Monetary Misperceptions, Climate Economics, and the Limits to Growth | Steve Keen

Monetary Misperceptions, Climate Economics, and the Limits to Growth | Steve Keen

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app, remember, you can give us a review. Each review helps more people find the show
and join our amazing community. With that, please enjoy this week’s episode. What’s up, everybody? My guest today is Professor Steve Keen. Steve is a distinguished research fellow at
University College London, and one of the few economists to correctly and publicly anticipate
the global financial crisis of 2008, as well as the subsequent deflationary forces that
would frustrate and confound policy makers in the years afterwards. He is also the author of “Debunking Economics:
The Naked Emperor Dethroned?,” as well as his more recent book titled, “Can We Avoid
Another Financial Crisis?” Steve and I have known each other going back
almost 10 years now. He was a frequent guest on my old television
program Capital Account. Over those years he really helped me gain
a more complete picture of the monetary system and how money is actually created, which I
think is so counterintuitive that I think, for most people, it takes some time for it
to really sink in. I think if you want to challenge your understanding,
especially if you’re wedded to an Austrian theory of money and credit as I was for so
many years, Dr. Keen’s work can really help to stimulate your curiosity because it draws
from so many different perspectives, and also because Steve is a gadfly of sorts in the
economics community. He likes to find these areas where he feels
that thinking has stagnated or become conventional, or where the consensus has gotten it wrong,
and go in there and stir things up. And we stir things up today, for sure, but
it’s also a jovial conversation because, again, we’ve known each other for so long, and also
because I only found out Steve would be in town a few days before this recording, and
so I didn’t have time to create a rundown. So this conversation is not structured in
the way that most of my conversations are, but it is no less engaging and interesting
because Steve has been spending more and more of his time lately on the economics of climate
change, which is something we haven’t really talked about on this show. It’s something we spend a lot of time on today,
including a host of other topics, many of which we get into in the overtime, which goes
on for an additional 40 minutes or so. Also, for anyone interested, Steve has a Patreon
page where he posts a ton of educational material, including podcasts, video blogs, eBooks, you
name it, so make sure to check that out. It’s at Without any further ado, please enjoy my conversation
with Professor Steve Keen. (music) Dr. Steve Keen, welcome to Hidden Forces. Good to be here, mate. Good to be with you in a bit different venue
to our previous life as interviewer and interviewee. For sure. Well, I wasn’t the interviewer in the previous
life. You might as well have been. (laughs) I drove the agenda. You did drive the agenda. Oh my God, and what an agenda it was. We were just talking about that outside in
the green room. There was definitely an agenda. Every morning with Capital Account we would
have show meetings. Everything had to fit within a particular
angle. How does this reinforce the fact that central
banks are bad, governments are bad, the markets are good? You know? You get boxed into it. It wasn’t something that I came up with disingenuously. I got boxed into an ideology that no longer
really fit. Yeah. Yeah. It gives you a formula, but a formula can
lead you astray as well as give you a structure. Yeah. It’s kind of one of the problems with a lot
of the way that media’s done today. It doesn’t offer the opportunity to grow because
growing means breaking with your stated beliefs, and those beliefs also are what the audience
has come to expect. They’re coming to you for validation that
their views of the world are correct, and if you give them something else, they feel
betrayed. Sometimes. I mean, most media is like that these days. It makes it very frustrating to work with
it. I had that happen with, and it shouldn’t have
happened because I don’t know, I’m not really sure what the general audience listener of
this show thinks, but I did an episode with Andrew Marantz who is a lefty. He’s a staff writer for The New Yorker. You know what I mean? That makes him a lefty? Okay. Well, New Yorker is a lefty magazine in New
York. He grew up in Park Slope, Brooklyn. He wrote a book on online troll culture, Milo
Yiannopoulos, those guys. He embedded with them for a while, and whatever. We’ve done episodes that I’ve been very critical
of cancel culture and political correctness and stuff. So, this is the one episode where I covered
the obscene, kind of right-wingish, trollish people, and I got a couple of emails from
people who felt like I was shilling for the deep state. That was one of the subjects of the email. Deep state shill. Hidden Forces is now a deep state shill. So, I don’t know. What are you going to do? It’s a few extreme voices, they get amplified. You must have to deal with that, too, though. All the time. I mean, you can imagine what conventional
economists think of me. I caught crap from them, and I have for the
last, literally, 50 years. Just shy of 50 years. It’ll be 50 years- Don’t say 50. 50 years of copping shit from neoclassical
economists will be in 2021, so not too far away from it. So that gave me a fairly thick skin for somebody
who’s inherently fairly sensitive having to cope with being rubbished and ridiculed all
the time. Then, of course, I take on the Austrian perspective. Even though I’ve got sympathies with some
parts of Austria in thinking, so I cop it from there. My first target in terms of academic writing
was Marxists because I could not accept the labor theory of value. When you were still studying? When you were- Yeah, when I was still studying. I was- Undergrad or graduate student? Undergrad. There’s- You went to the University of Sydney? Yep. Yep. Which was a fabulous place to go in the period
I went. It’s still a pretty good university, but when
I was there, it was right in the middle of the Vietnam War, so we were stupid enough
to join America in invading Vietnam, and- Did you have long hair back then? Yeah, I did. In fact, it was actually an afro. Oh really? Yeah. I- I feel like I’ve actually seen that picture. I remember once I just- Bell bottoms, jeans- Bell bottoms, yes. I could admit to those. Leather jacket? Never a leather jacket, but I had some pretty
amazing crocheted tops and stuff like that. I remember one time, my hair was so curly
once, I’d just look in the mirror and made just a little mental note of what I looked
like, and my girlfriend remarked on how curly it was. I said, “It looks like I comb my hair with
an Alka-Seltzer.” Alka Selter. She broke down, broke up. Yeah, that’s how hairy, and of course, now
I’m down … Usual story, gray, short-haired, and if it goes along it looks scraggly. I’ll have to get it cut after this interview,
I think. That’s so interesting. We should actually get into the whole Boomer
thing on the Bitcoin. We were talking about that earlier, but you
mentioned Austrian economics. This is something else we were talking about
before we started. When I had Capital Account, well, before the
financial crisis to back up, the way that I undid a lot of the misperceptions that I
had developed during the course of my undergraduate degree in economics was to chance upon Austrian
economic theory. Particularly the theory of the business cycle. I was reading those guys and those guys helped
me see the crisis. Then, when the crisis came, I doubled down
on Austrian economic theory and I kind of became very ideological. I’ve spent the last however many years, maybe
seven years, really since 2012 … Since it became clear that the Austrian models that
I was using to interpret the economy were not explaining what I was seeing. Yeah, well, they got their … It was certainly
OK about getting the approach of the crisis. The aftermath of the crisis they got completely
wrong because they basically accepted … because of the government response they predicted
hyperinflation. I don’t know how many of them are aware of
this, but they’re based on the model that banks lend out reserves, this money multiplier
model. And then you had this enormous increase in
reserves by Bernanke. I think he literally added about $2 trillion
to the reserve accounts of banks in less than a year. It was a ridiculous increase in the reserves. And then if you’d believed that model, then
there was going to be an enormous surge of inflation. And the more pragmatic approach to economics
that I come from, which is the Post-Keynesian school, although I’m in … I won’t say I
come from influence by the Post-Keynesian … Call myself a complexity theorist when
I actually want to put a serious tag on myself. But they looked at the mechanics of banking,
and this was actually understood before the Great Depression as well by people like Schumpeter. Even some mainstream economists. Banks create money by lending. But they cannot lend out reserves. There’s one condition under which they can
lend reserves and that is all loans are in cash. Now if you walk into a bank and they lend
you a million dollars, and you have to walk out with a wheelbarrow, then maybe the idea
that lend reserves makes sense. But they don’t do that. They give you an increase in your deposit
account. And that means they simply, in the terms of
accounting, cannot lend the reserves out. So from that point of view that’s not going
to do anything. Well they create the reserves. Well they’re … lending … It actually works
in reverse in some ways. A loan creates a deposit. So you go to the bank, they say, “Yep, buying
that flat in Manhattan is a great idea. Here’s $2 million. And by the way you owe us $2 million.” So their assets and your liabilities rise
by $2 million. Their liabilities and your assets rise by
$2 million. You then spend that $2 million buying the
property off somebody else, so you create demand doing it as well. But the reserves themselves play no role in
that, unless you bank at a different bank than the person you bought the property off. And then the reserves act like deposit accounts
for private banks that there is at the central bank. That’s their main role. So they circulate in a completely independent
system. Is the reserve ratio an anachronism or a legacy
of the gold standard? To some extent. It’s become a legacy because of textbook misinterpretations
of what the reserve ratio is actually there for. There’s a brilliant paper by a guy called
O’Brien. I think he was reserve staff when he wrote
it. Talking about reserve ratios in OECD countries. He goes through each of them. And the reserve ratio in America is 10%. Take a look at the fine print. It’s 10% on banks above a certain level of
deposit … I think it’s about $30 million, so it’s quite a small level. But it’s %10 of household deposits. For corporate deposits, it’s 0. For overseas commercial haulings, it’s 0. It’s there in case the households panic, go
to the bank and want to take money out. If 10% of your customers turn up in one day,
withdraw their money, it’s a bad day. But if you have 10% cash on hand you can catch
them, and then the reserve will rush the cash to you before the next banking day starts
and you won’t run out of money. So it’s there in case there’s a panic by the
household sector, fundamentally. When you look at the actually proportion of
the cashflow of America, which is actually affected by those reserve ratios, it’s less
than 2% of the money supply. There are some good federal reserve papers. O’Brien’s one. Another by Carpenter and Demiralp, I think
it is, do the same thing. And they go and say look, looking at the practicalities,
it doesn’t really exist as a ratio. But it’s still part of the mindset people
have about how they interpret banking. You and I got into a conversation about this
on Twitter not long ago. There was someone else on that thread … I
can’t remember who it was … Someone from the Bitcoin community, and they were talking
about reserve ratios, et cetera. You remember this conversation? And then Michael Kumhof’s name came up. Yeah, Michael’s a good friend. Right. We had dinner with Michael in 2012, remember
that? Yeah, it was a great little dinner. It was a sushi restaurant- And … with the guy from the old American
Monetary Institute? From Stephen Zarlenga? Maybe. I think it was Stephen Zarlenga, yeah. Maybe. Because we had dinner another time with another
guy who was a hedge fund manager here in New York. You’re always bringing these interesting characters
with you on your trips to DC. Or people would end up meeting … It was
a fun time doing that. So what are you working on these days? Well, I’m still working on the monetary stuff. I’ve actually built a software package called
Minsky, for mathematical modeling of financial dynamics and general dynamics as well. So the monetary stuff is still alive and well. But one thing which has always troubled me
about economics, and not just neo-classical economics here, but Austrian, Marxian, Post-Keynesian,
none of them have acknowledged the role of energy in production. So they all pretend you can produce output
by combining labor and capital. And this always felt unsatisfactory to me. And I’ve seen various attempts to try to bring
energy into the theory of production. And what fundamentally said, well you’ve got
labor, and you’ve got capital, and you’ve got energy. And they’ll then say there are three factors
of production. And I looked at that and thought, well, two
things are wrong with that. First of all, if you use the neo-classical
model, which is called the Cobb-Douglas production function, after the two people who dreamt
it up in the 1920s or 30s I think, it has labor raised to one power, capital to another
power, and then if you have energy, one minus the other two powers. So it gives you what they call constant returns
to scale. I’ll show you the maths later. But when you do that, if you set the coefficients
at the “right level,” you can say you have output with no energy input. Still. Using it that way. Which just felt … I was never satisfied
with that. Even people who did a more advanced model
would still go through that stage. Did they set up any kind of constants to deal
with that? How did they deal with that? Well, they just assumed they could leave it
out. And I thought that is not adequate. So I was working with a guy who was the leading
physicist involved in economics, trying to bring energy in, and a guy called Bob Ayres. Bob’s house was full of status, as it happens. And just walking back from the bathroom one
night, this little insight popped into my brain, which was labor without energy is a
corpse. Capital without energy is a sculpture. And I thought, holy shit, that’s the solution. Energy is an input to labor and capital, mathematically
speaking. You put energy as an argument into your labor,
energy in your argument into capital, and that gives it the role that says if you don’t
have energy input, you can’t get output either. It makes it absolutely fundamental. So I worked that out in about 2016. I’ve been working in that since. And of course that’s dragged me into climate
change. And in looking at it- So you started researching climate change
in 2016? Probably actually last year, 2018. 2018. Because I had to write up these papers and
I was still working on the monetary work. So I decided … of course in 2018, Nordhaus
gets the Nobel Prize for Economics, and my initial reaction- What’s his specialty in economics? Climate change. Oh, really? The economics of climate change. And so my initial reaction was, well, at least
they’ve given it … I mean, I’m a huge critic of the Nobel Prize. I think it should be abolished. The Economics Nobel Prize. You do know that it’s not a Nobel Prize? You know what? So, I know a little bit about this because
we had Brian … I can’t remember his last name now … He was in competition to win
the Nobel Prize in Physics. This was an episode on– That’s a real Nobel Prize. The real Nobel Prize. And I learned as a result, a lot of the dirty
politics that have to do with the Nobel Prize. There’s politics in all elements of the prize,
no doubt about that. But what do you mean it’s not … The economics
prize is not a Nobel Prize? Well, the actual title of the prize is … I
can’t pronounce it properly. It’s the Swedish Central Bank. The Sveriges Bank Award in Economics in Honor
of Alfred Nobel. That’s its proper title. It was invented in 1969. This is all in the literature of course- So does the Nobel Committee have any view
on this? Well, because they got 1.4 million krona,
or whatever it was, $1.4 million effectively, from the central bank to pay for the prize
each year- Oh, they license it. They effectively licensed it. They subcontracted it. They licensed the name, they’re like Trump. Trump Hotel. And they like the whole thing. The Nobel Prize family has been up in arms
about it, because apparently Nobel himself, Alfred Nobel- He was the inventor of gunpowder, wasn’t he? One funny story about … and I’m not sure
this is true, I’ve got to read more thoroughly on this, but what I have been told is that
Nobel read his own obituary. I think that is true. Okay. [crosstalk] This is coming back to me- He was in Russia I think it was. And his brother died. And the newspapers mistook his brother for
him, and published the … of course, all newspapers [crosstalk] Yes, it’s correct. This is correct. [crosstalk] And there it is saying, “slaughtered so many
people, greatest mass killer in history,” and he apparently looked and thought, “That’s
how I’m going to be remembered? No thank you.” So he invents the prize so his name is now
associated with something positive. And that’s of course how we think about him
these days. But he had the prize in chemistry, in physics,
in medicine. I think in literature and peace. Okay, there were five actual- The peace one is the biggest bullshit. Kissinger got that in like ’74 [crosstalk] And Obama gets it as well. It’s ridiculous. But the Kissinger one is like the worst. The moment Henry Kissinger got it, it completely
delegitimized the Nobel Peace Prize. The Nobel Prize for Economics was never legitimate. It starts with people like Milton Friedman
being awarded it. You know, my opinion of Friedman is unprintable. Also Krugman got it. Ditto, unprintable. We can print a few things on that front. I had no respect for the prize itself. But the prize was invented by the Swedish
central bank and there’s a very good book called The Nobel Factor which explains the
history of it and it was at a time when the central bank in Sweden was effectively at
war with a progressive political leadership of the country and they were championing a
neo-liberal … what we’d now call a neo-liberal economics approach, by instituting the prize. And it’s been highly successful. So I’ve always been skeptical of it, critical
of it, thinking it should be shut down. When Nordhaus got it, my first reaction, “Well
at least they gave it for climate change” And then I thought, hang on a second. I was one of the first people to read The
Limits to Growth. Okay? We had a [crosstalk] Donella Meadows. 1972. It’s my most-thumbed book. Was badly bound, it’s fallen apart like crazy. But I bought a copy in ’72 and read it back
then and I was, as somebody with a mathematical training at the time, I really appreciated
what they were doing with the technology of system dynamics. So I liked it. Nordhaus destroyed it. Nordhaus destroyed its credibility with a
set of papers, one of which was called Measurement Without Data, disparaging it completely, and
played a major role in driving this approach out of economics. And in subsequent years I’ve met one of the
three authors, Randers. In fact I met him again about two weeks ago,
in Norway. And Randers told me when I first met him,
this was back in Sydney in about 2009 I think, that when they developed Limits to Growth
they thought economists would be really happy about the idea because it was a technology
that meant you didn’t have to assume equilibrium anymore. Because what was actually lying behind Limits
to Growth is what I’d call system dynamics engineering, and that fundamentally says that
every … effectively, the old story “everything is connected to everything else.” But you then put the feedback effects between
those various things, and you can both model a system out of equilibrium, and you can also
try to get the magnitudes right so you don’t get the case that, you know, you’ve got to
ignore everything. Rather than ceteris paribus, you have the
major feedbacks tied together- But they’ve only been able to begin to model
these systems recently, right? They weren’t able to use these models to model
them because of the computational overload- Well, Limits to Growth was the first major
computational model. And it was done between 1968 and 1971. [crosstalk] They had mainframe computers back
in those days that cost … you know, back in those days the actual cost was well over
$1 million to build the model and run it. It took weeks in what was then a super computer
to get the runs out. These days you can run … There’s actually
a program on the web called Insight Maker. Insight Maker. And Insight Maker … Somebody has used Insight
Maker to build Limits to Growth as an Insight Maker model. You run it on a PC, it runs on a cloud a swell
and it takes a matter of seconds to run the model. Back then it took weeks for any of the particular
runs to be done. It was a giant supercomputer, in those days,
doing the work. So it was very difficult. But we could’ve been doing this approach to
modeling the economy from the early 1970s. Now instead, not only do they reject The Limits
to Growth, they specifically being Nordhaus who led the charge by economists against Limits
to Growth, they also rejected the whole technology. So, rather than learning how to model systems
out of equilibrium, with interacting systems and feedbacks often being more important than
direct effects, they got even more obsessed with the approach of equilibrium thinking. And so the divergence of economics from understanding
the real world … which, the real world is a complex system which is normally far from
equilibrium, that’s the methodology we need to get to. Wouldn’t they argue that they try to approximate
that complexity by thinking about it in terms of dynamic equilibria? Well, yeah, but there’s no such thing. And you’re still stuck in a paradigm of equilibrium. Yeah, I mean like when I first arrived at
university as [inaudible] do my Master’s degree, as [inaudible] my PhD, which was about 10
or 15 years after I finished my undergraduate degree, one of the colleagues I had at the
University of New South Wales, I think I might’ve even mentioned, a guy called Peter Kriesler,
he’s still there today … Peter would talk about how, from his post-Keynesian point of
view, economics can talk about the equilibrium but what about the traverse? And I looked at him and sort of shook my head,
“What do you mean, traverse?” He said, “Well, the movement from one equilibrium
to another.” And coming from a dynamics background I said,
“Well, you don’t actually start in equilibrium. You don’t end there either.” You move … Equilibria are reference points
for an overall system. But virtually every interesting system is
being driven by some external force. Like for example, you and I are driven by
the sun. If it wasn’t shining most of the time then
life wouldn’t exist, let alone the conversations we’re having. So there’s a force that gives you a pressure
that means the system is driven away from its equilibrium. And things like the way we model the weather
these days, that was the weather system in terms of the ultimate nonlinearity of weather
and the fact that it’s out of equilibrium. That was first put into meteorology by a guy
called Lorenz in 1963. Edward Lorenz. Yeah, yeah. And Lorenz- He was a climatologist. A mathematical climatologist. And he was critical of all the models of the
weather that existed at the time, which would do things like pattern matching. So like 7 days in a row like this had happened
32 years ago so we’re going to predict whether tomorrow is going to be like it was on the
8th day 32 years ago. Or they do linear regressions. And yes, look, we know the major forces are
nonlinear. And he took what’s called the Navier-Stokes
equation, which are equations that describe fluid dynamics. Incredibly complicated. What are called partial differential equations. I think there’s about 11 components, so that’s
what I call 11-dimensional model. He reduced it, using mathematical procedures,
to a set of what are called ordinary differential equations. So, only time rather than space and time as
the causal, driving variables, with just 3 variables and 3 constants for those 3 variables. Incredibly simple model, which generated incredibly
… what we … first of all, called chaotic, we now call complex systems [crosstalk 00:23:43]. Very dense data set. Dense, but it doesn’t occupy the entire, what’s
called “phase space.” So if you drew a container, saying where could
you be in this space, and you put a Lorenz model inside it, there’d be parts that it
would never occupy and 3 parts that it would never occupy are the equilibria. They’re all unstable, all 3 of them. But the system remains inside the bounding
box defined by the overall system. But nowhere near the equilibria. It’s actually repelled from the equilibria. So this is common knowledge in genuine sciences. But economics is stuck with this obsession
that everything’s in equilibrium. Or you talk about a movement from one equilibrium
to another. Which is what you mean by dynamic equilibrium. These neoclassical models came out of the
late 19th century? Yeah- Was that when Walras was writing? Neoclassical economics has changed more than
the neoclassical economists realize. They’re actually ignorant of their own history. So if you go back and see who were the progenitors
of neoclassical economics, you go back to Corneau, who was a mathematician writing in
the early 1800s in France, [inaudible] interesting, both French, and Jean-Baptiste Say. And Say was a foil for Ricardo. And Ricardo was somebody who came from the
classical school of economics. I don’t know if you chat about Ricardo. He was actually a conman, too, by the way. Who? Ricardo? Ricardo was a conman. I’ve written a cartoon book … I should’ve
brought a cartoon book for you. I’ll send you an electronic copy. But anyway, Ricardo followed what’s called
the classical school of economics. And the classical school- Ricardo gave us comparative advantage. Yeah, and other pieces of garbage as well. The main thing he gave us was- Well, there is some truth to that theory,
right? That there- No. None at all? No. So, for our listeners, why don’t you put forward
what the theory of comparative advantage is and why it doesn’t work in your view? I’m not saying all the extrapolations of it,
but the basic idea that you could be better in two things than I am in those two things,
but it could be to my comparative advantage to do one of them and allow you to do the
other. In our little microeconomy. In a micro world, that sort of stuff makes
sense. I mean, I am, for example, a lousy housekeeper,
okay? My partner is a brilliant housekeeper. She actually drives me away from the housekeeping. So in that- How convenient. How convenient. Yeah, I’m really sorry about that. I mean, we can easily extrapolate that individual
experience to a economy level, which is where comparative advantage is applied. Now, if you look at Ricardo, you can see what
he was trying to do. That is, he had a fundamental belief that
capitalism would grow faster and last in its growth phase longer, if you could get money
away from the landlords and get it to the capitalists. That was his real intention. He actually says that at one stage. “It’s been my objective to show that wages
cannot rise without a fall in profits, and vice versa.” So that the way to get more growth is to get
more money to profits. Workers get a subsistence wage, therefore
the way to increase the gap is to reduce the cost of subsistence, which you do by abolishing
the corn laws and bringing in corn more cheaply. Meaning wheat, as it happens. But that was the logic. But in the theory of comparative advantage,
what he did was a brilliant piece of debating. He said, “I’m going to accept the case made
by my opponents, the mercantilists. Who said that, “Look, we believe … ” In
those days, Portugal was the major rival that the UK faced. Portugal is better at producing everything
than we are. So if we have free trade, Portugal will wipe
out all our industries. And what Ricardo said, “I’m going to take
your belief that Portugal is better at everything than us, and show you that it’s still in our
advantage to have trade.” So it’s a very clever, and it’s a con man
argument, okay? So- He was writing in the late 18th century? No, the early 1800s. Early 19- 1812, 1817, that sort of period. Late- So late 19 … I mean early 19th century. Yeah, late 1700s, early 1800s. He actually … The reason I said he’s a conman,
is that I remember a friend of mine [inaudible] doing a thing called Planet Wall Street back
in Australia, told me a story about the Battle of Waterloo. Here’s one of the ultimate evil people in
capitalism. The Rothschilds or that sort of- The Rothschilds. They’re definitely at the very top. One of those, he told me, had a runner at
the Battle of Waterloo to see who won. Oh, right, I’ve heard the story. And as soon as the battle was over, the rider
just rode as fast as he could, boat was ready, all the stuff, to get to the London Stock
Exchange. And Rothschild, this is what my friend tells
me, he walks out onto the floor of the London Stock Exchange, goes, “Sell!” I wish that our listeners could see your dramatic
performance right now. And there’s absolute panic on the … Pandemonium,
everybody thinks, “Oh, my god! We must’ve lost the Battle of Waterloo.” Massive sale. And then he says, “Buy!” (laughs) It wasn’t … I’ve still got to check this
fully, but it wasn’t a Rothschild. It was David Ricardo. And he made a profit, at the time estimated
at over one- How do we know this is true? This could be fake news. In all seriousness it could be fake news. I’ve got to check it out because I’ve only
seen it- [crosstalk] We’re spreading rumors, we’re defaming this
man. More than 200 years since his death. Well, anyway, I’ll do more research [crosstalk]
Because I went looking for it, because I wrote a cartoon book on this topic, you see. Part of a cartoon was an introduction to how
bad economics … It was called eCONcomics. I think I read that. Did you? They used to do Superman pictures of you. That’s right, that’s right. That’s the guy that used to do it. Yeah, yeah, yeah. So anyway, I wanted to write this thing about
not David Ricardo, but David Trickardo. Okay? Har-har. Which is what I did. And I was looking … I knew about this story
and I went back and looked about when did Ricardo write, and so on, because I wanted
to see the publication date of The Principles of Political Economy. And I wanted it to be an April Fools’ joke
gone bad. And it turned out it was published on I think
the 17th of April. So it was actually published the month I wanted. Then I found Ricardo was the one who pulled
this stunt about the Battle of Waterloo. Made a million. Literally in those days. And had to leave the country and go and live
in sort of rural exile before he finally bought himself a seat in Parliament and came back
and lobbied for the corn laws. So, that’s the guy we’re talking about. No doubt a great intellect, but a conman. Financial history is full of these really
great stories, because they’re so personal. You know? And they’re people under immense stress. We did this episode with Daniel Paris on the
history of financial theory, where we covered this in part. But to bring it back to the conversation about
climate change, I haven’t read Limits to Growth but I have read Thinking in Systems by Donella
Meadows. That’s good. It was a fantastic book. I would recommend it to anyone who’s interested
in learning about systems theory and nonlinear dynamics. I also read James Gleick’s book Chaos- Yeah, it’s pretty good. Where he talked about Lorenz and lots of other
people. Mandelbrot. And you’ve written about the physiocrats. Which deals with this thing about bringing
energy into the equation. But let’s go back to … you said, 2018, about
a year or two ago. So, first of all, how did you educate yourself
on climate change? How did you go about doing that? Oh, I’ve been reading this for the past 30
or 40 years. Okay, so you’ve been interested in the subject
going back to the 70s? Ever since reading Limits to Growth in the
very first instance. I’ve always kept an eye of the physics of
the biosphere. So I’ve had awareness of the research being
done and how serious it was. And then, of course, because I’m now going
to be start writing on the economics of it … But bringing in the role of energy, because
I can now do equations about production where energy is necessarily involved, and with energy
necessarily involved you necessarily have waste because of the second law of thermodynamics. And so I can tie economics and ecology in
at the foundational level. And that’s what I’m working on as a positive
agenda right now. But I also remembered Nordhaus, went back
and saw this Measurement Without Data evisceration of Limits to Growth, where he clearly didn’t
understand the technology he was dealing with. And then I started reading his material. And actually I thought I had … If I’m going
to make comments on climate change from my perspective, then I have to understand the
orthodoxy as well. And what I expected was that even I can be
naïve on neoclassical economics. Which is ridiculous, because I’m probably
the most cynical person about neoclassical economics on the planet. But I still had higher expectations of them
than I actually found. Because what I thought was, they would’ve
taken the damage estimates that were being made by physicists and meteorologists about
what’s going to happen with climate change, and then they were discounting those because
they’re far in the future and saying, “It’s trivial now. Why worry about it?” They do that as well, but in fact they haven’t
used the damage estimates of physicists and scientists. They’ve made their own ones up. And the way they’ve made them up is, about
three methods they’ve used. One is what they call the statistical method. And that, on the surface, sounds reasonable. Let’s use statistics. What they’ve done is assume that the weak
relationship we can find today between income of a particular region and the temperature
of that region can be used to predict what’s going to happen with climate change. So they literally … Take, for example, the
gross state product data for America. Output per capita in Nevada, output per capita
in Florida, output per capita in New York. Take that data, take the data as well on temperature,
do a scatter diagram, do a fit to it, and they say that fit will tell you what’s going
to happen when temperature rises ten degrees. So what’s the reasoning behind that? I’m not sure I follow. Can I swear on your podcast? No. With these- It is sheer, unbelievable ignorant stupidity. It is because neoclassical economists- I love how you used stupidity in place of
whatever it is that was in your head originally. Oh, mate, I mean I … When I first read this
material, the line- [crosstalk] Weren’t you at the OECD giving a presentation- Yeah. … and it was this? Was he there? Richard Tol? No, he wasn’t. Nor Nordhaus. They wouldn’t have enjoyed it. Someone was sitting next to you and laughing,
though, when you brought up some … You gave an example of what would happen in their model
if temperature dropped by like- Four degrees. Yeah, yeah. Four degrees. And that GDP would drop by like 2% or something? Some small- I think it was 3.6% fall in GDP if temperature
fell by four degrees. But you also showed a map of like- What the- [crosstalk] Half of North America would’ve been frozen. Yeah. Because what they have done … It’s something
which neoclassical economists do all the time. They think they need a simplifying assumption. And what they call a simplifying assumption,
any sane person would call a fantasy. And that’s what they did in this particular
case. So they said, “We don’t have any data on what’s
going to happen to income as temperature rises, so let’s assume that the relationship we see
between temperature and GDP today can be used as a proxy of what’s going to happen to GDP
as temperature rises over time.” And the way that’s stated … The paper I
first read it in was by Richard Tol, I think it was the economic- Why do I know that name? He’s a Tol, he’s a troll, you’ll find him
on Twitter all the time. His last name is not Troll though, it’s Tol. It’s damn close. It’d be more honest if it was Troll. But why do I know that name, though? It sounds familiar. He’s fairly prominent. You would’ve … Richard Tol. He actually writes the IPCC reports. Maybe I’m thinking of Richard Vague. Very different human being. Very different human being. You like Richard- You have to have Richard on your show. He’s brilliant. Tol’s a troll. But anyway, in this article, which was used
as the basis for the, inverted commas, “data,” that Nordhaus fitted what he calls his damage
function to, which shows the relationship between … his predicted relationship between
increase in temperature and change in GDP. Tol’s paper from 2009 was the basis of that. So I’m reading this paper, and there are various
points in the paper where he hedges quite sensibly about how reliable what’s being done
by economists is. But at one point he says that a particular
study by a guy called Mendelsohn assumes the temperature and GDP relationships we see across
space will apply across time as well. Something to that effect. I don’t understand that. I think I saw- Neither does he. I think I saw that in your presentation. [crosstalk] What does that mean? I’ll actually grab it and quote it, because
I’ve got it in my machine. Do you want the quote? Can we do that? Sure. Okay. So the … Richard Tol wrote a survey paper
of the work that economists had done to try to predict the damages from climate change,
and it’s called The Economic Effects of Climate Change, published in the Journal of Economic
Perspectives in 2009. And I’ll now find the quote where he points
out how they develop the data. One type of set of data that is used to calibrate
the economists’ estimates of the damage from climate change. Okay. “Mendelsohn’s work can be called the statistical
approach. It is based on direct estimates of the welfare
impacts, using observed variations (across space within a single country) in prices and
expenditures to discern the effects of climate. Mendelsohn assumes that the observed variation
of economic activity with climate over space holds over time as well; and uses climate
models to estimate the future effect of climate change.” Yeah, I mean, I’m not sure … I still don’t
really understand what that means. Okay. What it means is, how important do you think
is temperature in determining the income of New York versus the income of Florida? Compared to everything else? I’m sure it’s important. I don’t know how important it is. No, it’s trivial. Okay. It’s the technology that’s in New York. If- Yeah but, that can’t be true. Well, in other words, what I’m saying is- Temperature plays a minor role. Okay? But temperature plays an important role in
determining what type of economy is born out of that region, right? Like you don’t have a tropical vacation economy
in New York. No, but you couldn’t use climate to rule out
Singapore. To rule out Singapore? Yeah, as a wealthy country. Okay? It’s got a really hot climate, it’s got a
wealthy country. Yeah, but I’m not saying that but like, I
mean, you know, there are important different … anyway, I mean, I think there are important
differences … It depends on how you’re sort of describing it. It plays a role. Because if you actually plot the data, and
I’ve done this to my own little fit, you can find a rough relationship, a very, very trivial
relationship between temperature and GDP. Aren’t hotter areas- Yeah, generally lower income. … not as wealthy? Yeah? Yeah. And really cold ones are not as wealthy as
well. But what you get out of that is a weak relationship
because there are many other factors that are more important. Culture being one. Sure. Lee Kuan Yew in Singapore being another. Factors that are more important than temperature
itself, overall. And secondly, it’s a mild relationship. It’s not the case that if you move to a place
that’s 10 degrees warmer the economy will disappear completely. It’ll be less than now, but it won’t be completely
obliterated. So your argument is not … Or the point your
making isn’t that temperature doesn’t play an important role in the type of economy,
it’s just that it doesn’t play an important role in the extent of income [crosstalk] economy. Yeah, [crosstalk] I’m saying that it can’t
show you what’s going to happen if you increase or de-increase the entire global temperature
that much. Because what’s happening with global warming,
fundamentally, is we’re blanketing … using chemically blanketing, if you like … the
sun, so that some of the energy which is normally reflected off the earth gets trapped for a
longer period and therefore warms the overall planet. So there’s an increase in the-[crosstalk 00:38:38] In the lower atmosphere. Yeah. There’s an increase in the energy in the biosphere
overall. Okay? And that energy increase is why we’re talking
about a temperature increase. Now the energy increase, the amount of extra
energy we’re retaining from the sun is gigantic. I did an estimate at one stage of how many
atom bombs we’d need to explode to make similar increase in energy for one and a half degrees
celsius. I mean, you’re talking thousands of Hiroshima
bombs a day, type level of increase of energy in the biosphere, given the amount of extra
energy we’re retaining from the sun. So it’s a huge change in the energy in the
system. Now when you’re saying, “Let’s compare the
GDP of … gross state product of Dakota to New York to Miami,” that’s all with a constant
level of energy in the biosphere. Now the important question is, what happens
when you change the amount of energy in the biosphere? So that relationship exists, but it’s not
going to tell you anything about increasing energy on the overall planet. Which is why I use the example of global cooling
rather than global warming. Because the relationship they’ve fitted to
this current GDP and temperature data is simply a parabola. Y equals X squared. Okay? The X there being the difference between current
temperatures and the temperature before industrialization began. So, if you’re talking a temperature 4 degrees
higher than pre-industrial, then you’re going to say it’s 16 times a coefficient. Well, the coefficient tells you how much damage
does that do to your GDP. Now the coefficient Nordhaus is now using
is .00227 times the temperature difference squared over pre-industrial. That’s less than one quarter of 1%. Point two-five, .0025 is one quarter. He’s using .00227. So what he’s saying, a 1 degree increase in
temperature over pre-industrial will reduce GDP by less than one quarter of 1%. A two degree … [inaudible] be 2 squared
which is 4, by less than one- So you’re saying he won the Noble Prize for
this. He won the Nobel Prize for it. And if you take a look at his Nobel Prize
lecture, you’ll see he has a graph showing various temperature directories depending
on whether we do or don’t try to- So what does he get for a 10 degree rise? About a 23% fall in GDP. A 10 degree rise would be catastrophic for
the planet. Life would cease. That means, first of all, at 10 degrees, all
the ice caps melt, right? Oh, they’re gone at probably about 5, but
yeah. Right. Just to be clear we’re not having a conversation
here about whether or not the earth is warming, we’re having a conversation here about is
if- If it did [crosstalk 00:41:09]- If temperatures rose- By 10 degrees. Yeah. The only ice that’d be left would be on the
cap of Mount Everest. And the … yeah. So you’d be talking 70-80 meter sea rise. You’d be- Is that how much it would be really? Something of that order. 70 to 80 meters of extra ocean. Wow. And the life … I mean, you’ve heard of what’s
called the wet bulb temperature measure? No. What’s that? Okay. You know you use the thermometer to measure
temperature obviously. The mercury thermometer. If you wrap that in a wet cloth, then the
evaporation of the cloth- Oh, is this about water vapor in the atmosphere? Water vapor, yeah. It’s saying if you complete this- Complete the feedback loop. Well, not so much the feedback loop but the
evaporation … I could say it’s 50 degrees outside, and you put a sock around something
then the evaporation will cool as much as the heat rises. So it turns out that if you measure 35 degrees
on a wet bulb thermometer, that is a temperature at which our cooling systems, human’s cooling
systems, break down. So we can no longer sweat to drive our body
temperature down below the exterior temperature, and we will die within 6 hours at that temperature. Now, if you had a 10 degree increase in temperature,
that would mean that most of the tropics, and a fair bit of the subtropics, would be
uninhabitable. Now, so these enormous changes are being trivialized. What Troll will say is that, oh, he has a
cutoff point. He doesn’t imagine it’s going to go that high
so let’s only go to 4 or 6 degrees. But he literally also talked about 6 degree
temperature increase, and 4 degrees, this is Nordhaus, talks about a 4 degree temperature
increase as optimal. Literally. Optimal based on the cost that it would take
to intervene and reduce emissions. On that chart in his 2018 Nobel Prize lecture,
which you can find online, he has one chart showing this set of trajectories, and without
any mitigation at all, that trajectory shows temperature being 6 degrees above pre-industrial
by about 2160, 2170. His optimal eventually stabilizes at 4 degrees
above pre-industrial in about 2140. And he calls it optimal because when he does
the cost of climate change versus the cost of mitigation, the smaller sum of the two
is with the 4 degree increase. I feel like the conversations about what to
do miss the point that the point of friction isn’t the dollar amount. And let’s actually move beyond simply talking
about climate and talk about the environment more broadly. Because I think you and I will both agree
that the environment’s important and conserving the environment is something that we should
aim to do. It’s sort of organically already happening,
with plastics, with straws, and things like this. But this thing about the money and how much
it would cost, I don’t think that’s the point of friction. The point of friction is the political inertia. Right? How are we supposed to do something about
the environment in a world where we require international cooperation, and we’re at a
time where international cooperation is moving in the other direction? Yeah. Well, I think we’re going to be forced into
it. The climate doesn’t give a shit about our
politics. It doesn’t give a shit about our paralysis
either. So whatever we do or fail to do, ultimately
the consequences of climate change will strike us. And then we’ll make reactions in that political
environment. And I think that political environment is
going to be so severe, so extreme, that what we call capitalism will no longer survive. So, I should also mention to listeners, two
great episodes to listen to that are related to our conversation today are with Brian Arthur
on complexity science and complexity economics, and the other one is with Geoffrey West on
what are effectively the limits- Scale. Brilliant book, yeah. Exactly. There are physical limits to growth and that
socioeconomic limits are not the same as physical limits. And those two systems don’t really work very
well together at the limit. So, to go back to what I was saying, some
of the things I’ve seen related to what the effects of climate change, or the projections
of what climate change … the effects of that, are going to be, the most damaging are
not climate related directly. They’re population related. Right? Because if you do have flooding in all those
low-lying areas in Southeast Asia- Then people have got to move. Or drown. Yeah. And some later studies have found we’ve actually
been overestimating the height of some of those regions. Not underestimating the amount of water that’s
going to be produced, but overestimating how tall they already are. And it looks like most of Vietnam and a fair
bit of Bangladesh will be underwater in the next 20 or 30 years. It’s ridiculous how close that could be. So what does that mean for the world? Let’s just follow one particular outcome. Let’s assume that we do see rising temperature
levels and that we just continue on the path that we’re on right now. Sort of the path of least resistance. Give me a scenario that you’ve come up with
in your head about what the world could look like 10, 20, 30, 50 years into the future. Well, the transition will involve some parts
of the world being forcibly evacuated. Which means, of course, massive refugee flows. Which means refugees flows into countries
that they’re not wanted in, which means political conflict. And I think to me the most volatile area is
going to be around Bangladesh and India. And of course Bangladesh, so far as we know,
doesn’t have nuclear weapons but Pakistan does. And the potential is there for political and
nuclear conflict between those countries. We have … collapse in food systems will
happen, because the analogy that I make to climate change is like putting the lid on
the pot that’s on the stove already. And the temperature of course is going to
rise because of that, which means that the circulating cells in there … which they’re
called Bénard cells … they’re going to change location. Where the water goes up and where the water
goes down will change because of putting the lid on the pot. The same thing with increasing the temperature. Those up and downs are what give us the large
scale climatic effects that give us rain in the wheat belt and things like that. If they move, and they’re moving quite rapidly
already, if they break down as well … So, for example, the, what are called the polar
vortex and the antarctic vortex, if they break down, then those regions which are freezing
now will suddenly become affected by the overall circulation of the rest of the planet. Meaning the climate changes radically there
as well. So, the food systems we rely upon will break
down. We can’t necessarily move to areas where the
rain will occur, because you need topsoil to grow. And topsoil does not grow in a matter of centuries. Also you need sunlight. And the areas that have the most sunlight
are in areas now that are warm enough but not too cold. In other words, if you had all the ice melt
in Canada, even if you had all the topsoil in the world you will only have so many days
of sunlight. Yeah, that’s true. That’s true. There are only certain types of crops that
will grow in those areas. That’s a good point. I hadn’t actually thought of that one before
now but you’re right. So those sorts of things, I mean you can’t
just simply shift the physical location of growing wheat from somewhere in Iowa to somewhere
in Alberta. Is that one of the reasons that some people
are investing early stage in some of these Soylent or Impossible Burger style companies? It isn’t just a cultural fad but in fact there’s
a push to try and find alternative sources of food? I’ve seen similar stuff with cricket protein. Yeah. I can imagine that’s happening. I mean, if you’re a technologist … I’m unfortunately
an economist by training … but if you’re a technologist and you’re seeing this is a
possibility then you’re going to be researching that as a potential profit opportunity, let
alone survival opportunity in future. But yeah, all this stuff means a breakdown
of the structure of the climate that currently sustains our civilization. And when scientists have looked at this, their
estimates are that if we had a 4 degree increase in temperature, we might be able to sustain
a billion people. Now, Nordhaus is calling 4 degree increase
in temperature “optimal,” and his model has no link between population growth and climate. Population’s just simply assumed to grow to
the estimates of the United Nations of the peak carrying capacity of the planet, which
I think is 10 1/2 billion people. So his model assumes we’re going to have 10
1/2 billion people with a 4 degree increase in temperature, and GDP will be about 3.6%
lower than it would’ve been in the complete absence of climate change. First of all, how reliable are these estimates
either way? The carrying capacity of the planet- Absolutely- Who the hell knows what the carrying capacity
of the planet is? You can make extremely rough estimates- Well, that’s the trouble. See, we are trying to predict what’s going
to happen in circumstances that the planet itself potentially has never experienced. But that’s why I like, one thing we were talking
about earlier, looking at global cooling. Because the damage function the economists
use, and particularly Nordhaus, is simply Y equals X squared. So you can have X being minus 4 rather than
plus 4, and therefore he’s going to say that the damage of a 4 degree fall in temperature
would be about a 3.6% fall in GDP. Now, that’s what I did at the OECD showing
those old maps. And of course they’re based on what knowledge
we actually have of where the ice sheets got to. And at 4 degrees temperature below pre-industrial
levels, New York was below about half a kilometer of ice. Chicago is below a kilometer of ice. The whole of Canada was gone. And his prediction is that would cause a 3.6%
fall in GDP. I’m sorry. That is just ridiculous. You cannot make that sort of extrapolation. You know, I think … putting aside all of
these models and predictions and climate change and everything else, We do have a really screwy
growth model. Oh, totally screwy. Of like this … I was walking to the studio
today because I was thinking about this, and I was just looking at all the people just
passing me by, and we generate so much waste, the fashion industry, all the clothing, we’re
a consumption-driven economy. And when I say “we” I mean the globe, but
there’s only a small percentage of the planet that actually drives that consumption beltway. And I think we do it because the models we
use don’t price the externalities. The things that are most valuable, that are
worth the most, the quality of the air, the water, the climate, everything, and also things
that are far out in the future. If you have children … And even if you don’t
have children, and you care about humanity, you should care about, let’s say, at the very
least your theoretical grandchildren. Right? So none of that’s priced in. And because it’s not priced in, the economy
doesn’t see it so it value it, and so, what do we do? We make trade-offs that we wouldn’t normally
make if they had a price attached to them. So that’s a major shortcoming of our system. And whenever you challenge that, when I say
“you” I don’t mean you specifically though I’m sure this happens to you, whenever you
challenge that, people immediately have a reaction. Not people. Not everyone. But a lot of people think that you’re attacking
capitalism. And that by attacking capitalism you are somehow
suggesting that we should create some alternative system that is socialistic or whatever, and
I don’t even know if people think that hard about it. I think it’s just defensive. People are knee-jerk defensive about it. It’s a visceral reaction which thinks you’re
attacking a social system that has clearly given enormous benefit to humanity over time. But what you’re saying is, this’d be a great
social system. If the earth was the scale of Jupiter. If we could continue- If there were new “new found lands.” New found lands. New Americas. New found lands. If that all existed, there was tons of this
space, we’d be fine. And in fact, a very conventional economist,
William Baumol, wrote a very nice article about this decades ago called Spaceship Earth,
and he said, we have a cowboy economics, where there’s vast prairie- That’s fascinating. Okay. And instead we live in a crowded economy. What’s sustainable in one is not sustainable
in the other. Totally. So in that point you have to say, if we get
to the crowded point, then we can’t have unbridled capitalism. Or unbridled anything. A socialist system would be just as bad. If you see what the social … what the Russians
did to … I’ve forgotten the name of the lake, but it’s the deepest lake in the world. It’s one of the many lakes that was polluted
by the soviets as well. So it is just unbridled growth which is the
problem. And therefore you say, “How do you control
growth when you have a disaggregated system?” It becomes something which you can’t do just
on the basis of individual behavior. Well, I mean the aboriginal lands of Australia,
the Americas, these were a very fortuitous bounty that the Europeans came upon. You know? Where would the Europeans be if they hadn’t
discovered the rest of the world? How long would they have been able to run
that model? Well they couldn’t … I mean, yeah, we’d
run it more slowly in many ways. I mean, slavery. When I look at what slavery is, slavery is
a way of finding cheap, directable energy. You tell a slave to go and move something,
the food the slave [inaudible] means the slave can make that effort. So the slave economy was a major factor in
pre-Civil War America. It was a major factor in Britain, until Britain
abolished slavery. So they all harnessed this source of controllable
energy for a long time, and then we discover coal. And not just discover coal, we realize you
can use coal in steam engines and then we don’t need the animal power anymore, we’ve
got the power of the coal. We don’t realize we’re burning an accumulated
mass of previous organic matter into the atmosphere. Which is where we start [inaudible] with the
carbon dioxide. And now we’re in the situation where, if we’d
stopped doing this or started slowing down doing this 50 years ago, roughly when The
Limits to Growth came out, we could still be within the bounds of the cowboy economy. There were also scenarios in The Limits to
Growth, I think there were 7 scenarios they played. And with one of them we had population control,
where we had increased efforts on moving across to green energy, more work on pollution sinks,
and a range of other changes. Those policies together, the model said we
could continue indefinitely. But we didn’t. And what we’ve done is we’ve more than doubled
population since that came out. We’ve more than doubled per capita energy
use. So we’ve more than quadrupled the load we’re
putting on the biosphere, and that’s where the breakdowns we’re seeing are coming from. Weren’t we like 2 million people on the planet
back in the 70s? About 3. 3 billion. So there’s about 7 1/2 billion now. You know, this is a really tough thing because
most people, what matters to them first is themselves, their family and their friends,
right? Yup. Mm-hmm (affirmative). That’s true for me. I don’t know if it’s true for you. Well, yeah, yeah. Yeah. And I don’t trust our government, or any other
government to be quite honest with you. Maybe the Norwegian government. I don’t know the Norwegian government. Maybe there are governments out there that
I could theoretically trust if I knew something about them. But I don’t trust them enough to put all my
eggs in that basket, right? What I think about is how can I protect myself
and my family. I feel like that’s what most people think. Right? Yeah. And the trouble is, your basket is affected
by everybody else’s basket. Yeah, exactly, and [crosstalk] No man is an island. Exactly, exactly. And there’s also the other issue which is
that the people that are most in favor of climate change are of course people that are
already rich. Right? Yep. People that, let’s say, are trying to generate
income … So what I’m trying to say is that this requires a very strong socialist response. Yes, it does. Yes, it does. I mean- Socialist in the sense that we do it collectively. Absolutely. And it requires redistribution of capital,
it requires huge collective effort. I mean, you’re talking about something analogous
to the buildup for World War II. It is exactly that. That’s my normal analogy is World War II on
steroids. So that … Again, America. Think of the sort of cultural economic model. This is a pioneer country. Right? It’s very much about empowerment of the individual,
the individual goes out … Let’s leave aside the fact that that is a very sort of simplified
model- Fairy tale view of American History. … of reality, but also it’s become much
more difficult because of the lopsided wealth distribution, the regulatory capture, all
the … you know, we saw those ridiculous bailouts after 2008. But still, what it would require is all sorts
of, let’s say, people in the country to reorient dramatically the way that they think about,
or the way that they even go about engaging in the world. It’s such a dramatic rethinking. You know what I mean? And on top that you need international cooperation. So I just don’t see it happening. Neither do I. You know what I’m saying? Neither do I. So then the question is, what do we … What are the consequences? So you and I have talked a little bit about
this. An eco-fascist model. Where a kind of eco-fascism would arise out
of this environment from a minimal friction sort of pathway. What are your thoughts on that? Quite scary. Because I think, first of all, I agree that
we will not make the political decisions necessary to reverse direction until it’s obvious we
should’ve reversed direction 20 or 30 years earlier. But like that’s my Titanic model. You know. You see the iceberg, but you see it too late
to change direction. You’re going to hit. So the question is, when you hit, what the
hell is going to happen? And in that world, one of the decisions people
will make is there are too many of us. This is basically the Treaty of Rome, a little
bit. Not exactly, but there were some … I may
be … Either I’m referencing a conspiracy theory, or there was something in the Treaty
of Rome … Not the Treaty of Rome, sorry. The Club of Rome? The Club of Rome. Not the Treaty of Rome, the Club of Rome- The Club of Rome [inaudible] population control. Right, Club of Rome. The Treat of Rome was the European Union. When they did the 7 scenarios, the only scenario
that actually managed to mean a sustainable load on the biosphere over time included population
control. So I’m not saying population is the problem. It’s all a problem. But it is- But it would be a problem at a higher temperature. Yeah, it’s a problem now. We’ve gone beyond the carrying capacity of
the planet. However you estimate it, we are- But we don’t really know that, though. We don’t know it- We might feel it. It certainly feels that way in New York. Yeah. Well, there’s what’s called the human ecological
footprint, which is an attempt to work out how much of the sustainable reproduction capability
of the planet are we absorbing as a species. Now, it does include … I know there are
plenty of climate skeptics who’ll be listening to this. Hello. But, so it does include the carbon dioxide
load as part of that measure of the human ecological footprint. But even if you take that out, and so you
don’t talk about the carbon dioxide load as part of the pressure we’re putting on the
planet, they are saying we are using about 80% of the complete renewable resources of
the planet every year for our species alone. When you include the carbon footprint, it’s
1.6 times. So, Steve, I’m going to move us to the overtime. For regular listeners, you know the drill. If you’re new to the show, or you haven’t
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13 thoughts on “Monetary Misperceptions, Climate Economics, and the Limits to Growth | Steve Keen”

  • The interviewer SUCKS!!!!!! He needs to stfu and allow his guest to complete his sentences and explanation WITHOUT INTERRUPTING!!! What a ignorant jerk….

  • Interesting, the guest mentioned higher average temperature is roughly correlated with lower GDP, but uses Singapore as an exemption. There's a very strong coloration between IQ and average temperature. The reason places like Singapore are an exemption is because Singapore is mainly ethnic Chinese and high IQ expats….The reason I've concluded is colder climates historically would've needed to prioritize planning ahead, other personalities would've been weeded out of the gene pool, as they would've froze and starved to death in the winter. More tropical climates wouldn't of needed to prioritize genetics that favor forward thinking, as food is year round, and the climate never cold enough to freeze. Yes, so obviously in places like America, Singapore, etc… it doesn't matter… because it's not the native population in these regions.

    Here's the data on IQ vs temperature

  • Capitalists sacrificed soundness for expediency decades ago. Now, negative interest rates on worthless fiat. This satire is writing itself.

  • Family values: caring more about my kids' and grandkids' access to clean healthy air, water and food than your right to unbridled short term greed.

  • sdrawkcabgnipytmi says:

    What I don't understand about people like Nordhaus is what their motivations are. It's hard to believe that anyone can be so unbelievably delusional.

  • Very interesting discussion. My bone to pick is the absolute dismissal of the fact that the planet is actually at historic low CO2 levels. Why do commercial greenhouses pump in 1000 ppm CO2 and people work in them with no adverse effects. The ISS space station and nuclear submarines function at around 5000 ppm CO2.
    Plant death starts occuring at about 180 ppm CO2 and the recent historic 280 ppm is to plants like the average human living above 10 000 ft altitude. Those with experience know it takes more effort and slows things down.
    Plants at higher levels of CO2 are also more drought tolerant because they don't need their stomata open as much which means less H2O loss.
    Cold temperatures and cold interrupted grow zones will kill more people than the opposite as has been demonstrated in the Little Ice Age between ~1600 to ~1850. If we look at the raw data temperature graphs and sea level rise we can see there is nothing like an overheating or flooding climate emergency going on.
    The last and current winter data in the Northern Hemisphere would indicate that there is in fact a cooling trend.

  • Christopher Jones says:

    Keen usually provides a few great key points. This was speculative rubbish, even dismissing key drivers of the stated topic.

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