“We don’t just have a climate change threat to humanity. Neoclassical economics itself is an existential threat.”

So says Stephen Keen, author of Debunking Economics and 50-year veteran critic of mainstream economics, Finance day, April 20 of the 2020 We Don’t Have Time Climate Conference, presenting Earth Day Week.

During his opening day keynote presentation for Earth Day Week 2020, economist Stephen Keen goes back in time to detail how economic theory has made the climate crisis much worse than it had to be, delaying solutions he believes will arise through panic mode rather than careful planning.

He begins with a portrayal of “a tale of two planets” — two quite different planets. On the one, natural scientists predict stressed human societies and the destruction of myriad ecosystems if we reach a two-degree rise in global temperature, up to likely extinction of the biosphere and planetary life at a six-degree increase.

Prof. Steven Keen during his keynote April 20 Finance day during Earth Day Week.

On the other, a two-degree rise could entail annual global economic losses between 0.2 and 2 percent, or up to about 8 percent in case of a six-degree rise in global temperature.

These are startlingly stark differences between the two models, and we’re of course talking about the same planet Earth.

Keen challenges us: guess which model has been fueling global policy for the past few decades?

If you guessed it was the latter, you’d be right. And, Keen tells us, these policies are largely based on findings by American economist William Nordhaus and a cohort of other “textbook economists” who:

Believe markets can cope with anything. Confuse temperature distribution today with the overall rising global temperature. Assume that industry activity that happens indoors is immune to climate change. Make up data. Distort or ignore scientific literature. Continually minimize the expected impact of climate change.

After elaborating on each of these six points in detail, Keen goes on to question Nordhaus’ 2018 Nobel Prize in Economics and inform us that in his Nobel Prize lecture Nordhaus described as optimal a four-degree increase in temperature over current levels, which Nordhaus estimates we’ll reach by 2140.

“The reason this stuff gets published is that it defends the neoclassical faith and the inherent superiority of an unfettered free market.” (Keen)

Keen points to neoclassical economics’ “simplifying assumptions” as assumptions like:

The observed variation of climate-related economic activity over space also holds true over time;

and

The majority of the economy takes place in controlled environments that are negligibly exposed to climate change.

Keen believes capitalism as a whole may be destroyed by the neoclassical economics model.

“What we have is an internally flawed model of capitalism which is convincing to its followers but is full of nonsense…Its adherents believe it the same way that a religious sect believes that drinking Kool-Aid is good for you. Because it explains everything to them. It’s not science; it’s scientism. It’s not mathematics; it’s…mythematics.” (Stephen Keen)

We Don’t Have Time CEO Ingmar Rentzhog asks, “How do we change leaders’ beliefs in these fairy tales?”

Keen doesn’t necessarily predict a happy ending — at least not without a messy, high-intensity climax.

“I would just really like to see politicians throw economists out of their advisory roles and put biologists and climate scientists in charge instead. I don’t think it’s going to happen until such a time as, just like corona virus — it’s only after the event that politicians will realize just how bad the advice is they’re following, just how much they’ve ignored of the dangers we face. And we’ll do it in panic mode.

That’s why unfortunately I don’t think it’s anything which we’re going to prepare for. I think it’ll be just like corona virus: we’ll end up doing things we never would have considered beforehand…

To my way of thinking it’s going to be panic that gets us there, not rational behavior.” (Keen)

Written by Lisa M. Bailey