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Steve Keen

  • ️Sat Mar 28 1953
Steve Keen
Post-Keynesian economics
SteveKeen01.jpg
Born March 28, 1953 (age 58)
Nationality  Australia
Opposed Neoclassical economics
Influences Hyman Minsky
Piero Sraffa
Joseph Alois Schumpeter
Francois Quesnay
Contributions Mathematical models of financial crises and debt-deflation

Steve Keen is a professor in economics and finance at the University of Western Sydney. 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 Hyman Minsky, Piero Sraffa, Joseph Alois Schumpeter, and Francois Quesnay. His recent work mostly concentrates on mathematical modeling and simulation of financial instability. He is a Fellow at the Centre for Policy Development.

Financial instability and debt deflation

Most of Steve Keen's recent work focuses on modeling Hyman Minsky's financial instability hypothesis and Irving Fisher's debt deflation.[1][2] The hypothesis predicts that an overly large debt to GDP ratio can cause deflation and depression. Here, the falling of the price level results in a continually rising real quantity of outstanding debt. Moreover, the continued deleveraging of outstanding debts increases the rate of deflation. Thus, debt and deflation act on and react to one another, resulting in a debt-deflation spiral. The outcome is a depression. Steve Keen argues that the current global economic crisis is the result of too much debt.

Debunking Economics

Keen's full-range critique of neoclassical economics is contained in his book Debunking Economics.[3] Keen presents a wide variety of critiques on neoclassical economic theory, and argues that they show neoclassical assumptions are fundamentally flawed. Keen points out that several neoclassical assumptions are empirically unsupported (that is, they are unsupported by observable and repeatable phenomena) nor are they desirable for society at large (that is, they do not necessarily produce either efficiency or equity for the majority). He argues that economists' overall conclusions are very sensitive to small changes in these assumptions.

Keen's book closes with a survey of various schools of heterodox economics, concluding "None of these is at present strong enough or complete enough to declare itself a contender for the title of ‘the’ economic theory of the 21st century." However, he argues that neoclassical economics is a degenerative research program, not generating new knowledge but growing a belt of protective auxiliary hypotheses to shield its core beliefs from critique. There is an accompanying web site which provides more detailed mathematical expositions.

Criticisms

Some reviewers contend that Keen has not shown what he claims and that he misrepresents economic theory.[4] Keen agrees that some more nuanced and qualified versions of neoclassical economics exist at very high levels. However he claims that his critique is aimed at the core neoclassical ideas that are taught in universities at undergraduate and postgraduate level and which are often used as the basis for policy prescriptions. As a cover blurb from Alan Isaac states, Keen's book is "A wide-ranging yet accessible critique of the staples of neoclassical pedagogy."

Firms setting price to marginal cost is consistent with the neoclassical theory of the firm [5] if those firms have some market power. However, Keen argues"[6] that economic theory neglects the effect on price of increasing or reducing supply by a single item and finds that charging a markup is actually a more stable, profitable equilibrium. In neoclassical theory, a firm would also charge a markup above marginal cost.[5] In fact, part of the purpose of the work by Eiteman & Guthrie and by Blinder that Keen cites as evidence, was to show that real life firms have some monopoly power, within the standard context of a neoclassical model.

Other publications

  • Lee, Frederic S. and Steve Keen (2004): "The Incoherent Emperor: A Heterodox Critique of Neoclassical Microeconomic Theory", Review of Social Economy, V. 62, Iss. 2: 169-199
  • Co-editor of: Commerce, Complexity and Evolution: Topics in Economics, Finance, Marketing, and Management: Proceedings of the Twelfth International Symposium in Economic Theory and Econometrics. New York: Cambridge University Press. ISBN 0-521-62030-9.

See also

References

  1. ^ The Roving Cavaliers of Credit
  2. ^ Steve Keen (1995): "Finance and economic breakdown: modelling Minsky’s Financial Instability Hypothesis", Journal of Post Keynesian Economics, Vol. 17, No. 4, 607–635
  3. ^ Debunking Economics: The Naked Emperor of the Social Sciences (2001, Pluto Press Australia) ISBN 1-86403-070-4
  4. ^ David Stern, "BOOK REVIEWS: Debunking Economics", Ecological Economics Volume 39, Issue 2, November 2001,pages 319–320 [1]
  5. ^ a b Tirole, Jean, 'The Theory of Industrial Organization', MIT Press 1998
  6. ^ Cite error: Invalid <ref> tag; no text was provided for refs named keen06; see Help:Cite errors/Cite error references no text

External links

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