An attempt to develop the significance of the difference between Post-Keynesian and Neoclassical economics by examining two representative economists (Steve Keen and Paul Krugman). Very simplified exposition because the speech time limit was 7 minutes.

1. The 2008 Financial Crisis
A Failure of (Neoclassical) Economics
Andrew Gilley

2. Two Representative Economists
Paul Krugman:
• Columnist for the New York Times
• Mainstream (Neoclassical)
Economist
Steve Keen:
• Post-Keynesian/Minskyian
Economist
• Head of the School of Economics,
History and Politics at Kingston
University, London.

3. The Role of Debt in Theory
Neoclassical: Loanable Funds Model
“…the overall level of debt makes no difference to aggregate net
worth—one person’s liability is another person’s asset. It follows that
the level of debt matters only if the distribution of that debt matters…”
-Eggertsson and Krugman (2012)

4. The Role of Debt in Theory II
“The key insight about the role of debt in a capitalist society was
provided by Schumpeter: in a growing economy, the increase in debt
funds more economic activity than could be funded by the sale of
existing goods and services alone…Aggregate demand in a credit-driven
economy is therefore equal to income (GDP) plus the change in debt.”
-Debunking Economics (2011) – Steve Keen

5. The Evidence for the Importance of Debt

6. The Evidence for the Importance of Debt II

7. Hyman Minsky
• Endogenous (internal) vs. Exogenous (external) Theory
• Financial Instability Hypothesis
• “A fundamental characteristic of our economy is that the financial
system swings between robustness and fragility and these swings are
an integral part of the process that generates business cycles.”
–Hyman Minsky (1974)

8. Hyman Minsky II
• “For the dominant school of neoclassical economics, depressions are
a result of some external shock, not of forces generated within the
system. The opposite and, in my view, vastly more plausible possibility
is that the crisis happened partly because the economic models of the
mainstream rendered that outcome ostensibly so unlikely in theory
that they ended up making it far more likely in practice.”
-Martin Wolf (2014)

9. A Plea for Pluralism
I. Against methodological exclusion
II. Science: goes with the evidence not tradition
III. Understanding crises and their causes is an important practical
concern