Steve Keen

Steve Keen (2013).

Why do economists persist in modelling the economy with static tools when dynamic ones exist; why do they treat as stationery an entity which is forever changing?

Steve Keen (born 28 March 1953) is a professor in economics and finance at the University of Western Sydney. His recent work mostly concentrates on mathematical modeling and simulation of financial instability. He is a Fellow at the Centre for Policy Development. He classes himself as a post-Keynesian, criticizing both modern neoclassical economics and Marxian economics as inconsistent, unscientific and empirically unsupported. The major influences on Keen's thinking about economics include John Maynard Keynes, Hyman Minsky, Piero Sraffa, Joseph Alois Schumpeter, and François Quesnay.

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Debunking Economics - The Naked Emperor Of The Social Sciences (2001)

• This ascendancy of economic theory has not made the world a better place. Instead, it has made an already troubled society worse: more unequal, more unstable, and less 'efficient'.
  • Preface, p. xiv

• With the market so much more in control of the global economy now than fifty years ago, then if economists are right, the world should be a manifestly better place: it should be growing faster, with more stability, and income should go to those who deserve it.
  • Chapter 1, No More Mister Nice Guy, p. 2

• Though mainstream economics began by assuming that his hedonistic, individualistic approach to analysing consumer demand was intellectually sound, it ended up proving that it was not.
  • Chapter 2, The Calculus Of Hedonism, p. 23

• Thus while diminishing returns do exist when industries are broadly defined, no industry can be considered in isolation from all the others, as supply and demand curve analysis requires.
  • Chapter 3, The Price Of Everything And The Value Of Nothing, p. 69

• Not even an economist can make time stand still (though some victims of economics lectures might dispute that!).
  • Chapter 3, The Price Of Everything And The Value Of Nothing, p. 79

• Economics is not the Emperor of the social sciences, but the Humpty Dumpty.
  • Chapter 3, The Price Of Everything And The Value Of Nothing, p. 83

Economics is not the Emperor of the social sciences, but the Humpty Dumpty

• Which comes first — price being set by the intersection of supply and demand, or individual firms equating marginal cost to price?
  • Chapter 4, Size Does Matter, p. 101

• Even economists can't escape the fact that, as commodities go, labour is something out of the ordinary.
  • Chapter 5, To Each According To His Contribution, p. 112

• The term 'capital' has two quite different meanings in economics: a sum of money, and a collection of machinery.
  • Chapter 6, The Holy War Over Capital, p. 130

• The position I favor is that economics is a science, but a rather pathological one.
  • Chapter 7, There Is Madness In Their Method, p. 148

• In general then, and contrary to Friedman, abandoning a factually false heuristic asumption will normally lead to a better theory — not a worse one.
  • Chapter 7, There Is Madness In Their Method, p. 153

• What makes economics different from and inferior to other sciences is the tenacity with which it holds to its core beliefs in the face of either contrary factual evidence or theoretical critiques that establish fundamental inconsistencies in its intellectual apparatus.
  • Chapter 7, There Is Madness In Their Method, p. 158

• Economic theory in general ignores processes which take time to occur, and instead assumes that everything occurs in equilibrium.
  • Chapter 8, Let's Do The Time Warp Again, p. 166

• Why do economists persist in modelling the economy with static tools when dynamic ones exist; why do they treat as stationery an entity which is forever changing?
  • Chapter 8, Let's Do The Time Warp Again, p. 177

• The obsession with equilibrium has imposed enormous costs on economics.
  • Chapter 8, Let's Do The Time Warp Again, p. 177

• If there was never any difference between the value of commodities someone desired to sell and buy on the market, then no-one would ever desire to accumulate wealth. But an essential feature of capitalism is the existence of a group of agents with precisely that intention.
  • Chapter 9, The Sum Of The Parts, p. 193

• Rather like the Bible is for many Christians, the General Theory is the essential economics reference which few economists have ever read.
  • Chapter 9, The Sum Of The Parts, p. 199

• The belief that a capitalist economy is inherently stabilising is also one for which inhabitants of market economies may pay dearly in the future.
  • Chapter 9, The Sum Of The Parts, p. 213

• Trusting souls who accept economic assurances that markets are efficient are unlikely to fare any better this time when the Bull gives way to the Bear.
  • Chapter 10, The Price Is Not Right, p. 215

• Since in reality the stock market is inhabited by mere mortals, there is no way that the stock market can be efficient in the way that economists define the term.
  • Chapter 10, The Price Is Not Right, p. 216

• The EMH cannot apply in a world in which investors differ in their expectations, in which the future is uncertain, and in which borrowing is rationed.
  • Chapter 10, The Price Is Not Right, p. 234

• If investors disagree about future prospects of companies, then inevitably the future is not going to turn out as most — or perhaps even any — investors expect.
  • Chapter 10, The Price Is Not Right, p. 235 (See also: Andy Kessler)

• If values are fairly evenly distributed around an average, then roughly two-thirds of all outcomes will be one standard deviation other side of the average.
  • Chapter 10, The Price Is Not Right, p. 235

The belief that a capitalist economy is inherently stabilising is also one for which inhabitants of market economies may pay dearly in the future.

• If financial markets aren't efficient, then what are they? According to the 'fractal market hypothesis', they are highly unstable dynamic systems that generate stock prices which appear random, but behind which lie deterministic patterns.
  • Chapter 11, Finance And Economic Breakdown, p. 243

• There are numerous theorems in economics that rely upon mathematically fallacious propositions.
  • Chapter 12, Don't Shoot Me, I'm Only The Piano, p. 259

• If a 19th century capitalist Machiavelli had wished to cripple the socialist intelligentsia of the 20th century, he could have invented no more cogent weapon than the labour theory of value. Yet this theory was the invention, not of a defender of capitalism, but of its greatest critic: Karl Marx.
  • Chapter 13, Nothing To Lose But Their Minds, p. 270–271 (See also: Adam Smith, Wealth of Nations, Book I, Chapter VI, p. 58)

• You have a voice, which has been perhaps been quiescent on matters economic because you have in the past deferred to the authority of the economist. There is no reason to remain quiet.
  • Chapter 14, There Are Alternatives, p. 313