Steve Keen: A Computer Simulation of Monetary Dynamics

The financial crisis that ran from 2007 to 2009 has been called a "Minsky Moment," meaning it offered a much-needed reminder to all economists of Hyman Minsky's neglected dictum that "capitalism is essentially a financial system."
But even with this reminder, it is hard to know what to do next, since it is difficult to express Minsky's vision using the standard equilibrium methods of economics. Arguably that is one reason that Minsky has remained a minority taste in economics.
Steve Keen, a grantee of the Institute for New Economic Thinking, wants to change all that by developing a computer simulation tool that captures the monetary side of the economy in a realistic way, including its non-linear dynamic development over time. When Keen is done, students of economics will be able to build their intuition by simulating money flows through the banking system. And professional economists will be able to explore complex interactions without imposing limits of tractability, simply by tweaking the model and seeing what happens.
Keen gives credit to Augusto Graziani's writings on the monetary circuit for showing him how to translate the complex workings of the monetary economy into something that can be programmed to run on a computer. He met Graziani in 1998, the same year he finished his Ph.D., and has been following the money circuit ever since, first in his own work and now by developing tools for the rest of us. Sometimes new tools are what we need to create new thinking.
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[@patrikkorda]

Always glad to see the great Wynne Godley getting some credit.

[@davidfsnyder]

Is the code open source? Is there a paper we can look at? Glad to see a rigorous approach to including the banking system, and to have the program named after MInsky! Great!

[@AdryNT]

sourceforge.net/projects/minsky/

[@BnTamari]

Minsky: "capitalism is essentially a financial system." Tamari: capitalism is essentially an ownership system.

[@sharann3482]

Ownership wasn’t unique to capitalism

[@hedgehog5ful]

When he talks about the demo of Goodwin cyclical model which drew such an Aha! from his students [9:17]... I would really like to see that! Is there a video of this somewhere (preferably with commentary from someone much smarter than me to tell me what I'm looking at). BTW.. Why is this video unlisted, so that nobody can find it?! Simple oversight, maybe?

[@JesseMaurais]

He runs a channel called ProfSteveKeen where he shares many of his talks, most of which provide demonstrations of his Minsky software.

[@AdryNT]

He runs through his model here, starting at ~[17:45] "The Economic Crisis And The Crisis In Economics" kzbin.info/www/bejne/iWbTgaV-n9-FfKs

[@joebhed1]

Using modern Systems Dynamics, macro-economic modeling of our economies can indeed provide much-needed policy guidance in this era of debt-overhung, secular stagnation. In considering alternatives.... monetary.org/wp-content/uploads/2011/11/DesignOpenMacro.pdf Dr. Kaoru Yamaguchi Compare to Keen's policy insights. For the Money System Common.

[@prayfortruejustice]

Just in time for the explosion of peer-to-peer exchange. ?:\ (with color)

[@ShawnHCorey]

Any model of the economy that does not take human psychology into account is wasted effort.

[@ShawnHCorey]

You mean you wouldn't take to the psychologists first and listen to what they may say?

[@AdryNT]

Behavioural economics can help inform a more realistic 'micro,' agreed. (Dan Ariely, Daniel Kahneman & others have some great books on the subject.) The interesting thing about Steve Keen's model is that he starts from three axiomatically true definitions of 'macro' and builds a cyclical model that reproduces a Great Moderation, as well as a 'breakdown' like the Great Depression or 2008. Macro is ultimately an emergent phenomenon based on the structure of monetary flows. The simple fact that we earn wages to buy products is enough - along with companies investing to earn profits, and banks lending to earn interest - to produce a system with behaviours independent of any individual's psychology.

[@TomekSamcik69]

Who the heck was Minxy ?

[@cyborganic99]

Minsky is an American economist who theorized how bubbles form. He also wrote a book on Keynes.

[@davidfsnyder]

Here is minsky's summary of his financial instability hypothesis: papers.ssrn.com/sol3/papers.cfm?abstract_id=161024 Also read Prof. Mehrling's book on Minsky (Mehrling is the interviewer above)

[@TomekSamcik69]

Great, many thanks

[@therealnoodles7638]

He knows when financial crisis start and how to stop it

[@jamesrawlings5781]

@Deos Guff.