Author Archives: Steve Keen

I’ll be speak­ing at Pol­i­tics in the Pub on Fri­day May 29, along with Jacob Saulwick from the SMH.  The Loca­tion is the Gael­ic Club, Lev­el 1 (Tel. 9212 1587) 64 Devon­shire Street Sur­ry Hills–just 50 metres or so from the Chalmers Street exit from Cen­tral Sta­tion.

The top­ic will be rather appo­site to the most recent blog entry: “The Rudd-Swan Bud­get 2009 – Whose Inter­ests Will It Serve?”

The event starts at 6pm and fin­ish­es at 7.45pm, after which any­one who wants to sol­dier on can join us for din­ner at a near­by restau­rant.

In May 1973, dis­sat­is­fac­tion over the teach­ing of eco­nom­ics at the Uni­ver­si­ty of Syd­ney went from a fes­ter­ing sore amongst the staff only to an out­right revolt by a minor­i­ty of the staff, and a major­i­ty of the stu­dents.  In 1975, a new Depart­ment of Polit­i­cal Econ­o­my had its first intake into Eco­nom­ics I℗. Thir­ty four years lat­er, it is still going. Pro­fes­sor Frank Stil­well, who has lived this dis­pute since 1970, is launch­ing Polit­i­cal Econ­o­my Now!, a his­to­ry of the dis­pute, next Tues­day at Syd­ney Uni­ver­si­ty’s Fish­er Library (May 5th, 5.30pm, Lev­el 5).

Title: “Crunchtime”: Bring­ing togeth­er the best pol­i­cy minds to dis­cuss Aus­trali­a’s future
Loca­tion: Trades Hall Audi­to­ri­um, 4 Goul­burn St, Syd­ney NSW
Link out: Click here
Descrip­tion: The best pol­i­cy thinkers from Aus­tralia and abroad will come togeth­er for “Crunchtime” — Aus­trali­a’s first pro­gres­sive think-tank con­fer­ence.

Tax, social pol­i­cy, the glob­al finan­cial cri­sis and cli­mate change will be pulled apart by impres­sive pol­i­cy minds includ­ing Ann Pet­ti­for from Advo­ca­cy Inter­na­tion­al in the UK. Ann has writ­ten exten­sive­ly on debt and finance, cli­mate change and inter­na­tion­al devel­op­ment and was one of the authors of the UK nation­al eco­nom­ic foundation’s Green New Deal.

As usu­al, the lat­est set of data from the ABS on the econ­o­my was “unex­pect­ed­ly worse” than (neo­clas­si­cal) econ­o­mists had been expect­ing. The con­sen­sus was for a 0.2% increase over the month of March, from 5.2 to 5.4 per­cent. In fact, it leapt by two and a half times as much, to 5.7%.

This was right in line with what I was expect­ing from a non-ortho­dox, “Hyman Min­sky” point of view. As I have argued in numer­ous blogs, aggre­gate demand is the sum of GDP plus the change in debt. Now that our econ­o­my is utter­ly debt-depen­dent, the debt-financed asset-price bub­bles have burst, and debt de-lever­ag­ing has begun in earnest, the econ­o­my will tank and unem­ploy­ment will explode as debt-financed spend­ing evap­o­rates.

I’ve just been sent this link to a hilar­i­ous face-off between Max Keis­er and an Eco­nom­ics Pro­fes­sor. Max calls the Wall Street spec­u­la­tors “finan­cial ter­ror­ists”, calls for decap­i­ta­tion as in days of olde…

The most fun I got out of this was watch­ing the Pro­fes­sor’s dis­com­fort, and his attempts to under­stand the cri­sis in terms of neo­clas­si­cal eco­nom­ic the­o­ry: mar­kets  are ratio­nal  and mere­ly respond to pol­i­cy, bonus­es are fine, the cri­sis is all due to bad mon­e­tary pol­i­cy…

There’s an inter­est­ing sto­ry in the New York Mag­a­zine by Michael Osin­s­ki–the author of the main soft­ware pack­age used to cre­ate the CMOs and CDOs that have helped crip­ple the finan­cial sys­tem.

Osin­ski’s sto­ry is worth a read in its own right. But what I found curi­ous about it was that he appears unaware of a flaw that exist­ed in those prod­ucts from the outset–the pre­sump­tion that the stan­dard math­e­mat­ics of risk and return could be applied to finan­cial assets. He does­n’t even men­tion this top­ic, but state­ments like the fol­low­ing imply that his soft­ware used a stan­dard prob­a­bil­i­ty dis­tri­b­u­tion to cal­cu­late risk and return for a giv­en bond:

I’m still hav­ing dif­fi­cul­ties get­ting my pod­casts up and run­ning at the moment, so in lieu here is a link to the ABC Radio Nation­al Big Ideas record­ing of an Evatt Foun­da­tion forum on the Glob­al Finan­cial Cri­sis.

Speak­ers were Bernie Fras­er, ex-Gov­er­nor of the Reserve Bank of Aus­tralia, myself, and Gar­ry Weiss, a cor­po­rate lawyer (this is also the speak­ing order).

The whole of the most recent Real World Eco­nom­ics Review (for­mer­ly known as the Post-Autis­tic Eco­nom­ics Review) is devot­ed to the ques­tion of “How should the col­lapse of the world finan­cial sys­tem affect eco­nom­ics?”.

My paper, which led vol­ume 49, is repro­duced below. If you’d like to read the entire vol­ume, click here for the online ver­sion and here for the PDF. You can also go here for back issues, and to sub­scribe for free.

The most impor­tant thing that glob­al finan­cial cri­sis has done for eco­nom­ic the­o­ry is to show that neo­clas­si­cal eco­nom­ics is not mere­ly wrong, but dan­ger­ous.