Author Archives: Steve Keen

In his lat­est blog, Paul Krug­man slings off at non-main­stream econ­o­mists — and the stu­dents at Man­ches­ter Uni­ver­si­ty cam­paign­ing for change to the eco­nom­ics cur­ricu­lum — for want­i­ng fun­da­men­tal change in eco­nom­ics. para­phras­ing his argu­ment, it is:

No need for change, boys and girls: main­stream eco­nom­ics has every­thing under con­trol. We missed the cri­sis just because we failed to observe the shenani­gans in the shad­ow bank­ing sys­tem. Once we realised our obser­va­tion­al errors, we had all the nec­es­sary tools and knew what to do (oh, and what the rebels said would hap­pen did­n’t any­way, so there!). The sta­tus quo is fine: move along folks, noth­ing to see here…

Pro­fes­sor John Kom­los has just released a new text­book on eco­nom­ics which breaks away from the mold of pro­duc­ing clones of Samuel­son’s genre-defin­ing opus. Its title is “What Every Eco­nom­ics Stu­dent Needs to Know and Does­n’t Get in the Usu­al Prin­ci­ples Text”. At a price of $26.55 via Ama­zon, it is priced to be an afford­able sup­ple­ment to a stan­dard text­book. Giv­en the fail­ings of the dis­ci­pline that were so vivid­ly high­light­ed by the glob­al finan­cial cri­sis, this book is well worth con­sid­er­ing as an alter­na­tive to the Neo­clas­si­cal mono­cul­ture that dom­i­nates eco­nom­ic tuition today.

The fol­low­ing blurb is lift­ed from John’s web­site:

I will launch Sack the Econ­o­mists, by Geoff Davies, on Sun­day 4 May (3:30pm for a 4pm start) at Glee­books, 49 Glebe Point Road Glebe NSW 2037 Syd­ney.  The event is free, but an RSVP is required here or via phone at 02 9660 2333.  Fol­low­ing is an edit­ed extract per­tain­ing to Thomas Piketty’s recent best-sell­er.  I hope to see Syd­ney-side read­ers of this blog at the launch.]

This is a guest post from Geoff Davies

There is no end of com­men­tary about China’s real estate bub­ble, with an even split between those who believe it may pop at any moment, and oth­ers who argue it nev­er will.

The alter­na­tive ploy — that it doesn’t exist — doesn’t get same air­ing that it did in the US before the sub­prime crash. Instead, the “it’s a bub­ble, but it won’t burst” case is that the bub­ble is too impor­tant to China’s con­tin­ued growth to be allowed to burst, and — unlike the US — Chi­na has the where­with­al to keep it going, at least for a while. (See There will be no Min­sky moment for Chi­na, March 25; Chi­na Can’t Afford to Let Its Hous­ing Bub­ble Pop, Jan­u­ary 30;Tem­ple­ton Brav­ing China’s Hous­ing Bub­ble, Feb­ru­ary 28; Chi­nese Prop­er­ty Sec­tor Will Not Implode Like Amer­i­ca’s Sub­prime Mar­ket, March 11.)

Back in the Olde Days, before the glob­al finan­cial cri­sis, when I was one of a hand­ful rais­ing the alarm, some of the most stri­dent oppo­si­tion to my opin­ion about what this might mean for hous­ing in Aus­tralia came from Christo­pher Joye (who was then a Direc­tor at Ris­mark). We went head to head on many occa­sions, with me argu­ing that our prices were a debt-fuelled bub­ble, and Joye argu­ing that ris­ing house prices sim­ply reflect­ed ris­ing house­hold incomes.

There are very few peo­ple who qual­i­fy as unfor­get­table in your life, and Ted Wilshire was one of those for me. A larg­er than life char­ac­ter in every sense of the word, Ted was best known as the Research Offi­cer for the Aus­tralian Met­al Work­ers Union (AMWU) who penned the then-influ­en­tial pam­phlets Aus­tralia Ripped Off and Aus­tralia Uproot­ed in the days pri­or to The Accord under the Hawke and Keat­ing Gov­ern­ments.

A cri­tique of a yet-to-be-pub­lished paper of mine (“Loan­able Funds, Endoge­nous Mon­ey and Aggre­gate Demand”, forth­com­ing in the Review of Key­ne­sian Eco­nom­ics lat­er this year; the link is to a par­tial blog post of that paper) by non-main­stream econ­o­mist Tom Pal­ley reminds me of one of my favourite ripostes by a politi­cian, back in the days before spin doc­tors stopped them say­ing any­thing offen­sive — or indeed any­thing inter­est­ing.

As Sir Robert Men­zies, for­mer Aus­tralian prime min­is­ter and leader of the con­ser­v­a­tive Lib­er­al Par­ty, was giv­ing a cam­paign speech in 1954, a heck­ler called out “Mr Men­zies, I would­n’t vote for you if you were the Archangel Gabriel”. Men­zies shot back: “Madam, if I were the Archangel Gabriel, you would not be in my con­stituen­cy.”

My call a few weeks ago that the glob­al finan­cial cri­sis is over was very much an Anglo-cen­tric one, and a US-cen­tric one in par­tic­u­lar (Clos­ing the door on the GFC, March 10).

Europe’s con­tin­u­ing own goal from the euro and aus­ter­i­ty, and cred­it excess­es in emerg­ing economies, could still derail a glob­al recov­ery. But the epi­cen­tre of the cri­sis was the US, and the indi­ca­tions are sol­id there that this par­tic­u­lar ‘Min­sky moment’ is behind it.

What a dif­fer­ence three decades makes: my vis­it in 1981–82 coin­cid­ed with the tri­al of the Gang of Four; now many sub-25 Chi­nese think that must be the name of a new boy band they yet haven’t heard of.

A cou­ple of weeks ago I took a swipe at Bank of Eng­land over a speech by its Gov­er­nor Mark Car­ney that was unre­al­is­tic about the dan­gers of a bloat­ed finan­cial sec­tor (Godzil­la is good for you? March 3). Today I’m doing the oppo­site: I’m doff­ing my cap to the researchers at Thread­nee­dle Street for a new paper “Mon­ey cre­ation in the mod­ern econ­o­my,” which gives a tru­ly real­is­tic expla­na­tion of how mon­ey is cre­at­ed, why this real­ly mat­ters, and why vir­tu­al­ly every­thing that eco­nom­ic text­books say about mon­ey is wrong.