If you want to understand what mainstream economics says about environmental issues, read this article in Nature by Don Fullerton and Robert Stavins,

http://www.hks.harvard.edu/fs/rstavins/Papers/How%20Economists%20See%20The%20Environment.pdf

or open any Economics 101 textbook.

Sakir, read my last response, to Kyle. You’ll note that, even if you ignore everything preceding it above, it addresses your claims directly.

Note: I won’t be approving more hostile posts repeating the same nonsense points.

If you ever speak to a physicist or a mathematician, I recommend you avoid calling such a set up dynamic, as they will probably laugh at you. This is transition from one static equilibrium to another one disguised as dynamic.

A truly dynamic model does not require exogenous shocks in order to generate psuedo dynamics from one steady state to another, as in mainstream macro models. A truly dynamic model for instance can be a system of differential equations (as in Prof Keen’s papers), which generates data-consistent business cycle behaviour of an economy (troughs and peaks) and generates this business cycle behaviour internally beginning from a data-consistent set of initial points and evolving with respect to that set of differential equations (like weather predictions or systems of differential equations simulated by engineers, which are all very sensitive to initial points), without some unexplained unknown “shock” which makes the economy to move from one steady state to another. Therefore, he is right, there is NO macro model I have come across which are truly dynamic. If you have a quick glance to Prof. Keen’s macro models, you will see that is exactly what his models do. You may like his models or not, but they are truly dynamic. So your mistake lies with the ill-definition of “dynamic” in economic terminology.

It is feasible to see Sraffa’s critique as simply an attempt to take seriously the limitations which Jevons, Walras, Marshall and Clarke all acknowledged were endemic in using static methods to analyse what are clearly dynamic problems. Their defence for the use of static tools was the inherent difficulty of dynamic analysis, and the absence of suitable tools. No such defence is available to modern economics, since dynamics is now a far more developed field of analysis (in sciences other than economics), and so many tools exist to analyse dynamic systems dynamically. We can begin this process of recasting economics as a dynamic science by taking Sraffa’s critique to heart and drop altogether the neoclassical treatment of time. Our first step here should be to take time seriously by treating revenue and costs as functions of not just quantity, but also time.

Notice that is not a claim that DSGE models are not “really” dynamic, or something similar. It’s a sweeping claim that economists ignore dynamic modeling. In fact, explicitly dynamic methods to study dynamic problems have been very common in economics since the development of suitable analytic methods in the 1950s and 1960s, and much of modern economic theory and empirics is built on such dynamic models. The strained, semantic defence that Keen has something different in mind by the use of the word “dynamic” doesn’t fly, because the example he proceeds to give of a “dynamic” model is in fact a standard neoclassical model.

If Keen limited his attention to claims that Econ 101 is not taught the way he would like, I would probably have never written a word about his criticism. He claims to be destroying the foundations of modern mainstream research. I am not distorting what he claims. He is, on the other hand, horribly misrepresenting methods and conclusions in modern economic thought.

If “dynamic” implied “endogenous disequilibrium” we wouldn’t need that phrase, and there are many canonical models across the sciences called “dynamic” which are not of sort to which you refer. Paul Krugman did not say or imply otherwise: “going for a dynamic story with no end state” does not imply that “stories with end states” are, therefore, static. Many of Krugman’s most famous papers study dynamic, equilibrium (and usually deterministic) models, explicitly described as “dynamic” models.

The model Keen present in his paper is meant to criticize the marshallian model of perfect competition and is uninteresting. The interesting part of Keen’s work is his macro modeling, which exhibit chaotic dynamics and altought still at an embryonic stage, is a good starting point to build genuine dynamic models. If you want to see what he thinks economist should do, that’s what it would be.