Key insights

• ⚠️ University education around economics criticized for teaching outdated concepts
• ⭐ Studying System Dynamics recommended as a practical alternative
• 📉 Economist Steve Keen advises against pursuing an economics degree due to outdated teachings
• 📊 Firms face declining or constant marginal costs, contrary to traditional economic theory
• 🚗 Tesla's pricing strategy for the Model 3 exemplifies firms' cost calculation approach
• ⚙️ System Dynamics, pioneered by engineer Jay Forrester, offers a more comprehensive understanding of economic systems
• 📉 Neoclassical economics viewed the economy as an equilibrium, but experiences like the Great Depression exposed its limitations
• 💻 Minsky program designed to make equations visible on canvas and promotes learning dynamic non-equilibrium systems for real-world applications

Q&A

• What is the Minsky program, and how does it support learning non-equilibrium systems?

  The Minsky program, now Ravel, is designed to make equations visible on a canvas and run simulations live. It uses the flow Shar Paradigm to model monetary systems and promote the understanding of dynamic non-equilibrium systems for real-world applications. The program also utilizes double entry bookkeeping, allowing for the simulation of chaotic models and weather forecasting, making it an essential tool for learning and analyzing complex, non-equilibrium systems.

• How did the experiences like the Great Depression lead to the development of System Dynamics?

  Experiences like the Great Depression exposed the limitations of neoclassical economics, challenging the idea of the economy as an equilibrium system. This realization, coupled with the debt deflation theory by Irving Fisher and the work of Jay Forrester, led to the development of System Dynamics and complex modeling programs. System Dynamics focuses on understanding time lags, delays, and feedbacks in the economy, addressing the shortcomings of traditional economic theory.

• What are the critiques of neoclassical economics and its influence on economic models?

  Neoclassical economics is critiqued based on its founding assumptions and its dominance in economic theories. The use of algebraic equations and equilibrium in economic models, which was initially seen as a stopgap, became a fundamental characteristic of capitalist economic models. Despite its scientific perception, equilibrium in economic models has been critiqued as naive, highlighting the need for a more modern and dynamic framework like System Dynamics.

• How does System Dynamics provide a better framework for understanding economics?

  System Dynamics, pioneered by engineer Jay Forrester, offers a more comprehensive understanding of economic systems compared to traditional economic theory. It addresses the failure of traditional economic models to reflect regenerative loops and feedbacks, which are prevalent in real-world economic systems. By focusing on dynamic non-equilibrium systems, System Dynamics provides practical insights essential for real-world applications.

• What are the criticisms of traditional economic theory regarding firm costs and pricing strategies?

  Traditional economic theory fails to acknowledge that firms often face declining or constant marginal costs, contrary to its foundational principles. The approach of determining production costs by calculating variable inputs and desired profit margins, as exemplified by Tesla's Model 3 pricing strategy, diverges from the traditional economic theory. This disparity emphasizes the need for a more practical and modern framework like System Dynamics in understanding real-world economic phenomena.

• Why is studying System Dynamics recommended as a practical alternative to traditional economics?

  Studying System Dynamics is recommended as a more practical alternative to traditional economics due to its ability to provide a more comprehensive understanding of economic systems. It offers insights into dynamic non-equilibrium systems, which is essential for real-world applications. Engineer Jay Forrester pioneered the use of System Dynamics after identifying shortcomings in traditional economic models, highlighting its practical relevance.

• 00:00 University education around economics is criticized for teaching outdated and empirically false concepts, and studying System Dynamics is recommended as a more practical alternative. Economist Steve Keen suggests not pursuing an economics degree because of its outdated teachings.
• 02:40 Firms often face declining or constant marginal costs, contrary to traditional economic theory. Economists have largely ignored this reality. Firms determine production cost by calculating variable inputs and desired profit margins. Tesla's pricing strategy for the Model 3 provides a real-world example of this approach.
• 05:21 System Dynamics provides a better framework for understanding economics than traditional economic theory. Jay Forrester, an engineer, pioneered the use of System Dynamics after identifying shortcomings in traditional economic models.
• 08:10 The critique of neoclassical economics from its historical context to its dominance in economic theories, and the influence of equilibrium in economic models.
• 11:02 Neoclassical economics views the economy as an equilibrium but experiences like the Great Depression showed its limitations; Irving Fisher and Jay Forrester realized the need to model dynamic systems leading to the development of System Dynamics and complex modeling programs.
• 14:12 A program called Minsky, now Ravel, makes equations visible on a canvas and runs simulations live. It utilizes a flow Shar Paradigm to model monetary systems and can be used to simulate any system. It promotes learning dynamic non-equilibrium systems for real-world applications.