The Myths Shaping Our Economies: The Disconnect between Economic Theory and Reality
The Great Simplification #185 with Josh Farley
Economic theory has come to wield outsized influence over our societal goals, decisions, and policies – often relying on models that claim to optimize how human systems function. Yet the outcomes of our modern economic structures tell a different story: accelerating ecological collapse, widening inequality, declining public health, and increasing social disconnection. What if the foundational principles of mainstream economics are actually built on false assumptions that obscure the realities of our world?
In this conversation, I’m joined by ecological economist Josh Farley to explore the persistent myths taught in business schools, and the disconnect between economic theory and reality. Building on my recent Frankly episode, we unpack topics like the misconception between value and price, how GDP is a flawed measure of well-being, the truth about debt, and the ripple effects these have across market dynamics. Ultimately, Josh emphasizes the need for a new economic framework that prioritizes cooperation, well-being, and ecological stewardship.
How could we change the incentives that are embedded in our economy to prioritize the well-being of people and the planet? What would happen to our economies if we rooted them in the science of psychology, ecology, and physics? Most of all, could prioritizing cooperation and community be the key to realigning our economic systems to be in service of life?
In case you missed it…
In last week’s Frankly, I imagined that I was looking back from an unspecified point in the future (even from beyond my lifetime), and pondered the core things I would want during my time on Earth. Breaking from what our culture steers us to seek out, I examine what a bedrock of human experiences might include — the things in our lives that keep us grounded and experiencing life to the fullest extent.
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Hi Nate, worth getting Steve keen on at some point? If you already have then I apologise as I have just started out on my mission of listening to every single one of your podcasts! I think they are excellent! I keep mentioning your podcast to Steve on twitter and he does acknowledge those mentions so he is listening, thanks, Phil
This was a really helpful addition to your ongoing discussions about economics. I love Professor Farley's way of explaining things. After listening I stumbled upon an interview with Michael Hudson, who would be great in a Round Table with Farley! Like you guys, he challenges the myths of traditional economic models and points to the harm they continue to do. @thegreatsimplification It would be interesting to see how Hudson's and Nate's analyses of the interplay between global debt and the unprecedented confluence of massive changes humanity faces compare.
It's is a tomb of a podcast since he does a deep dive into the history of how "money became a balance sheet;" the dynamics of debt, nation states, and war; the symbiotic relationship between debt and growth; the socio-cultural and values systems underpinning economics throughout history across the globe; and much more. Importantly, he recognizes extreme weather and AI as two existential threats.
"Distinguished Research Professor of Economics at the University of Missouri, Kansas City and President of the Institute for the Study of Long-Term Economic Trends. He researches domestic and international finance, the history of economics, and the role of debt in shaping class stratification...
most recent book is 'Temples of Enterprise' (ISLET, 2024)."
Michael Hudson: Trump, China, AI, and the Untold History of Economics
https://youtu.be/3roQw-zbmLM?si=Kp4XOusDyGdSgtA3
(Cross posted in YouTube)