> 00:49:48,959
Speaker 1: physical constraints of a production system on a planet, and

919
00:49:49,040 --> 00:49:52,359
Speaker 1: we have completely ignored that and we're now paying for it.

920
00:49:53,560 --> 00:49:57,000
Speaker 1: Given that framework, what's your solution for it then, Because

921
00:49:57,040 --> 00:50:00,879
Speaker 1: of course the challenge here is always that, um, well,

922
00:50:00,920 --> 00:50:03,800
Speaker 1: first of all, people don't seem to appreciate the physical

923
00:50:03,840 --> 00:50:08,359
Speaker 1: aspect of economic growth. But secondly, uh, it's that sort

924
00:50:08,400 --> 00:50:12,319
Speaker 1: of classic commons problem right where everyone can abuse the

925
00:50:12,440 --> 00:50:16,960
Speaker 1: environment because they individually benefit from it. So how do

926
00:50:16,960 --> 00:50:22,040
Speaker 1: you actually fix that? Well, I think we could have

927
00:50:22,040 --> 00:50:24,040
Speaker 1: fixed it if we listened to the limits to growth

928
00:50:24,120 --> 00:50:26,400
Speaker 1: arguments fifty years ago. We could have fixed it gradually

929
00:50:26,440 --> 00:50:29,759
Speaker 1: using market mechanisms like carbon taxes and carbon pricing would

930
00:50:29,800 --> 00:50:33,560
Speaker 1: have been feasible, and also constraints on population growth and

931
00:50:33,640 --> 00:50:36,440
Speaker 1: a whole range of other issues that when the limits

932
00:50:36,440 --> 00:50:39,120
Speaker 1: growth through their simulations, they had about I think about

933
00:50:39,160 --> 00:50:41,759
Speaker 1: fourteen simulations, and three or four of them led to

934
00:50:41,760 --> 00:50:46,399
Speaker 1: a sustainable future where we continued having up to three

935
00:50:46,400 --> 00:50:49,319
Speaker 1: times the standard of living. The average standard living they

936
00:50:49,360 --> 00:50:51,640
Speaker 1: got for the whole planet was about three times the

937
00:50:51,640 --> 00:50:54,719
Speaker 1: standard living at an American in nineteen seventy, and since

938
00:50:54,760 --> 00:50:57,120
Speaker 1: Americans in nine and seventy, most of the martine better

939
00:50:57,160 --> 00:50:59,440
Speaker 1: off today than they were back in nine in seventy.

940
00:50:59,680 --> 00:51:02,480
Speaker 1: Given the skew and income distribution, that would be a

941
00:51:02,480 --> 00:51:05,759
Speaker 1: pretty a pretty darn nice world now. Instead, because we're

942
00:51:05,800 --> 00:51:09,719
Speaker 1: delayed it for fifty years and troubled or quadrupled a

943
00:51:09,719 --> 00:51:12,600
Speaker 1: load on the planet, I think we're in massive overshirt

944
00:51:12,840 --> 00:51:15,360
Speaker 1: and to get to a sustainable level, we've got to

945
00:51:15,400 --> 00:51:17,080
Speaker 1: go backwards. We have to have our people are calling

946
00:51:17,160 --> 00:51:21,360
Speaker 1: the growth, and we're not going to do it voluntarily. Again.

947
00:51:21,520 --> 00:51:23,719
Speaker 1: I think we'll do it because we're forced into it

948
00:51:23,760 --> 00:51:27,200
Speaker 1: with events like the Canadian heat wave and worse to come.

949
00:51:28,080 --> 00:51:30,200
Speaker 1: I can't that that will be something which has to

950
00:51:30,200 --> 00:51:32,680
Speaker 1: be done by a command economy. You can't do it

951
00:51:32,800 --> 00:51:35,160
Speaker 1: using market mechanisms. So I think in that sense we've

952
00:51:35,160 --> 00:51:38,120
Speaker 1: got ourselves into another war. But it's not that it's

953
00:51:38,120 --> 00:51:40,200
Speaker 1: not the war on climate. It's a war to restore

954
00:51:40,239 --> 00:51:43,520
Speaker 1: the climate, and that means really a war on our

955
00:51:43,640 --> 00:51:47,279
Speaker 1: over consumption on the planet. And you know, the only

956
00:51:47,280 --> 00:51:49,880
Speaker 1: way I can see it happening is people that people

957
00:51:50,000 --> 00:51:53,719
Speaker 1: truly realize that this is an existential threat, not for

958
00:51:53,760 --> 00:51:57,640
Speaker 1: their children or their children shouldn it's an existential threat

959
00:51:57,640 --> 00:52:01,440
Speaker 1: for anybody alive today. Thinking back to the beginning of

960
00:52:01,480 --> 00:52:04,839
Speaker 1: the conversation, of course, and you know, there has been

961
00:52:04,880 --> 00:52:09,160
Speaker 1: like there's a big turning point, perhaps from a fiscal perspective,

962
00:52:09,800 --> 00:52:13,319
Speaker 1: in rejecting austerity. And you pointed out to that, you know,

963
00:52:13,360 --> 00:52:17,040
Speaker 1: at times of like extreme crisis, such as prior to wars,

964
00:52:17,480 --> 00:52:20,640
Speaker 1: necessity changes people's perception of like what the government is

965
00:52:20,680 --> 00:52:22,719
Speaker 1: capable of doing. And I think that, like you know,

966
00:52:22,840 --> 00:52:27,640
Speaker 1: right now the political debate around climate there seems to

967
00:52:27,640 --> 00:52:29,920
Speaker 1: be a lot of impulse to address it, but not

968
00:52:30,040 --> 00:52:32,520
Speaker 1: a lot of impulse to do what you've just described,

969
00:52:32,960 --> 00:52:36,360
Speaker 1: which is essentially a form of de facto austerity, except

970
00:52:36,400 --> 00:52:39,239
Speaker 1: it's not about um. The pre you know, the pretext

971
00:52:39,640 --> 00:52:43,319
Speaker 1: or the argument is not fiscal sustainability but sort of

972
00:52:43,400 --> 00:52:47,760
Speaker 1: ecological sustainability, Like how do you build the politics though

973
00:52:47,920 --> 00:52:51,560
Speaker 1: for what you're describing, it would for most people like

974
00:52:51,640 --> 00:52:54,240
Speaker 1: be uh, you know, a sort of an austerity regime.

975
00:52:54,560 --> 00:52:58,120
Speaker 1: It won't be done in any voluntary sense. I mean people,

976
00:52:58,880 --> 00:53:02,080
Speaker 1: most people clearly uninterested in economics. I've got, I've got

977
00:53:02,120 --> 00:53:04,960
Speaker 1: used at the time. It's only obsessive like us who

978
00:53:04,960 --> 00:53:07,160
Speaker 1: really want to know how the economy operates at all times.

979
00:53:07,440 --> 00:53:09,759
Speaker 1: Most people a bit like me with a car. I

980
00:53:09,800 --> 00:53:11,480
Speaker 1: only want to know how the energy works when it

981
00:53:11,520 --> 00:53:14,600
Speaker 1: stops working, you know, Otherwise ourssum it's just going to

982
00:53:14,719 --> 00:53:16,560
Speaker 1: continue ticking over and I hop in the car and

983
00:53:16,600 --> 00:53:19,200
Speaker 1: turn the engine on and driveway on going and turn

984
00:53:19,280 --> 00:53:21,360
Speaker 1: it off again. And I don't think about all the

985
00:53:21,360 --> 00:53:24,759
Speaker 1: complicated mechanics involved in making that possible. So the same

986
00:53:24,800 --> 00:53:28,200
Speaker 1: thing applies to the economy for most people, and therefore

987
00:53:28,680 --> 00:53:31,680
Speaker 1: they can't see any need to restrain their own spending.

988
00:53:31,960 --> 00:53:35,839
Speaker 1: They won't voluntarily turned vegan, they won't voluntarily walk rather

989
00:53:35,880 --> 00:53:38,160
Speaker 1: than hop in the car and drive to the local shop.

990
00:53:38,760 --> 00:53:40,520
Speaker 1: It's going to be a thing, I think, Holly hell,

991
00:53:40,600 --> 00:53:43,200
Speaker 1: if I don't do that, we're all going to die. Now.

992
00:53:43,280 --> 00:53:45,879
Speaker 1: If you look back to the the the Second World War,

993
00:53:46,800 --> 00:53:50,239
Speaker 1: that realization hit England after the Phony War period, when

994
00:53:50,280 --> 00:53:52,719
Speaker 1: they had to suddenly evacuate what was left to their

995
00:53:52,800 --> 00:53:56,720
Speaker 1: army out of Dunkirk, and you had very rapid rapid

996
00:53:56,760 --> 00:54:00,239
Speaker 1: procession Pole and falls, France falls and suddenly really held

997
00:54:00,320 --> 00:54:02,799
Speaker 1: us is serious. We've got to throw all our resources

998
00:54:03,200 --> 00:54:06,560
Speaker 1: at trying to defeat this enemy. And then in that

999
00:54:06,680 --> 00:54:10,600
Speaker 1: situation people accepted rational. Now, I think the same thing

1000
00:54:10,640 --> 00:54:12,799
Speaker 1: is going to apply here. We are going to need

1001
00:54:13,280 --> 00:54:17,279
Speaker 1: some serious crisis, and then when it does, people will

1002
00:54:17,320 --> 00:54:20,320
Speaker 1: suddenly realize this isn't something for two or three centuries

1003
00:54:20,320 --> 00:54:23,160
Speaker 1: in the future, which is what William Nordhouse literally says.

1004
00:54:23,640 --> 00:54:26,880
Speaker 1: He says limited small damages, relatively small damages in the

1005
00:54:26,920 --> 00:54:29,760
Speaker 1: next two centuries. That's in one of his published papers.

1006
00:54:29,960 --> 00:54:33,320
Speaker 1: It's not relative small damages. They're huge damages. They're becoming

1007
00:54:33,600 --> 00:54:35,680
Speaker 1: if we're lucky in the next thirty years, if we're

1008
00:54:35,719 --> 00:54:39,399
Speaker 1: unlucky in the next ten and when that realization hits

1009
00:54:39,760 --> 00:54:43,239
Speaker 1: then it's an existential threat. Then in those situations, people

1010
00:54:43,320 --> 00:54:46,120
Speaker 1: are willing to accept constraints on what they can do

1011
00:54:46,400 --> 00:54:49,799
Speaker 1: to drastically reduce our level of consumption and give us

1012
00:54:49,840 --> 00:54:54,200
Speaker 1: some possibility of throwing our resources rather than producing more

1013
00:54:54,239 --> 00:54:57,600
Speaker 1: and more plastic furniture. All this junk we we consume

1014
00:54:58,239 --> 00:55:01,319
Speaker 1: drastically reduced. It is just a center true consumption, and

1015
00:55:01,440 --> 00:55:05,719
Speaker 1: all our resources are directed at creating non carbon generating

1016
00:55:06,120 --> 00:55:09,040
Speaker 1: energy systems and reducing our load on the planet, trying

1017
00:55:09,080 --> 00:55:12,759
Speaker 1: to restore the biodiversity, to restore the things like the

1018
00:55:12,880 --> 00:55:15,520
Speaker 1: artic which we're obviously losing, the Arctic summer see us,

1019
00:55:15,560 --> 00:55:17,840
Speaker 1: we're losing right now. Everything has to be going to

1020
00:55:17,920 --> 00:55:21,960
Speaker 1: VACTU trying to restore the stability of the climate that

1021
00:55:22,120 --> 00:55:25,120
Speaker 1: we have just with the Holocene climate that we evolved

1022
00:55:25,160 --> 00:55:27,719
Speaker 1: our societies and we've got to rebuild that for our

1023
00:55:27,800 --> 00:55:31,200
Speaker 1: societies be able to continue existing. Only once that realization

1024
00:55:31,320 --> 00:55:34,279
Speaker 1: hits I think will anything be done. And in that case,

1025
00:55:34,360 --> 00:55:36,920
Speaker 1: we're not going to be getting there ahead of it.

1026
00:55:37,000 --> 00:55:40,479
Speaker 1: We're going to be in cata catastrophe catch up mode.

1027
00:55:40,960 --> 00:55:42,760
Speaker 1: I want to see it happened as soon as possible,

1028
00:55:42,840 --> 00:55:45,200
Speaker 1: just so we reverse direction before it gets even worse.

1029
00:55:46,120 --> 00:55:49,920
Speaker 1: What about this sort of like liberal optimists would say, well,

1030
00:55:50,080 --> 00:55:53,839
Speaker 1: nuclear power and carbon sequestration and other technologies that can

1031
00:55:54,000 --> 00:55:57,239
Speaker 1: address some of these things without the sort of like

1032
00:55:57,440 --> 00:56:03,320
Speaker 1: extreme austerity regime that you're describing. I assume your skeptical

1033
00:56:03,600 --> 00:56:07,399
Speaker 1: of those paths. What I'd like to hear why yeah.

1034
00:56:07,600 --> 00:56:09,840
Speaker 1: I mean to two reasons. First of all, where's the

1035
00:56:09,880 --> 00:56:13,040
Speaker 1: engineers for this. I have a lot of engineers on

1036
00:56:13,120 --> 00:56:16,120
Speaker 1: my Patreon website, and some of them are totally pro

1037
00:56:16,400 --> 00:56:19,880
Speaker 1: solar and some are totally pro nuclear. And I've come

1038
00:56:19,920 --> 00:56:21,759
Speaker 1: out in a balance of both saying, yes, if we

1039
00:56:21,840 --> 00:56:25,400
Speaker 1: had a well designed energy system, we'd have both nuclear

1040
00:56:26,480 --> 00:56:30,239
Speaker 1: things like thorium reactors rather than uranium, but those and

1041
00:56:30,719 --> 00:56:33,200
Speaker 1: and lots of solar power and wind as well. But

1042
00:56:33,440 --> 00:56:36,439
Speaker 1: the reality is we haven't produced one thorium reactor since

1043
00:56:36,480 --> 00:56:39,600
Speaker 1: the very first trial one was done before America scrapped

1044
00:56:39,600 --> 00:56:42,040
Speaker 1: the thorium for uranium reactors because that way you could

1045
00:56:42,040 --> 00:56:45,120
Speaker 1: make nuclear weapons. So we simply don't have the technology

1046
00:56:45,560 --> 00:56:48,680
Speaker 1: or the engineers able to produce them as rapidly as

1047
00:56:48,760 --> 00:56:52,240
Speaker 1: we need to. And then it's actually easier to produce

1048
00:56:52,320 --> 00:56:55,880
Speaker 1: the solar power, because so long as we can make

1049
00:56:55,920 --> 00:56:58,400
Speaker 1: the solar cells out of the factories, the work of

1050
00:56:58,480 --> 00:57:01,360
Speaker 1: installing them as trivial compared to the work of building

1051
00:57:01,560 --> 00:57:05,279
Speaker 1: and installing a thorium nuclear reactor. So in that sense,

1052
00:57:05,320 --> 00:57:08,120
Speaker 1: I see solar is a more immediate way of addressing

1053
00:57:08,360 --> 00:57:10,520
Speaker 1: our need to get away from coal. But the other

1054
00:57:10,560 --> 00:57:13,440
Speaker 1: trouble is it isn't just carbon dioxide. The whole focus

1055
00:57:13,520 --> 00:57:15,680
Speaker 1: on carbon diox that actually suits to some extent the

1056
00:57:16,000 --> 00:57:19,560
Speaker 1: climate change trivial arcers like Born Lomborg and Norderhouse and

1057
00:57:19,640 --> 00:57:22,080
Speaker 1: all that mob because it's leading out things like an

1058
00:57:22,120 --> 00:57:25,520
Speaker 1: impact on biodiversity. Now you may you may that have

1059
00:57:25,640 --> 00:57:29,920
Speaker 1: seen this was a segment recently on snot ocean snot

1060
00:57:30,360 --> 00:57:35,080
Speaker 1: off the coast of Turkey, huge disturbance to the bio

1061
00:57:35,960 --> 00:57:39,880
Speaker 1: the biological patterns in one of the ocean between the

1062
00:57:39,960 --> 00:57:43,280
Speaker 1: Mediterranean and the and the Black Sea. And this is

1063
00:57:43,320 --> 00:57:46,440
Speaker 1: the sort of damage we're doing by the runoffs we have,

1064
00:57:46,600 --> 00:57:50,400
Speaker 1: the fertilizer runoffs are putting into the ocean, the way

1065
00:57:50,440 --> 00:57:55,200
Speaker 1: we're wiping out species. That layer of snot is in

1066
00:57:55,360 --> 00:57:58,240
Speaker 1: some places apparently up to a meter thick. It means

1067
00:57:58,280 --> 00:58:00,080
Speaker 1: that any fishment ooth that are going to starve have

1068
00:58:01,680 --> 00:58:05,400
Speaker 1: lose oxygen and and we're going to have mass die offs.

1069
00:58:05,960 --> 00:58:08,200
Speaker 1: So it isn't just the carbon, It isn't just the

1070
00:58:08,360 --> 00:58:10,360
Speaker 1: energy issue. It's the whole pressure of putting on the

1071
00:58:10,400 --> 00:58:13,400
Speaker 1: boss sphere and we have to restrain ourselves in ways

1072
00:58:13,440 --> 00:58:17,040
Speaker 1: that humanity in general, it isn't just under capitalism, humanity

1073
00:58:17,080 --> 00:58:20,720
Speaker 1: in general has never practiced restraint, and until we do,

1074
00:58:21,000 --> 00:58:24,640
Speaker 1: we're not going to have a sustainable future on the planet. Sorry,

1075
00:58:24,720 --> 00:58:27,480
Speaker 1: I have one more question based on that, but a

1076
00:58:27,600 --> 00:58:32,000
Speaker 1: big part of our conversation has been how do you

1077
00:58:32,080 --> 00:58:36,520
Speaker 1: change attitudes, whether it's towards um physical capacity and the deficit,

1078
00:58:36,920 --> 00:58:40,880
Speaker 1: or towards climate change, or towards the relationship between capital

1079
00:58:41,280 --> 00:58:44,480
Speaker 1: and labor. What do you think is needed to change

1080
00:58:44,720 --> 00:58:49,600
Speaker 1: or to shake up classical economics and maybe change the

1081
00:58:49,640 --> 00:58:52,720
Speaker 1: way um economists are are viewing a lot of these issues.

1082
00:58:54,200 --> 00:58:57,800
Speaker 1: I think economists wal lost cause, frankly, because once you

1083
00:58:57,880 --> 00:59:01,000
Speaker 1: believe this stuff, it's a self contan belief system. And

1084
00:59:01,040 --> 00:59:03,280
Speaker 1: this is not just being critical of economists, it's something

1085
00:59:03,360 --> 00:59:06,080
Speaker 1: about humanity as well. Max Plank, who's the guy who

1086
00:59:06,160 --> 00:59:09,200
Speaker 1: discovered quantum mechanics by solving what was called the black

1087
00:59:09,240 --> 00:59:13,840
Speaker 1: body radiation problem using complex mathematics. He realized that part

1088
00:59:13,880 --> 00:59:16,240
Speaker 1: of the solution involved energy being discreet coming and what

1089
00:59:16,360 --> 00:59:19,280
Speaker 1: we now call quanta, rather than being continuous, which was

1090
00:59:19,360 --> 00:59:22,800
Speaker 1: the assumption of the Maxwellian physicists that he was raised

1091
00:59:22,960 --> 00:59:25,760
Speaker 1: and all these colleagues were Maxwellian physicists. Now, he tried

1092
00:59:25,800 --> 00:59:27,800
Speaker 1: to persuade his fellows that, you know, they had to

1093
00:59:27,840 --> 00:59:30,600
Speaker 1: think of energy and discreete units of quanta rather than

1094
00:59:30,680 --> 00:59:32,960
Speaker 1: being smooth, and they simply couldn't do it. And he

1095
00:59:33,080 --> 00:59:35,560
Speaker 1: finally wrote a wonderful line which is summarized by saying

1096
00:59:35,760 --> 00:59:39,200
Speaker 1: science advances one funeral at a time. That works in

1097
00:59:39,360 --> 00:59:43,880
Speaker 1: sciences because the experiments that prove that the Maxwellian thing

1098
00:59:43,960 --> 00:59:47,000
Speaker 1: didn't work, you can do those experiments thaying it exactly

1099
00:59:47,040 --> 00:59:49,760
Speaker 1: the same results. You can reproduce what sciences did back

1100
00:59:49,760 --> 00:59:52,480
Speaker 1: then to find that the old theory doesn't work. And

1101
00:59:52,560 --> 00:59:54,800
Speaker 1: so when students come in, they've got these professors who

1102
00:59:54,840 --> 00:59:57,440
Speaker 1: are still teaching them the old stuff. But these students

1103
00:59:57,520 --> 01:00:00,160
Speaker 1: are aware of that us that the old stuff us

1104
01:00:00,200 --> 01:00:03,240
Speaker 1: and solve this new problem. And so when the professors

1105
01:00:04,040 --> 01:00:06,000
Speaker 1: get to the stage they've got to replace themselves. They

1106
01:00:06,040 --> 01:00:08,600
Speaker 1: retire or they die. They've got a higher new star

1107
01:00:08,800 --> 01:00:12,280
Speaker 1: students as staff. And those students are dedicated in a

1108
01:00:12,360 --> 01:00:14,960
Speaker 1: new way of thinking. That's why his science progresses one

1109
01:00:15,040 --> 01:00:17,480
Speaker 1: funeral at a time. But in economics, you can have

1110
01:00:17,520 --> 01:00:20,640
Speaker 1: a crisis like the Great Depression, and it becomes a

1111
01:00:20,720 --> 01:00:23,680
Speaker 1: history nobody knows about it. You can't reproduce the Great depression,

1112
01:00:24,120 --> 01:00:26,280
Speaker 1: we have the Great recession. You can't reproduce that and

1113
01:00:26,360 --> 01:00:29,560
Speaker 1: see whether postcamcing approach would work better than a new

1114
01:00:29,640 --> 01:00:32,640
Speaker 1: classical approach. So we tend to forget history, We forget

1115
01:00:32,680 --> 01:00:35,120
Speaker 1: the experience we've done in the real world in which

1116
01:00:35,160 --> 01:00:37,960
Speaker 1: we live, and then new people come along and get

1117
01:00:38,000 --> 01:00:41,120
Speaker 1: taught by the same old neoclassical lot. And the neo

1118
01:00:41,160 --> 01:00:44,440
Speaker 1: classical vision is a beautiful vision of an effectively an

1119
01:00:44,480 --> 01:00:49,200
Speaker 1: anarchist society with no power to corrupt everything, and where

1120
01:00:49,200 --> 01:00:51,720
Speaker 1: there's no need for government. It's all done by the market,

1121
01:00:51,760 --> 01:00:55,200
Speaker 1: and it's all nice, anonymous and egalitarian. And that is

1122
01:00:55,240 --> 01:00:58,600
Speaker 1: such a seductive vision that these nerds who come along

1123
01:00:58,680 --> 01:01:01,720
Speaker 1: and fall for this stuff end up reproducing it again.

1124
01:01:02,200 --> 01:01:05,400
Speaker 1: You can't get rid of them. So I say economics

1125
01:01:05,440 --> 01:01:07,720
Speaker 1: does not progress one funeral at the time. We have

1126
01:01:07,880 --> 01:01:10,480
Speaker 1: to replace a lock stock and barrel. And I'd be

1127
01:01:10,560 --> 01:01:13,960
Speaker 1: sending these economists off to go plant trees somewhere, or

1128
01:01:14,520 --> 01:01:18,640
Speaker 1: maybe teach a few mathematics classes to history students, rather

1129
01:01:18,760 --> 01:01:22,080
Speaker 1: than you can't convince them, you can't convert them. But

1130
01:01:22,240 --> 01:01:26,240
Speaker 1: with the last people to realize the world has changed, well,

1131
01:01:26,320 --> 01:01:29,840
Speaker 1: Professor Keen an absolute pleasure speaking with you. Thank you

1132
01:01:29,920 --> 01:01:33,760
Speaker 1: so much for coming on odd Blots and really fascinating conversation.

1133
01:01:33,840 --> 01:01:35,920
Speaker 1: So thank you and thank you for the inside of

1134
01:01:36,200 --> 01:01:38,760
Speaker 1: a lot of Funapple. Wasn't it got a bit hairy? There? Have?

1135
01:01:38,880 --> 01:01:43,400
Speaker 1: It didn't get to Harry? No, that was great, really good. Okay, great, Yeah,

1136
01:01:43,560 --> 01:02:02,160
Speaker 1: it's really good. Thanks so much, Chess So Joe, uh,

1137
01:02:02,800 --> 01:02:05,360
Speaker 1: really a fascinating conversation and there's so many bits and

1138
01:02:05,400 --> 01:02:08,520
Speaker 1: pieces to pull out of it. One thing I really

1139
01:02:08,640 --> 01:02:13,760
Speaker 1: liked well, in addition to Professor Keane's emphasis on the physical,

1140
01:02:13,960 --> 01:02:16,600
Speaker 1: which again has been one of our themes for this year,

1141
01:02:16,720 --> 01:02:18,840
Speaker 1: this idea that economics actually doesn't do a very good

1142
01:02:18,920 --> 01:02:21,560
Speaker 1: job of taking that into account. But I really like

1143
01:02:21,680 --> 01:02:25,520
Speaker 1: the distinction between public and private debt, and if you

1144
01:02:25,560 --> 01:02:28,520
Speaker 1: just look at the way the world works, it's absolutely

1145
01:02:28,560 --> 01:02:32,080
Speaker 1: true that like classical economics seems to put much more

1146
01:02:32,160 --> 01:02:34,560
Speaker 1: emphasis on public debt than it does private debt. Like

1147
01:02:34,680 --> 01:02:37,439
Speaker 1: even if you look at the European Union and things

1148
01:02:37,520 --> 01:02:40,840
Speaker 1: like the Masters Treaty, like that is all about constraining

1149
01:02:41,000 --> 01:02:44,960
Speaker 1: government debt and doesn't say anything about private debt. It's

1150
01:02:45,000 --> 01:02:50,600
Speaker 1: incredible how backwards so many people's intuitions are about I mean,

1151
01:02:50,640 --> 01:02:53,800
Speaker 1: it couldn't be more spotted. There's so much, as you say,

1152
01:02:53,840 --> 01:02:56,360
Speaker 1: the Mastic Treaty embedded in the law of this idea

1153
01:02:56,440 --> 01:03:00,360
Speaker 1: that like the public debt specifically must be contained, so

1154
01:03:00,600 --> 01:03:05,040
Speaker 1: much you know, fearmongering about like fiscal expansion and having

1155
01:03:05,080 --> 01:03:07,760
Speaker 1: to pay for it, etcetera. It's almost like it's it

1156
01:03:07,880 --> 01:03:10,840
Speaker 1: really feels like it's a hundred and eighty degrees backwards

1157
01:03:10,880 --> 01:03:14,120
Speaker 1: when you look at you know, any crisis, how often

1158
01:03:14,240 --> 01:03:18,000
Speaker 1: it originates in the banking system, the private sector, household debt.

1159
01:03:18,040 --> 01:03:20,840
Speaker 1: It's so forth. It's kind of like amazing, how consistently

1160
01:03:20,920 --> 01:03:23,800
Speaker 1: back how totally backwards. A lot of people's and tuitions

1161
01:03:23,800 --> 01:03:26,080
Speaker 1: are about this totally And I'm just thinking back to

1162
01:03:26,240 --> 01:03:30,000
Speaker 1: like Spain during the Eurozone crisis, the problems that were

1163
01:03:30,400 --> 01:03:34,080
Speaker 1: entirely on the banking slash private debt side, and meanwhile

1164
01:03:34,280 --> 01:03:37,880
Speaker 1: the EU is sort of wringing its hands over government

1165
01:03:37,960 --> 01:03:40,720
Speaker 1: debt ratings and things like that in fiscal austerity. It's

1166
01:03:41,200 --> 01:03:43,880
Speaker 1: I kind of wish I'd known of Professor Keane's work

1167
01:03:44,360 --> 01:03:47,040
Speaker 1: back in you know, I guess two thousand and twelve

1168
01:03:47,240 --> 01:03:49,480
Speaker 1: like that would have been a really helpful framework for

1169
01:03:49,520 --> 01:03:53,640
Speaker 1: actually viewing the Eurozone crisis. And like, you know, I

1170
01:03:53,760 --> 01:03:56,720
Speaker 1: really think I've said it many times. It's so like

1171
01:03:57,480 --> 01:03:59,600
Speaker 1: I do think that within sort of like more like

1172
01:04:00,000 --> 01:04:04,600
Speaker 1: eellectual economics, economic circles, there does seem to be like

1173
01:04:04,680 --> 01:04:07,920
Speaker 1: a certain sneering at accounting. That's just like what the

1174
01:04:07,960 --> 01:04:10,720
Speaker 1: person in the back office does, like balance his books.

1175
01:04:10,840 --> 01:04:13,920
Speaker 1: But it's consistent. Who is it a Stephen Clapham. Clapham

1176
01:04:14,400 --> 01:04:16,520
Speaker 1: we talked to, Like so many of the most interesting

1177
01:04:16,600 --> 01:04:19,880
Speaker 1: conversations we have are rooted in accounting. I want to

1178
01:04:20,000 --> 01:04:23,040
Speaker 1: just you know, like going back to like the climate portion,

1179
01:04:23,200 --> 01:04:26,840
Speaker 1: because it's really interesting. Like I do feel like there

1180
01:04:26,960 --> 01:04:28,960
Speaker 1: is a lot of like I would say again, sort

1181
01:04:29,000 --> 01:04:31,960
Speaker 1: of liberal climate optimism that it's sort of like we

1182
01:04:32,040 --> 01:04:34,600
Speaker 1: can get two things. I want green new deal. Green

1183
01:04:34,680 --> 01:04:37,880
Speaker 1: new deal implies a new deal everyone's jobs, sort of

1184
01:04:38,200 --> 01:04:40,840
Speaker 1: a message of abundant green. We can do it in

1185
01:04:40,920 --> 01:04:46,000
Speaker 1: a way that um, you know, environmentally friendly. And Professor

1186
01:04:46,120 --> 01:04:49,360
Speaker 1: King's message is at this point and I think, you know,

1187
01:04:49,480 --> 01:04:50,920
Speaker 1: no one wants to hear it, and I don't. I

1188
01:04:50,960 --> 01:04:53,040
Speaker 1: don't know. I don't have an opinion whether it's right

1189
01:04:53,080 --> 01:04:54,960
Speaker 1: or wrong. But no one wants to hear. That's essentially

1190
01:04:55,040 --> 01:04:59,880
Speaker 1: like the only message, like extreme austerity is the answer

1191
01:05:00,120 --> 01:05:03,440
Speaker 1: to the sort of too ecological crisis. Well, it's again

1192
01:05:03,520 --> 01:05:06,440
Speaker 1: like sort of totally at odds with classical economics, which

1193
01:05:06,520 --> 01:05:08,960
Speaker 1: is all about economic growth, and then suddenly you switch

1194
01:05:09,040 --> 01:05:11,800
Speaker 1: into well, actually, in order to save the planet, um

1195
01:05:11,960 --> 01:05:14,800
Speaker 1: and ensure that we all survive in the long run,

1196
01:05:14,920 --> 01:05:17,880
Speaker 1: ha ha ha um, you have to restrain economic growth.

1197
01:05:18,120 --> 01:05:20,640
Speaker 1: Like I don't know, and yet you kind of made

1198
01:05:20,720 --> 01:05:24,560
Speaker 1: this point. But yet people, people seem comfortable sometimes, or

1199
01:05:24,600 --> 01:05:27,480
Speaker 1: at least in classical economics, people seem comfortable with the

1200
01:05:27,600 --> 01:05:32,600
Speaker 1: idea of fiscal austerity in order to preserve the budget,

1201
01:05:32,760 --> 01:05:35,240
Speaker 1: and yet like there seems to be a lot of

1202
01:05:35,320 --> 01:05:39,440
Speaker 1: difficulty with the idea of physical austerity in order to

1203
01:05:40,040 --> 01:05:43,000
Speaker 1: save the planet and preserve the planet, or just sort

1204
01:05:43,000 --> 01:05:49,960
Speaker 1: of consumption austerity. More broadly, it's like fiscal expansion consumption austerity.

1205
01:05:50,280 --> 01:05:52,400
Speaker 1: I loved um, And again I thought it was a

1206
01:05:52,720 --> 01:05:58,200
Speaker 1: very interesting phraseology or characterization, like neo classical economics as

1207
01:05:58,320 --> 01:06:01,120
Speaker 1: actually like a defect of form of like anarchy. And

1208
01:06:01,200 --> 01:06:03,120
Speaker 1: I hadn't really thought about that before. But if you're

1209
01:06:03,120 --> 01:06:05,720
Speaker 1: sort of like assumption is then in this sort of

1210
01:06:05,800 --> 01:06:09,040
Speaker 1: like the natural state of nature is for things to

1211
01:06:09,120 --> 01:06:12,320
Speaker 1: come into balance, right, for things to come into balance,

1212
01:06:12,440 --> 01:06:14,920
Speaker 1: that two lines intersect on a chart, and there's the

1213
01:06:14,960 --> 01:06:16,920
Speaker 1: price that if we just let that happen, then everything

1214
01:06:17,000 --> 01:06:21,200
Speaker 1: balances out. We just sort of like what neoclassical economics

1215
01:06:21,280 --> 01:06:24,560
Speaker 1: is rooted in these assumptions of equilibrium, But that is

1216
01:06:24,640 --> 01:06:28,120
Speaker 1: also like implicitly anarchist, because then the best the government

1217
01:06:28,240 --> 01:06:32,480
Speaker 1: can do at that point is create distortions and create

1218
01:06:32,560 --> 01:06:37,000
Speaker 1: you know, or maybe necessary but unfortunate distortions in what

1219
01:06:37,120 --> 01:06:39,760
Speaker 1: would otherwise be this perfect harmony. Is sort of this

1220
01:06:39,960 --> 01:06:48,240
Speaker 1: very interesting, anyway, fascinating, provocative conversation with Professor Kan. Yeah. Absolutely, um.

1221
01:06:48,440 --> 01:06:50,640
Speaker 1: It reminds me a lot of that The anarchy point

1222
01:06:50,720 --> 01:06:52,400
Speaker 1: reminds me a lot of that quote about you know,

1223
01:06:52,600 --> 01:06:56,720
Speaker 1: things fall apart the center cannot hold. Okay, shall we

1224
01:06:56,800 --> 01:06:58,800
Speaker 1: leave it there, Let's see it there? All right. This

1225
01:06:58,960 --> 01:07:01,680
Speaker 1: has been another episode of the All Thoughts Podcast. I'm

1226
01:07:01,720 --> 01:07:04,480
Speaker 1: Tracy Alloway. You can follow me on Twitter at Tracy

1227
01:07:04,520 --> 01:07:07,560
Speaker 1: Alloway and I'm Joe Wisn'tal. You can follow me on

1228
01:07:07,680 --> 01:07:11,400
Speaker 1: Twitter at the Stalwart. Follow our guest on Twitter, Steve Keane.

1229
01:07:11,440 --> 01:07:15,760
Speaker 1: He's at Prof Steve Keane. Follow our producer Laura Carlson.

1230
01:07:15,960 --> 01:07:19,520
Speaker 1: She's at Laura M. Carlson. Follow the Bloomberg head of podcast,

1231
01:07:19,600 --> 01:07:23,080
Speaker 1: Francesca Levi at Francesca Today, and check out all of

1232
01:07:23,120 --> 01:07:27,280
Speaker 1: our podcasts on Twitter at Bloomberg onto the handle at podcasts.

1233
01:07:27,480 --> 01:07:28,200
Speaker 1: Thanks for listening.