Every Economics Concept Explained in 30 Minutes
ProfSteveKeen
45,941 views
Business enquiries: Leah McIver leah@krugercowne.com
Signup to my online Rebel Economics course at: https://www.skool.com/stevekeen/about
Follow me on Patreon (Patreon: profstevekeen) or Substack (https://profstevekeen.substack.com/)
Every Economics Concept Explained in 30 Minutes
There are multiple videos on YouTube purporting to explain economics in 30 minutes or less. All of them treat textbook economics as accurate. I show in this video that the textbooks are based on myths.
Economics is often introduced through separate models of microeconomics and macroeconomics, with textbooks suggesting that macroeconomics can ultimately be built from microeconomics. But decades ago, scientists realised that higher levels of analysis, like biology, can’t be constructed from lower levels, like chemistry. Macroeconomics is not applied microeconomics.
Traditional supply and demand models assert that the supply price rises as output rises, while the demand price falls, and the two in equilibrium determine both quantity and price. But empirical research has found that the vast majority of firms have falling costs of production as output rises. The assumption that goods are homogeneous is a fantasy: in the real world, firms compete by process diversity. Competition is about evolution, not equilibrium.
Textbooks also omit the need for inputs from Nature to produce output, showing how ignorant economists are of the Laws of Thermodynamics.
I also explain how commercial banks create money when they make loans, creating deposits for borrowers while recording the corresponding debt. Textbooks pretend that banks do not create money, and for that reason, economists ignore banks, and money, and private debt, in their macroeconomic models.
I show how changes in private credit affect the money supply, aggregate demand, GDP, and unemployment.
Finally, I examine government deficits and international trade, challenging the textbook idea that government deficits necessarily crowd out private spending and investment. I explain how government spending and taxation affect private-sector money and discuss the limitations of comparative advantage when specialized machinery and investment are involved. I conclude by arguing that economics should focus not only on allocating existing scarce resources and reaching equilibrium, but also on investment, credit, innovation, the creation of new resources, and how economies evolve over time.
0:00 - Intro
1:00 - Why More Is Different
4:08 - The Broken Supply and Demand Model
13:27 - The Missing Role of Energy
19:17 - How Banks Create Money
26:22 - Government Deficits Create Money
29:23 - The Flaw in Comparative Advantage
20 Comments
Every Economics Concept Explained in 30 Minutes
ProfSteveKeen
45,941 views
Business enquiries: Leah McIver leah@krugercowne.com
Signup to my online Rebel Economics course at: https://www.skool.com/stevekeen/about
Follow me on Patreon (Patreon: profstevekeen) or Substack (https://profstevekeen.substack.com/)
Every Economics Concept Explained in 30 Minutes
There are multiple videos on YouTube purporting to explain economics in 30 minutes or less. All of them treat textbook economics as accurate. I show in this video that the textbooks are based on myths.
Economics is often introduced through separate models of microeconomics and macroeconomics, with textbooks suggesting that macroeconomics can ultimately be built from microeconomics. But decades ago, scientists realised that higher levels of analysis, like biology, can’t be constructed from lower levels, like chemistry. Macroeconomics is not applied microeconomics.
Traditional supply and demand models assert that the supply price rises as output rises, while the demand price falls, and the two in equilibrium determine both quantity and price. But empirical research has found that the vast majority of firms have falling costs of production as output rises. The assumption that goods are homogeneous is a fantasy: in the real world, firms compete by process diversity. Competition is about evolution, not equilibrium.
Textbooks also omit the need for inputs from Nature to produce output, showing how ignorant economists are of the Laws of Thermodynamics.
I also explain how commercial banks create money when they make loans, creating deposits for borrowers while recording the corresponding debt. Textbooks pretend that banks do not create money, and for that reason, economists ignore banks, and money, and private debt, in their macroeconomic models.
I show how changes in private credit affect the money supply, aggregate demand, GDP, and unemployment.
Finally, I examine government deficits and international trade, challenging the textbook idea that government deficits necessarily crowd out private spending and investment. I explain how government spending and taxation affect private-sector money and discuss the limitations of comparative advantage when specialized machinery and investment are involved. I conclude by arguing that economics should focus not only on allocating existing scarce resources and reaching equilibrium, but also on investment, credit, innovation, the creation of new resources, and how economies evolve over time.
0:00 - Intro
1:00 - Why More Is Different
4:08 - The Broken Supply and Demand Model
13:27 - The Missing Role of Energy
19:17 - How Banks Create Money
26:22 - Government Deficits Create Money
29:23 - The Flaw in Comparative Advantage