What Bitcoin Did
#134 - Steve Keen - How Modern Economics Became Ideology
What Bitcoin Did
•December 9, 2025•2h 29m
0
What Bitcoin Did•Dec 9, 2025
Key Takeaways
- •Economists lack practical experience, turning economics into ideology.
- •Politics drives policy, often ignoring proven wartime monetary lessons.
- •Cost of production, not utility, determines most manufactured goods prices.
- •Real firms keep excess capacity and differentiate products, defying equilibrium.
- •Marketing and artificial scarcity shape markets, ignored by neoclassicals.
Pulse Analysis
Steve Keen argues that modern economics has become an ideology detached from reality because economists lack "skin in the game" and often serve political agendas. He highlights how World War II demonstrated that governments can finance massive production by creating money, not borrowing, a lesson later erased by neoclassical orthodoxy. This disconnect fuels policy cycles that swing between extreme left and right, ignoring pragmatic monetary insights and leaving Western economies structurally dysfunctional.
A central debate Keen revisits is price determination. Post‑Keynesian and classical traditions maintain that the cost of production sets prices for the vast majority of manufactured goods, while neoclassical and Austrian schools blend cost with consumer utility. Empirical evidence, according to Keen, supports the production‑cost view for 95 % of items, reserving utility‑driven pricing for scarce assets like art, diamonds, or agricultural commodities. This long‑standing dispute, spanning two centuries, shapes how policymakers and analysts model inflation, supply chains, and market interventions.
Beyond theory, Keen critiques textbook assumptions about firm behavior. Real companies operate with excess capacity, differentiate products, and rely heavily on branding and artificial scarcity—strategies seen in Rolex watches or De Beers diamonds. Such dynamics contradict the homogeneous‑product, equilibrium‑focused models of neoclassical and Austrian economics. For business leaders, recognizing the evolutionary, competitive process and the role of marketing is essential for strategic pricing and investment decisions in today’s differentiated markets.
Episode Description
Modern economics is built on competing theories that often describe the world in very different ways. In this conversation, economist Steve Keen sets out his explanation for how money works, why he believes mainstream economic models fail, and why debt, banking and housing play a far greater role in economic crises than most policymakers acknowledge.
Keen's perspective challenges the assumptions of neoclassical, Keynesian and Austrian economists alike.
In this episode we discuss:
– How economics became political ideology
– Why neoclassical theory broke the West
– The Left vs Right illusion in economic policy
– What money really is (and how banks actually create it)
– Why inflation is misunderstood by almost everyone
– How private debt fuels instability and inequality
– Housing, mortgages & the destruction of the middle class
– Why equilibrium economics is fantasy
– What a sane, reality-based economic model looks like
– How young people can survive a debt-driven system
Economics didn't fail by accident — it failed because ideology replaced reality.
Steve Keen is one of the world's leading heterodox economists, known for his critiques of mainstream theory and his work on private debt, banking, financial instability and the 2008 crisis, which he warned about years in advance.
TIMESTAMPS:
00:00:00 – Introduction
00:03:12 – Why Economics Became Ideology
00:09:04 – Economists vs Reality
00:14:47 – How Money Actually Works
00:21:18 – Banks, Loans & Money Creation
00:33:44 – Inflation: What Really Drives It
00:38:59 – Wages, Markups & Bargaining Power
00:47:55 – The Housing Crisis Explained
00:54:03 – Deregulation & the Death of Affordability
00:59:22 – Middle Class Collapse
01:04:48 – Left and Right Get Economics Wrong
01:11:02 – Neoclassical Economics
01:17:26 – The Problem With Economic Models
01:22:31 – Why Economists Misunderstand Production
01:28:08 – AI, Automation & The Future of Work
01:44:28 – Structural Failures
01:55:46 – Can Government Use Good Economics?
02:01:23 – Global Debt, Fragility & Future Crises
02:06:40 – What Would Real Reform Look Like?
02:13:28 – Why Young Generations Feel Hopeless
02:19:47 – Can We Build a Post-Ideological Economics?
02:25:10 – Final Thoughts
CONTACT PETE
› Website – http://petermccormack.com
› Feedback – https://www.petermccormack.com/contact
› Email – me@petermccormack.com
› Instagram – /mccormack555
› X/Twitter – https://x.com/petermccormack/
CONNECT WITH STEVE KEEN
› Website – https://www.patreon.com/ProfSteveKeen
› Twitter – https://x.com/profstevekeen
SPONSORS
› IREN - https://www.iren.com/
› Ledger - https://www.ledger.com/
› Gemini - https://gemini.com/
LISTEN / SUBSCRIBE
› Apple Podcasts: https://apple.co/40ruY9K
› Spotify: https://spoti.fi/3Wc94Vu
› Fountain: https://bit.ly/FountainPM
› YouTube: https://bit.ly/YouTube_PM
› Rumble: https://bit.ly/RumblePM
FILMED BY CURTIS TAYLOR
› https://www.curttaylor.co.uk/
› https://x.com/curttayloruk/
EDITED BY CONOR MCCORMACK
› https://x.com/ConorM04
Show Notes
0
Comments
Want to join the conversation?
Loading comments...