Ep 185  |  Josh Farley

Josh Farley — The Myths Shaping Our Economies: The Disconnect between Economic Theory and Reality

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The Great Simplification

Description

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, Nate is 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 Nate’s recent Frankly episode, they 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?

About Josh Farley

Josh Farley is an ecological economist and Professor in Community Development & Applied Economics and Public Administration and a Fellow in the Gund Institute for Environment at the University of Vermont. He was formerly President of the International Society for Ecological Economics and the point person for the Ecological Economics Network Strategy Center, as well as part of the Leadership for the Ecozoic Initiative with McGill University. He is also the co-author with Herman Daly of Ecological Economics: Principles and Applications, 2nd edition.

His broad research interests focus on the design of an economy capable of balancing what is biophysically possible with what is socially, psychologically, and ethically desirable. His current research focuses on the economics of essential resources, social dilemmas, agroecology, the democratization of monetary and financial systems, the evolution of cooperation, the economics of information, and The Commons. 

In French, we have a motto that says that a simple drawing is often better than a long explanation. Jean-Marc Jancovici Carbone 4 President

That’s very understandable because with left atmosphere thinking, one of the problems is that you see everything as a series of problems that must have solutions. Iain McGilchrist Neuroscientist and Philosopher

We can’t have hundreds and hundreds of real relationships that are healthy because that requires time and effort and full attention and awareness of being in real relationship and conversation with the other human. Nate Hagens Director of ISEOF

This is the crux of the whole problem. Individual parts of nature are more valuable than the biocomplexity of nature. Thomas Crowther Founder Restor

Show Notes & Links to Learn More

00:00 – Josh Farley, Works

Previous TGS Episodes:

“Unlearning Economics”: Jon Erickson, Josh Farley, Steve Keen, and Kate Raworth

The Past, Present, and Future of Human Cooperation

Money, Money, Money

00:40 – The 10 Core Myths Still Taught in Business Schools | Frankly 99 

01:20 – Nate’s PhD Paper

04:05 – Myth #1: Humans function as Homo Economicus

04:40 – Economics and Calculus: Optimal choice

05:00 – Economics students are more self-interested than non-economics students

05:25 – Human sociality, Groupthink 

07:00 – Major Evolutionary Transitions

07:20 – Eukaryotic cell and its origin, Multicellular animal development

08:15 – Multilevel Selection Theory, More information

10:17 – Cultural Evolution

13:05 – Human social interaction and Oxytocin

13:30 – We are lonelier than ever, High rates of depression and anxiety in younger generations  who are consuming significantly more media

15:28 – Myth #2: Price determines the value, Supply and Demand Curve intersection determines price

16:20 – Welfare Maximizing Equilibrium

16:55 – Paul Samuelson (First textbook in modern economics), J.D. Rockefeller, healthcare, and the economy

19:00 – Our market doesn’t include externalities in prices

19:40 – Ecological Economics, Feedback Loops in the body

21:49 – Economic Superorganism

23:01 – Myth #3: Supply curves continually slope upward 

24:00 – Alan Blinder on Supply Curves

26:20 – Who Controls What in the U.S. Economy?

27:13 – Natural Monopolies

27:38 – The Information Economy 

28:40 – Myth #4: Energy is treated as just another input

29:39 – Energy plays no role in the standard economic production function

31:37 – Thomas Shelling’s article on economics and climate change

32:10 – Dematerialization

32:23 – One barrel of oil can perform ~4.5 years of physical human labor

33:08 – The Wealth of Nations by Adam Smith, Watt steam engine development

33:42 – Jevons, The Coal Question, Jevons Paradox

34:27 – Seafloor methane

34:40 – The Techno-Optimist Manifesto

34:42 – Thomas Midgley Jr. and his death, Tetraethyllead and lower IQ 

34:45 – James Lovelock, His initial misunderstanding of ozone depletion (p. 74-75), Chlorofluorocarbons, Bromofluorocarbons

35:55 – Global Catastrophic Risks, TGS Episode on Existential Risk

36:40 – Geoengineering + risks

37:38 – Solow Residual

40:25 – Ponzi scheme, Bernie Madoff 

41:17 – Human Life Expectancy

42:40 – Myth #5: Banks are just immediaries for money

43:10 – Where money comes from, U.S. government spends money into existence

43:40 – How banks create money

44:00 – Central bank acknowledging that banks can create money out of nothing

45:30 – Household debt payments as a percent of personal income

45:46 – Financial Services growth in the U.S.

45:52 – Congress’s Coinage Power

47:46 – U.S. National Debt vs. U.S. Household Debt

48:48 – Arthur C. Clarke’s three laws

50:29 – Land-Grant Universities

50:42 – Myth #6: Debt is an intertemporal transfer of consumption preferences

51:37 – Distribution of wealth in U.S., U.S. history of Boom and Bust cycles

52:40 – Complexity of wildfires

53:40 – The Great Simplification

53:47 – Japan interest rates increasing, BOJ boosting bond buying

54:47 – “Too big to fail”, Bear Stearns and Lehman Brothers

55:48 – Public financial management, Public banks

56:15 – Ellen Brown

56:40 – Myth #7: GDP is the societal marker

57:03 – Simon Kuznets, GDP, and his warning

57:15 – Goals of the OECD

57:33 – GDP is not a measure of human well-being

58:10 – Two-thirds of wealth goes to the top 1% 

58:25 – GDP per capita vs. Personal income per capita vs. Median personal income 

58:51 – Russia invading Ukraine greatly affected global wheat production and prices

1:00:05 – US spends most on health care but has worst health outcomes among high-income countries

1:01:27 – Herman Daly + TGS Episode

1:01:39 – Myth #8: Nature is a subset of the economy

1:01:55 – Partha Dasgupta: Nature in Economics

1:02:15 – Conservation of energy

1:04:20 – Uneconomic Growth is growing in awareness

1:05:15 – Myth #9: Adam Smith’s “Invisible Hand” ensures positive outcomes

1:06:20 – Social Dilemmas, Prisoner’s Dilemma, and Tragedy of the Commons 

1:08:55 – Food waste in the United States

1:09:40 – Sociopathy

1:10:30 – David Sloan Wilson (TGS Podcast)

1:11:11 – Humans are naturally good

1:11:40 – In-group/Out-group

1:12:25 – Myth #10: Economic “laws” are timeless

1:15:50 – After basic needs, the best things in life are free

1:18:40 – Mandelbrot and Fractal Systems, Coastline paradox, Power Law Distributions

1:20:28 – William Nordhaus: Climate Economics and the DICE Model

1:22:13 – The Power of the Commons

1:23:04 – Hyman Minsky’s Financial Instability Hypothesis vs. Eugene Fama’s Efficient Market Hypothesis

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