Home > RWER > RWER issue 57: Steve Keen

RWER issue 57: Steve Keen

Economic growth, asset markets and the credit accelerator

Steve Keen  

According to the U.S. National Bureau of Economic Research, the “Great Recession” is now two years behind us, but the recovery that normally follows a recession has not occurred. While growth did rise for a while, it has been anaemic compared to the norm after a recession, and it is already trending down. Growth needs to exceed 3 per cent per annum to reduce unemployment—the rule of thumb known as Okun’s Law and it needs to be substantially higher than this to make serious inroads into it. Instead, growth barely peeped its head above Okun’s level. It is now below it again, and trending down. Unemployment is therefore rising once more, and with it, Obama’s chances of re-election are rapidly fading.

You may download the whole paper at:


  1. shivz
    September 23, 2011 at 11:09 am

    Steve Keen writes (in the article): “Neoclassical economists ignore the level of private debt, on the basis of the a priori argument that “one man’s liability is another man’s asset”, so that the aggregate level of debt has no macroeconomic impact.”

    It is beyond me why arguing with neoclassical economists instead of sending them, first, to learn the original, namely, classical economics.

    Few words from J S Mill would have sufficed: “Credit given by dealers to unproductive consumers is never an addition, but always a detriment, to the sources of public wealth”. In other words, the creation of private debt is, macro-economically, not a problem of assets and liabilities, but of wealth creation (i.e., the only source of, ultimately, increased consumption).

  2. Dunning-Kruger
    September 25, 2011 at 10:29 am

    Very interesting indeed. I have two a questions on the paper.

    First, why is the NAS not equal to 0? When I buy an asset (net buy) the seller sells an asset for exactly the same amount (net sell), which equals out. This might be different in an open economy, but than you have to add net exports as well to the equation.

    Second, the text argues the debt accelerator leads the DJIA by 10 month. When I take a look on figure 12 it rather seems to me rather the debt accelerator lags the DJIA by the same amount.

    Maybe Steve or anyone can clarify?

  3. Dave Taylor
    September 25, 2011 at 10:27 pm

    Steve surely makes the point in his equation where he uses an arrow instead of an equals sign to indicate “direction of causation”. In a loop you are not talking about two views of an event at the same point in time, you are talking about successive occurrences of the causal effect on the same VARIABLE, not the same EVENT. Here, when the credit authorised goes up (creating new money out of nothing, not real debt) the price of assets tends to go up.

    In effect this is dynamic rather than static logic. The algorithmic scientific language Algol68 uses a “becomes” arrow and explicit algorithmic loops to make precisely that point, though the American programming language ‘C’ bowdlerised it by using “=” and “==” to make
    the same distinction. Play around with Algol68 for a bit, D-K, and you will begin to understand how this works out. (http://www.fh-jena.de/~kleine/history/languages/Algol68R-UserGuide.pdf).

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: