Why "economists pay no attention to private debt"

Steve Keen in Economics in the Age of Deleveraging, 28 January 2012:

Australian private debt is still rising (though more slowly than nominal GDP), whereas US private debt has been falling in absolute terms, and the UK has fluctuated between rising and falling debt.

Non-economists might expect professional economists to pay great heed to these indicators—after all, surely private debt affects the economy? However, the dominant approach to economics—known as “Neoclassical Economics” —ignores them completely, on the a priori grounds that the aggregate level of private debt doesn’t matter ...

Economists say private debt doesn't matter.


Steve Keen in Get ready for a recession by 2017, 22 March 2016:

conventional economists ... ignore private debt as just a “pure redistribution”, to quote Ben Bernanke.

Economists say private debt doesn't matter.


Stephen G. Cecchetti, M. S. Mohanty and Fabrizio Zampolli in Achieving Growth Amid Fiscal Imbalances: The Real Effects of Debt

For a macroeconomist working to construct a theoretical structure for understanding the economy as a whole, debt is either trivial or intractable. Trivial because (in a closed economy) it is net zero—the liabilities of all borrowers always exactly match the assets of all lenders.

Economists say private debt doesn't matter. It's the same explanation Steve Keen uses all the time.


Finally, I found another explanation.

Patrizio Lainà in Dynamic Effects of Total Debt and GDP: A Time-Series Analysis of the United States, 2011:

Interestingly, mainstream economists have given warnings about the public debt to GDP ratio (see e.g. Sargent & Wallace 1981), but at the same time they have almost completely neglected the private debt to GDP ratio. This might be due to Fama's (1965 & 1970) widely used efficient market hypothesis, which simply implies that private debt does not matter because it is always on the “right” level and no economic imbalances, such as bubbles, should occur. This, in turn, indicates that there is no need to study private or total debt.

It's the EMH.