March 19, 2021

247. The fallacy of the demand curve

Steve Keen believes the way we look at economics is wrong from the ground up. Take the demand curve, for example. It shows how, when prices fall demand goes up, and vice versa. Whilst it works at an individual level, but attempts by theoreticians to demonstrate that this works at the aggregate level have all failed. In this episode we look at the Sonnerschein-Mantel-Debreu theorem, which looks at how price changes of one good will impact your consumption of that good and all others. The big failing, says Steve, is that they ignore the relationship between workers, capitalist and bankers. In this podcast we explain how the income distribution effect makes the demand curve much more complicated than the neoclassical economists would let on, to the point where the theory at its simplest level is worthless. Next!

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