Last week, Ty Keynes tweeted that his “national macroeconomic model [is] nearing completion”. I enquired if this method could be used to prototype a design of a new economics, and Ty replied that it could, with a link to the Minsky software he’d used to build the model. At that link was a manual written by
(who co-developed the software), and within that manual are several “Steve Keen rants”. For levity, it helps if you have watched YouTube or listened to podcasts of Steve Keen, then imagine the rants being delivered in the same style. It was reading these rants that I came to a number of realisations about what it is that I am doing here.Firstly, there is a rant about how Bill Phillips’ work was bastardised by neoclassical economists. The Phillips curve was originally about wages growth and unemployment rates – not about inflation and unemployment (Phillips, 1958). Paul Samuelson and Robert Solow perhaps decided that it was politically easier to target general inflation rather than wages growth, and this distortion has since been a justification for the use of mass-unemployment to control inflation – surely not Phillips’ original intent, since he evidently thought in a Keynesian way about aggregate demand (Phillips, 1958, p. 299). But this is not the main point of the rant. Rather, Keen shows how the Phillips curve was originally part of a complex system design that described the economy. Phillips was from an Electrical Engineering background (MONIAC and Bill Phillips, 2023), so it is perhaps not so curious that this system design looks a bit like an amplifier circuit:
This was my moment of realisation. The cross-disciplinary background of Phillips is what allowed this insight into the nature of the economy, that was so far ahead of its time it was basically ignored. Prior to this, Phillips had constructed a water computer, MONIAC, with tanks and pipes to model stocks and flows in the economy, and an accuracy of +/- 2%. It could even be programmed to test policy choices, and was far better at modelling complex system behaviour than the electronic machines of the time (MONIAC and Bill Phillips, 2023). Now look again at the diagram above. It’s not an electrical circuit, it’s a plumbing layout. A different perspective changes the facts.
Another realisation came from Keen’s modelling of a modern debt jubilee, his proposed means of escaping the debt trap caused by unrestrained private credit creation (the other means of escaping is to have a depression and accompanying debt-deflation). Keen’s proposed model of converting private sector debt into government debt is not unlike what Japan has been doing since its debt deflation in 1991, where the Bank of Japan has been buying up private debt to re-float the property market and facilitate business investment. Here, Keen is using the Minsky software to model a proposed solution, effectively testing a policy design. It is a very interesting solution to an obvious problem, but it leads me to think – why not go further? Why not design an entirely new economics, with an intent to not cause unstable exponential growth in the first place? My own cross-disciplinary background in design taught me that you need to design it to know that it doesn’t work, then you need to design it again. Software like Minsky makes possible the prototyping of an entirely new economics, with the ability to test it until it breaks – without having to break people’s lives and pretend it’s for their own good.
My last realisation comes from Keen’s own words, “having wasted so much time fighting Neoclassical economists” (Keen, 2022, p. 250). This made me think of Barthes’ Mythologies – you cannot argue with neoclassical economics because you cannot argue with a myth (1957/1991, pp. 134, 153–155). There is no point trying to tear down capitalism because it is immune to argument, and its mythology has pre-defined our view of the world. Those of us who read further than undergraduate economics texts understand that exponential growth makes us a rat plague, not a god. We can clearly see that capitalism is accelerating towards a wall. Yet those who remain within the capitalist mythology cannot see this wall – wearing a fluorescent vest doesn’t help if you’re not looking. Those of us who can see the wall are forced to prop up the bubble and keep accelerating just to survive within capitalism, so perfect and inescapable is its circular logic. Instead of trying to defeat capitalism, the answer is to design a new future, complete with its own sustainable economics, prototyped and modelled. Then we must don our fluoro, wait at the wall, and be ready to pick up the pieces. If we are lucky, capitalism will shit itself before the impact. If we are not, Mother Nature will call in her debts – and there is no possible jubilee for that.
Reference List
Barthes, R. (1991). Mythologies (A. Lavers, Trans.; 25th ed.). The Noonday Press. (Original work published 1957)
Keen, S. (2022). The free online companion to The New Economics: A Manifesto. Third revision. http://www.profstevekeen.com/minsky/
MONIAC and Bill Phillips. (2023). Engineering New Zealand. https://www.engineeringnz.org/programmes/heritage/heritage-records/moniac-and-bill-phillips/
Phillips, A. W. (1954). Stabilisation Policy in a Closed Economy. The Economic Journal, 64(254), 290–323. https://doi.org/10.2307/2226835
Phillips, A. W. (1958). The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957. Economica, 25(100), 283–299. https://doi.org/10.2307/2550759