Some Constructive Comments on Steve Keen’s Manifesto for a New Economics

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Notes

1 The formalized version of the Minsky model can be found in Keen (2020).

2 ‘ […] if capital was lent in kind, there would undoubtedly develop, through the supply of and the demand for available capital, a certain rate of interest on the lending market, which would be the natural rate of interest in the strictest sense’ (Wicksell 1898 [1958], p. 84).

3 See Minsky (1986, 1990, 1993). For an analysis of Minsky’s thought, see Bertocco and Kalajzić (2022b).

4 This relationship derives from an analysis contained in a previous article in which Keen sets out to overcome what he considers a limit of Keynes’s analysis, that is, the assumption of the equality of income and expenditure and, thus, the equality of savings and investments: ‘In this paper, I prove that a key concept in Keynes’s General Theory — the equality of income and expenditure and hence of savings and investment — must be modified for a model of capitalism with growth in which banks endogenously create money. The starting point of the monetary macroeconomics of endogenous money is instead that effective demand is equal to income plus the turnover of new debt’ (Keen 2014, p. 271). This is equivalent to arguing that instead of the equality between savings $\left(S\right)$ and investments $\left(I\right)$, it is the equality between investments $\left(I\right)$ and the sum of savings $\left(S\right)$ and the new debts corresponding to the money flow created by banks $\left(\mathrm{\Delta }M\right)$, as shown by equation 1) that is valid. For a criticism of Keen’s thesis see Fiebiger (2014), Palley (2014), and Lavoie (2014).