Vote for Revere Award

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Vot­ing is now open for the Revere Award for Eco­nom­ics. The Revere Award is the pos­i­tive com­pan­ion to the Dyna­mite Award in Eco­nom­ics, which was devel­oped by the Real World Eco­nom­ics Review to rec­og­nize the fail­ure of the vast major­ity of econ­o­mists to fore­see the Global Finan­cial Cri­sis. It was awarded to the three econ­o­mists whose work most helped cause the GFC, with the even­tual win­ners being Alan Greenspan, Mil­ton Fried­man and Larry Sum­mers (see Greenspan, Fried­man and Sum­mers win Dyna­mite Prize in Eco­nom­ics).

The Revere Award, on the other hand, will go to three of the hand­ful of econ­o­mists who fore­saw the global finan­cial cri­sis.  Yours truly is one of the nom­i­nees, along with Dean Baker, Wynne God­ley, Michael Hud­son, Paul Krug­man, Jakob Brøch­ner Mad­sen, Ann Pet­ti­for, Kurt Richebächer, Nouriel Roubini, Robert Shiller, George Soros and Joseph Stiglitz. Click here to go to the Real World Eco­nom­ics Review vot­ing site.

The remain­der of this post repro­duces the three rel­e­vant entries from the RWER:

For the record, I voted for Wynne God­ley, Michael Hud­son, and myself.

Voting is now open for the Revere Award for Economics

The Revere Award for Eco­nom­ics is named in hon­our of the Amer­i­can rev­o­lu­tion­ary hero Paul Revere, who rode through the night to warn of the approach­ing British army. In this its inagural year, it will be awarded to the 3 econ­o­mists who first and most clearly saw the Gobal Finan­cial Col­lapse com­ing and whose work is most likely to pre­vent another GFC in the future.

96 peo­ple were nom­i­nated for the prize.  Through con­sul­ta­tion with con­trib­u­tors to the Real-World Eco­nom­ics Review Blog, the fol­low­ing short­list of twelve econ­o­mists has been selected for the bal­lot: Dean Baker, Wynne God­ley, Michael Hud­son, Steve Keen, Paul Krug­man, Jakob Brøch­ner Mad­sen, Ann Pet­ti­for, Kurt Richebächer, Nouriel Roubini, Robert Shiller, George Soros and Joseph Stiglitz.

As with the Dyna­mite Prize, which attracted over 7,500 mostly econ­o­mist vot­ers –, the bal­lot will be con­ducted by Poll­Daddy.

Vot­ing is quick and easy.  The bal­lot is near the top of the right-hand col­umn (of the Real World Eco­nom­ics Review Blog home page).   Click on your three choices and then the big yel­low “vote” but­ton.

Foresight and Fait Accompli: Two Timelines for the Global Financial Collapse


Steve Keen con­cludes his JPKE paper “Finance and eco­nomic break­down: mod­el­ling Minsky’s ’finan­cial insta­bil­ity hypoth­e­sis’” as fol­lows:

There are, how­ever, severe doubts as to whether the kind of gov­ern­ment that has been con­structed over the last thirty years is a suf­fi­ciently pow­er­ful or bal­anced sta­bi­lizer to cap­i­tal­ist invest­ment behav­iour.

From the per­spec­tive of eco­nomic the­ory and pol­icy, this vision of a cap­i­tal­ist econ­omy with finance requires us to go beyond that habit of mind that Keynes described so well, the exces­sive reliance on the (sta­ble) recent past as a guide to the future.  The chaotic dynam­ics explored in this paper should warn us against accept­ing a period of rel­a­tive tran­quil­lity in a cap­i­tal­ist econ­omy as any­thing other than a lull before the storm. [empha­sis added]


Wynne God­ley in a paper with L. Ran­dall Wray argued that the cur­rent sta­bil­ity in the US econ­omy was unsus­tain­able, because it was dri­ven by the growth of house­holds’ debt, which in turn was fuelled by real estate cap­i­tal gains.  Using an account­ing frame­work of the US econ­omy devel­oped by God­ley, they pre­dicted that when debt growth slowed down – as it inevitably would within years -, growth would stop.


Kurt Richebächer in Sep­tem­ber 2001 wrote:

the new hous­ing boom is another rapidly inflat­ing asset bub­ble financed by the same loose money prac­tices that fuelled the stock mar­ket bub­ble.


Dean Baker in August pub­lished “The Run-Up in Home Prices: Is It Real or Is It Another Bub­ble?” in which he said:

While the short-term effects of a hous­ing bub­ble appear very beneficial—just as was the case with the stock bub­ble and the dol­lar bubble—the long-term effects from its even­tual defla­tion can be extremely harm­ful, both to the econ­omy as a whole, and to tens of mil­lions of fam­i­lies that will see much of their equity dis­ap­pear unex­pect­edly. The econ­omy will lose an impor­tant source of demand as hous­ing con­struc­tion plum­mets and the wealth effect goes into reverse. This will slow an econ­omy already reel­ing from the effects of the col­lapse of the stock bub­ble of 1999, … Unfor­tu­nately, most of the nation’s polit­i­cal and eco­nomic lead­er­ship remained obliv­i­ous to the dan­gers of the stock mar­ket and dol­lar bub­bles until they began to deflate. This fail­ure cre­ated the basis for the eco­nomic uncer­tainty the coun­try cur­rently faces … [which] will be aggra­vated fur­ther by the defla­tion of the hous­ing bub­ble. This process will prove even more painful if the hous­ing bub­ble is allowed to expand still fur­ther before col­laps­ing.


Jakob Brøch­ner Mad­sen (month unknown) wrote:

I am very pes­simistic. We are head­ing into some­thing in the world which is worse than what we expe­ri­enced in 1982. It will be the worst reces­sion since the Sec­ond World War”.

Ann Pet­ti­for in August pub­lished in Open Democ­racyThe Com­ing First World Debt Cri­sis”.  The arti­cle, which focused on “a giant credit bub­ble”, began:

The reck­less finan­cial poli­cies of lead­ing west­ern pow­ers in the last two decades make it likely that the next seis­mic debt cri­sis will be in Amer­ica, not Argentina. It can be avoided … only by seri­ous efforts to bring reg­u­la­tion and bal­ance to the inter­na­tional econ­omy.

Ann Pet­ti­for in Sep­tem­ber pub­lished her edited col­lec­tion Real World Eco­nomic Out­look: The Legacy of Glob­al­iza­tion: Debt and Defla­tion, which exam­ined the growth and new dom­i­nance of the finan­cial sec­tor. Con­trib­u­tors included Dean Baker, Her­man Daly, Wynne God­ley, Michael Hud­son and Joseph Stiglitz.

Pet­ti­for’s intro­duc­tion said:

Remov­ing con­trols over the finance sec­tor paved the way for its rise to dom­i­nance, which in turn has led to a trans­for­ma­tion of the global econ­omy and increased insta­bil­ity.

[One of] the con­se­quences for the global econ­omy [is an] enor­mous increase (or ‘bub­ble’) in the stock of finan­cial assets in rela­tion to the real econ­omy, as mea­sured by GDP or the stock of phys­i­cal, human, and tech­no­log­i­cal cap­i­tal.

There will be a col­lapse in the credit sys­tem in the rich world, led by the United States

Once default rates approach 1 per cent of the value of the debt across the whole lend­ing spec­trum, the prof­itabil­ity of banks is called into ques­tion. If default rates reach 2 per cent, the prob­a­bil­ity of a finan­cial cri­sis rises appre­cia­bly.

Also in Sep­tem­ber, Pet­ti­for restated her argu­ments for a forth­com­ing global finan­cial col­lapse in a cover arti­cle for The New States­man mag­a­zine.

Dean Baker pub­lished in the Los Angles Times on Decem­ber 3 “Who to Blame When the Next Bub­ble Bursts. This was the first of dozens of columns that Baker wrote on the bub­ble. (most can found at

Dean Baker’s col­umn “Build­ing on the Bub­ble” in May appeared in six US news­pa­pers. He wrote:

The fact that peo­ple are bor­row­ing against their homes at a rapid rate (more than $750 bil­lion in 2003) is more evi­dence of an unsus­tain­able bub­ble. The ratio of mort­gage debt to home equity is at record highs.

This is espe­cially scary because equity val­ues may be inflated by as much as 30 per­cent due to the bub­ble,

Michael Hud­son in June pre­sented at an aca­d­e­mic con­fer­ence the paper “Sav­ing, Asset-Price Infla­tion, and Debt-Induced Defla­tion”. He noted that the ‘large debt over­head – and the sav­ings that form the bal­ance-sheet coun­ter­part to it” is the ‘anom­aly of today’s [US] econ­omy’.  He warned against the ‘self expand­ing growth of sav­ings’ and the unsus­tain­able ‘growth of net worth through cap­i­tal gains’ induced by US mon­e­tary and tax poli­cies.  He said that the:

nat­ural limit to the process was reached in 2004 when the Fed­eral Reserve reduced its dis­count rate to 1 per­cent. Once rates hit this nadir, fur­ther growth in debt threat­ens to be reflected in drain­ing and amor­ti­za­tion pay­ments away from spend­ing on goods and ser­vices, slow­ing the econ­omy accord­ingly.

Dean Baker spon­sored through the CEPR a $1,000 essay con­test to solicit the most-con­vinc­ing argu­ment that the hous­ing mar­ket was not in a bub­ble.  The con­test was twice writ­ten up in the New York Times.

Jakob Brøch­ner Mad­sen (month unknown) wrote:

There is some­thing com­pletely wrong. We are see­ing large bub­bles and if they bust, there is no backup. House prices and shares are com­pletely out of pro­por­tion. And it will go wrong.


Dean Baker and Paul Krug­man in March pre­dicted in a paper writ­ten with J. Brad­ford DeLong that asset prices in the US were bound to fall in the medium term.

Robert Shiller in May in the Intro­duc­tion to the sec­ond edi­tion of his book Irra­tional Exu­ber­ance warned that home prices were look­ing “very anom­alous” and that:

fur­ther rises in the [stock and hous­ing] mar­kets could lead, even­tu­ally, to even more sig­nif­i­cant declines… A long-run con­se­quence could be a decline in con­sumer and busi­ness con­fi­dence, and another, pos­si­bly world­wide, reces­sion. This extreme out­come … is not inevitable, but it is a much more seri­ous risk than is widely acknowl­edged.

Paul Krug­man on 27 May wrote in his NYT col­umn:

If hous­ing prices actu­ally started falling, we’d be look­ing at [an econ­omy pushed] right back into reces­sion. That’s why it’s so omi­nous to see signs that America’s hous­ing mar­ket … is approach­ing the final, fever­ish stages of a spec­u­la­tive bub­ble.

Nouriel Roubini in sum­mer 2005 pre­dicted that real home prices were likely to fall at least 30% over the next 3 years.

Steve Keen in Decem­ber, draw­ing heav­ily on his 1995 the­o­ret­i­cal paper “Finance and eco­nomic break­down: mod­el­ling Minsky’s ‘finan­cial insta­bil­ity hypoth­e­sis’” and con­vinced that a finan­cial cri­sis was approach­ing, decided to go very pub­lic with his analy­sis. He reg­is­tered the web­page ded­i­cated to ana­lyz­ing the “global debt bub­ble”.  His site soon attracted a large inter­na­tional audi­ence.  At the same time he began appear­ing on Aus­tralian radio and tele­vi­sion with his mes­sage of approach­ing finan­cial col­lapse.

Jakob Brøch­ner Mad­sen (month unknown) wrote:

I feel lost. Money growth is increas­ing, oil and com­mod­ity prices have dou­bled in the last 10 years. There­fore infla­tion and inter­est rates should increase, but noth­ing hap­pens. All the mod­els we use to pre­dict infla­tion have bro­ken down, it is chaos.


George Soros in Jan­u­ary on CNBC tele­vi­sion said:

There’s (a) prob­lem that I think is brew­ing, and that is the end of the hous­ing boom in the United States and the abil­ity of house­holds to spend more than they earn because the value of their house is ris­ing.

So I expect that by ‘07 there will be a sig­nif­i­cant decline in U.S. con­sumer spend­ing and I don’t see what will take its place because it’s so impor­tant as a motor of the world econ­omy.

And to an audi­ence in Sin­ga­pore Soros said:

the soft land­ing (for the US econ­omy) will turn into a hard land­ing. That’s why I expect the reces­sion to occur in 2007 not 2006.

Michael Hud­son in April pub­lished ‘The Road to Serf­dom: An Illus­trated Guide to the Com­ing Real Estate Col­lapse’, in Harper’s Mag­a­zine. In it he wrote:

almost every­one involved in the real estate bub­ble thus far has made at least a few dol­lars. But that is about to change. The bub­ble will burst… Amer­ica holds record mort­gage debt in a declin­ing hous­ing mar­ket… For those who bought at the top and who now face decades of pay­ments on houses that soon will be worth less than they paid for them, seri­ous trou­ble is brew­ing. …. Ris­ing debt-ser­vice pay­ments will fur­ther divert income from new con­sumer spend­ing. Taken together, these fac­tors will fur­ther shrink the “real” econ­omy, drive down those already declin­ing real wages, and push our debt-rid­den econ­omy into Japan-style stag­na­tion or worse.

Wynne God­ley in May in a paper with Gen­naro Zezza, “Debt and Lend­ing: A Cri de Coeur”:

demon­strated again the US economy’s depen­dence on debt growth and argued that only the small slow­down in the rate at which US house­hold debt lev­els were ris­ing, result­ing form the house price decline, would imme­di­ately lead to a “sus­tained growth reces­sion … some­where before 2010

Kurt Richebächer in July wrote in his newslet­ter:

The one thing that still sep­a­rates the U.S. econ­omy from eco­nomic and finan­cial dis­as­ter is ris­ing house prices that appar­ently jus­tify ever more credit and debt”…

… a reces­sion and bear mar­ket in asset prices are inevitable for the U.S. econ­omy. … This will not be a gar­den-vari­ety reces­sion, in which mon­e­tary eas­ing unleashes pent-up demand, as it used to do in past busi­ness cycles”.

… the great trou­ble for the future is that the credit bub­ble has its other side in expo­nen­tial debt growth

The U.S. liq­uid­ity del­uge of the last few years has had one sin­gle source: bor­row­ing against ris­ing assets backed by the Fed’s mon­e­tary loose­ness… all hing­ing on fur­ther rises in asset prices. But they are going to plunge.

Michael Hud­son pub­lished his paper “Sav­ing, Asset-Price Infla­tion, and Debt-Induced Defla­tion”.

Joseph E. Stiglitz et al. in August 2006 pub­lished Sta­bil­ity with growth: macro­eco­nom­ics, lib­er­al­iza­tion and devel­op­ment which includes a chap­ter on “cap­i­tal mar­ket fail­ures” that looks “at how cap­i­tal mar­ket lib­er­al­iza­tion can exac­er­bate the prob­lems posed by coor­di­na­tion fail­ures and broader macro­eco­nomic fail­ures” [p. 189]

Robert Shiller on August 30, writ­ing with K. Case in the Wall Street Jour­nal, said:

there is sig­nif­i­cant risk of a very bad period, with slow sales, slim com­mis­sions, falling prices, ris­ing default and fore­clo­sures, seri­ous trou­ble in finan­cial mar­kets, and a pos­si­ble reces­sion sooner than most of us expected.

Nouriel Roubini  on August 23, 2006 wrote:

By itself this [house price] slump is enough to trig­ger a US reces­sion.

On August 30 he wrote:

The recent increased finan­cial prob­lems of … sub-prime lend­ing insti­tu­tions may thus be the prover­bial canary in the mine – or tip of the ice­berg – and sig­nal the more severe finan­cial dis­tress that many hous­ing lenders will face when the cur­rent hous­ing slump turns into a broader and uglier hous­ing bust that will be asso­ci­ated with a broader eco­nomic reces­sion. You can then have mil­lions of house­holds with falling wealth, reduced real incomes and lost jobs…

Like Baker and Keen, Roubini now put out repeated pub­lic warn­ings of the sys­temic impli­ca­tions of the hous­ing bub­ble.

Kurt Richebächer in Sep­tem­ber 2006 wrote:

There is no ques­tion that the U.S. hous­ing bub­ble is fin­ished. All remain­ing ques­tions per­tain solely to speed, depth and dura­tion of the economy’s down­turn.

Ann Pet­ti­for in Octo­ber pub­lished her book The Com­ing First World Debt Cri­sis, an exten­sion of the analy­sis she had pre­sented in 2003 and which detailed leg­is­la­tion needed to avert the com­ing col­lapse.  She sum­ma­rized her book’s analy­sis in arti­cles for The Guardian and Open Democ­racy.

Octo­berThe boom in US house prices begins to reverse its course.  Defaults on home mort­gages approach record lev­els.

Joseph E. Stiglitz on Octo­ber 30 on the Alex Jones radio show dis­cussed the warn­ing signs of plum­met­ing real estate prices in the U.S. and the pos­si­bil­ity of a global eco­nomic down­turn. He said:

If it’s well man­aged it will only be a slow-down, if it’s not well-man­aged it could be a reces­sion,


….I think we can avoid an implo­sion if we man­age this care­fully but it’s going to be very risky

Steve Keen in Novem­ber began pub­lish­ing on his monthly Debt­Watch Reports (33 in total). These were sub­stan­tial papers (upwards of 20 pages on aver­age) that applied his pre­vi­ously devel­oped ana­lyt­i­cal frame­work to large amounts of empir­i­cal data. Ini­tially these papers ana­lyzed the GFC that he was pre­dict­ing and then its real­iza­tion. His first report was titled “The Reces­sion We Can’t Avoid?”.

Dean Baker in Novem­ber, pub­lished the paper “Reces­sion Looms for the U.S. Econ­omy in 2007” (–29.html)  in which he fore­casts that weak­ness in the hous­ing mar­ket was likely to push the econ­omy into a reces­sion in 2007, pre­dict­ing –0.7 % GDP growth over 2007, Baker wrote:

The wealth effect cre­ated by the hous­ing bub­ble fuelled an extra­or­di­nary surge in con­sump­tion over the last five years, as sav­ings actu­ally turned neg­a­tive. …This home equity fuelled con­sump­tion will be sharply cur­tailed in the near future…. The result will be a down­turn in con­sump­tion spend­ing, which together with plung­ing hous­ing invest­ment, will likely push the econ­omy into recession….Over the course of the year, the econ­omy will shed 1.2 mil­lion jobs.”

Nouriel Roubini in a Nov 17 blog said:

[t]he hous­ing reces­sion is now becom­ing a con­struc­tion reces­sion; and the con­struc­tion reces­sion is now turn­ing into a clear auto and man­u­fac­tur­ing reces­sion; and the man­u­fac­tur­ing reces­sion will soon turn into a retail reces­sion as squeezed house­holds – fac­ing falling home prices and ris­ing mort­gage ser­vic­ing costs – sharply con­tract their rate of con­sump­tion.

Steve Keen’s Decem­ber report, titled “The run­away train of debt”, con­cludes:

Clearly house­holds can’t go on like this. At some point, whether vol­un­tar­ily or by duress, house­holds have to sta­bilise, and prefer­ably sub­stan­tially reduce, their level of debt. They can only do this by either sig­nif­i­cantly reduc­ing spend­ing, or by liq­ui­dat­ing assets. Long before this process actu­ally causes the debt bur­den to fall, the econ­omy will be in a debt-induced reces­sion.

Paul Krug­man on 4 Decem­ber in the NYT wrote

Right now, sta­tis­ti­cal mod­els based on the his­tor­i­cal cor­re­la­tion between inter­est rates and reces­sions give roughly even odds that we’re about to expe­ri­ence a for­mal reces­sion.

2007 (The GFC becomes a fait accom­pli)

Steve Keen con­tin­ues through the year with Debt­watch Report

Feb­ru­ary The decline in US house prices accel­er­ates. HSBC issues its first profit warn­ing in its 142-year his­tory, cit­ing bad debts in its US sub­prime unit.

April New Cen­tury, the US’s largest sub­prime lender, goes bank­rupt.

Wynne God­ley in April fore­saw out­put growth “slow­ing down almost to zero some­time between now and 2008 and then recov­er­ing toward 3 per­cent or there­abouts in 2009–10”; but warned that “unem­ploy­ment [will] start to rise sig­nif­i­cantly and does not come down again.”

July – Invest­ment bank Bear Stearns reveals it has made huge losses in two of its hedge funds.

August – Banks around the world begin to dis­close that they too have large hold­ings in mort­gage-backed secu­ri­ties.

Sep­tem­ber – British bank North­ern Rock requests emer­gency funds, prompt­ing a run on the bank.

Steve Keen on 14 Sep­tem­ber pub­lished, with the Cen­tre for Pol­icy Devel­op­ment, a 79 page report “Deeper in Debt”, ana­lyz­ing the causes of the finan­cial break­down in the US and the pos­si­bil­ity of it spread­ing to Aus­tralia.

Octo­ber – Cit­i­group reports sub­prime related losses of $40bn.

George Soros in early Novem­ber in a lec­ture at New York Uni­ver­sity said that after decades of over­spend­ing the U.S. econ­omy is “on the verge of a very seri­ous eco­nomic cor­rec­tion”

Wynne God­ley and oth­ers in Novem­ber 2007 pre­dicted “a sig­nif­i­cant drop in bor­row­ing and pri­vate expen­di­ture in the com­ing quar­ters, with severe con­se­quences for growth and unem­ploy­ment”.

George Soros in Jan­u­ary at Davos said:

The cur­rent cri­sis is not only the bust that fol­lows the hous­ing boom,… It’s basi­cally the end of a 60-year period of con­tin­u­ing credit expan­sion based on the dol­lar as the reserve cur­rency.

March — Bear Stearns col­lapses and, days later, is sold to JP Mor­gan Chase for just $2 a share.

Sep­tem­ber 14 – Mort­gage lenders Fan­nie Mae and Fred­die Mac are res­cued in one of the largest bailouts in US his­tory.

Sep­tem­ber 15 — Lehman broth­ers files for bank­ruptcy, prompt­ing panic as investors had assumed the US gov­ern­ment would pre­vent a bank of Lehman’s size – it was the US fourth largest invest­ment bank – from going under.

As Mer­ril Lynch approaches insol­vency, it is bought by Bank of Amer­ica for $50bn.

Sep­tem­ber 16 — Credit rat­ing agen­cies down­grade sta­tus of AIG, America’s largest insurer. The US Fed­eral Reserve loans the AIG $85bn and takes an 80 per cent stake.

Sep­tem­ber 19 – Henry Paul­son, then US trea­sury sec­re­tary, unveils plan to use tax­pay­ers’ money to sta­bilise firms and buy up toxic assets.

Sep­tem­ber. 29: Dow suf­fers largest ever one-day drop.

Sep­tem­ber to Octo­ber – In the space of a month, banks around the world, notably HBOS, Royal Bank of Scotland,Washington Mutual, For­tis, Hypo Real Estate and Lands­banki, col­lapse.

Octo­ber. 6: Dow drops below 10,000 for the first time since 2004.

Octo­ber. 9: Dow falls below 9,000.

Novem­ber. 19: Dow drops below 8,000 for first time since 2003.

Novem­ber 25 US Fed announces fur­ther $800bn stim­u­lus.

Novem­ber 28 The IMF approved a $2.1bn loan for Ice­land.


Jan­u­ary. 29: US job­less claims hit all-time high.

March - Stock mar­kets hit record lows, wip­ing out gains made since 1997. The Dow drops below 7,000.

* In com­pil­ing the Fore­sight Time­line, much use has been made of  Dirk Bezemer’s out­stand­ing paper ‘“No One Saw This Com­ing”: Under­stand­ing Finan­cial Cri­sis Through Account­ing Mod­els’. Bib­li­o­graphic details may be found therein.

Short bios of the twelve short­listed econ­o­mists, the selec­tion cri­te­ria used for the short­list and back­ground about the prize can be read here.

Shortlist for the Revere Award for Economics

This Award is named in hon­our of the Amer­i­can rev­o­lu­tion­ary hero Paul Revere, who rode through the night to warn of the approach­ing British army. In this its inagural year, it will be awarded to the 3 econ­o­mists who first and most clearly saw the Gobal Finan­cial Col­lapse com­ing and whose work is most likely to pre­vent another GFC in the future. 

To its great shame, the eco­nom­ics estab­lish­ment has attempted to evade respon­si­bil­ity for the Global Finan­cial Col­lapse by call­ing it an unpre­dictable, “Black Swan” event.  That asser­tion is man­i­festly untrue. Numer­ous non-neo­clas­si­cal econ­o­mists fore­saw the cri­sis and warned the pub­lic (usu­ally at the cost of ridicule) of its approach. The Revere Award aims to give these econ­o­mists the pro­fes­sional and pub­lic recog­ni­tion that they deserve, to encour­age oth­ers to uti­lize their meth­ods, and – most impor­tant — to increase the like­li­hood that, for the ben­e­fit of humankind, empir­i­cally respon­si­ble econ­o­mists will be lis­tened to in the future

97 peo­ple have been nom­i­nated for the award.  Some of these did not fit the require­ment stated in the orig­i­nal announce­ment of the award, that the nom­i­nees should be econ­o­mists(broadly inter­preted) and to have pub­licly warned of this par­tic­u­lar col­lapse, not col­lapses in gen­eral.  From those nom­i­nees who filled these require­ments and through con­sul­ta­tion with this blog’s com­mu­nity of authors, a short­list of 12 has been selected.  All of them are wor­thy of our spe­cial regard.  If any of them had been lis­tened to by the pow­ers that be, a colos­sal amount of human mis­ery would have been avoided.

Cri­te­ria used in the selec­tion included the fol­low­ing:

  1. that the pre­dic­tion was not whim­si­cal or lucky, but was dri­ven by the­o­ries, meth­ods, and tools that are clearly within the domain of ‘eco­nomic thought’;
  2. that the fore­cast could be repli­cated given sim­i­lar data;
  3. that the fore­cast was made pub­lic, and
  4. that the meth­ods and tools used will spur the devel­op­ment of eco­nom­ics such that the sub­ject gains rather than loses trac­tion as a result of the cri­sis.

As with the Dyna­mite Prize, which attracted over 7,500 mostly econ­o­mist vot­ers –, the bal­lot will be con­ducted by Poll­Daddy.

You may vote for three of the short­list nom­i­nees.

The prize will be awarded jointly to the three econ­o­mists receiv­ing the most votes.

But before vot­ing (the bal­lot box opens in a few hours), please con­sult the post Fore­sight and Fait Accom­pli: Two Time­lines for the Global Finan­cial Col­lapse.

Short­list for the
Revere Award for Eco­nom­ics

Dean Baker, for­merly a pro­fes­sor at Buck­nell Uni­ver­sity, is co-direc­tor of the Cen­ter for Eco­nomic and Pol­icy Research in Wash­ing­ton. He is the author of many research papers, an eco­nom­ics colum­nist for the Guardian, a weekly online com­men­tary on eco­nomic report­ing, and sev­eral books, most recently False Prof­its: Recov­er­ing from the Bub­ble Econ­omy.

Wynne God­ley is pro­fes­sor emer­i­tus of applied eco­nom­ics at Cam­bridge Uni­ver­sity and more recently a Dis­tin­guished Scholar at the Levy Eco­nom­ics Insti­tute of Bard Col­lege, New York. He is noted for his research that uses account­ing macro­eco­nomic mod­els to reveal struc­tural imbal­ances.

Michael Hud­son is a Dis­tin­guished Research Pro­fes­sor of Eco­nom­ics at the Uni­ver­sity of Mis­souri (Kansas City), pres­i­dent of the Insti­tute for the Study of Long-term Eco­nomic Trends and a Wall Street finan­cial ana­lyst. He has long been a critic of growth induced by asset-price infla­tion.

Steve Keen is a pro­fes­sor of eco­nom­ics and finance at the Uni­ver­sity of West­ern Syd­ney and a spe­cial­ist in finan­cial insta­bil­ity. His ana­lyt­i­cal frame­work draws on Min­sky, Fisher and Keynes. Begin­ning with the 2001 pub­li­ca­tion of his book Debunk­ing Eco­nom­ics, he gained inter­na­tional promi­nence through his math­e­mat­i­cally ori­ented attack on the neo­clas­si­cal main­stream, his expla­na­tion of why the lat­ter is such a poor guide to the way the econ­omy actu­ally works and his hypoth­e­sis of finan­cial insta­bil­ity.

Paul Krug­man is Pro­fes­sor of Eco­nom­ics at Prince­ton Uni­ver­sity, win­ner in 2008 of the Sveriges Riks­bank Prize in Eco­nomic Sci­ences in Mem­ory of Alfred Nobel and op-ed colum­nist for The New York Times.

Jakob Brøch­ner Mad­sen was a pro­fes­sor of eco­nom­ics at the Uni­ver­sity of Copen­hagen until 2006, when he moved to Monash Uni­ver­sity in Den­mark.

Ann Pet­ti­for is the author of sev­eral books on debt and inter­na­tional finance.  Begin­ning in 2000, she headed the New Eco­nom­ics Foundation’s research unit on global macro-eco­nom­ics.  Cur­rently she is exec­u­tive direc­tor of Advo­cacy Inter­na­tional, which under­takes research and advises gov­ern­ments and organ­i­sa­tions on mat­ters relat­ing to inter­na­tional finance and sus­tain­able devel­op­ment.

Kurt Richebächer (1918–2007) was chief econ­o­mist for Dres­d­ner Bank from 1964 to 1977, when he left it for pri­vate con­sul­tancy. He wrote one of the longest-stand­ing invest­ment newslet­ters, “The Richebächer Let­ter,” in which he warned against the bub­ble in tech­nol­ogy stocks in the late ’90s. Paul Volker, for­mer Chair­man of the US Fed­eral Reserve, once remarked that the chal­lenge for today’s cen­tral bankers “is to prove Kurt Richebächer wrong.” He died on August 24, 2007, two weeks before the col­lapse began.

Nouriel Roubini is Pro­fes­sor of Eco­nom­ics and Inter­na­tional Busi­ness at the Stern School of Busi­ness, New York Uni­ver­sity, Research Asso­ciate at the NBER and Research Fel­low with the CEPR. He is a for­mer advi­sor to the U.S. Trea­sury Depart­ment and for­mer mem­ber of the  White House Coun­cil of Eco­nomic Advis­ers. He runs the Roubini Global Eco­nom­ics Mon­i­tor and the blog Roubini Global Eco­nom­ics.

Robert Shiller is a Yale eco­nom­ics pro­fes­sor.  Like Richebächer he warned against the dot­com bub­ble.

George Soros, leg­endary financier and founder of a global net­work of char­i­ta­ble foun­da­tions, has authored numer­ous books on finance and eco­nom­ics, includ­ing The Cri­sis of Global Cap­i­tal­ism (1998). Like Richebächer and Shiller, he warned against the dot­com bub­ble. His analy­sis iden­ti­fies fun­da­men­tal insta­bil­i­ties in cap­i­tal­ism, most notably — and rem­i­nis­cent of Keynes — the reflex­iv­ity of mar­kets.

Joseph Stiglitz holds chairs at Colum­bia Uni­ver­sity and Man­ches­ter Uni­ver­sity and in 2001 received the Sveriges Riks­bank Prize in Eco­nomic Sci­ences in Mem­ory of Alfred Nobel.  He is know for his crit­i­cal views of glob­al­iza­tion, free-mrket fun­da­men­tal­ism, the IMF and the World Bank.

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  • ak


    My main inter­est in the Award is the pos­si­bil­ity that it might alert Stiglitz and Krug­man to the exis­tence on non-neo­clas­si­cal eco­nom­ics.”

    I think that you are 100% right.

    In my opin­ion there may be another way of let­ting Krug­man know as he has some pres­ence in the “blo­gos­phere” and he seems to be a very bright per­son. It is just a mat­ter of care­fully craft­ing the mes­sage and choos­ing the right time to deliver. We may work on that dur­ing the walk.

    I won­der whether Krug­man (or his assis­tant) both­ers to read the com­ments or it is a write-only medium for him …

  • TruthIs­ThereIs­NoTruth

    I have looked at islamic bank­ing and to call it ‘back­ward’ is a lit­tle short sited and I think we have to be a lit­tle care­ful our lan­guage here. It is not back­ward, it is a dif­fer­ent per­spec­tive.

    It does bring up some inter­est­ing thoughts which are the main rea­son for this post rather then the open­ing critism. I think the rea­son islamic bank­ing works is because peo­ple believe in it. It could work any­where as long as peo­ple have a moti­va­tion for it to work. And that goes for any eco­nomic sys­tem. Sys­tems work well if peo­ple believe in them and are there­fore moti­vated by them. Ulti­mately you want peo­ple to go to work and some way of allo­cat­ing cap­i­tal in a way which keeps the sys­tem going in a pos­i­tive direc­tion. Both things need a cer­tain level of con­fi­dence for it all to work, the con­fi­dence under­lies the moti­va­tion to per­form both func­tions.

    Of course in the con­text of the GFC we know the sys­tem is not per­fect. But in say­ing that and argu­ing that it should be bet­ter we sort of assume that the sys­tem is meant to be ‘per­fect’ or socially just, sta­ble… But was it really meant to be all those things? Is this part of the design? When was soci­ety ever sta­ble or just or ‘per­fect’. This seems to be a deep desire in a lot of human beings but is soci­ety as a whole ready for that? We do how­ever make incre­men­tal progress in this direc­tion, while a lot of peo­ple see the GFC as evi­dence to the con­trary I see it as one of those things which inspires a lot of progress in the right direc­tion. If we over­hauled it and made it nice and sta­ble and just to the peo­ple pledg­ing alle­giance to the same flag or sys­tem would we stop and pat our­selves on the back while the real major­ity of the human pop­u­la­tion still suf­fers and is left behind. From my per­sonal per­spec­tive I hope that this progress encom­passes the whole world and that we stop ignor­ing the places which our sys­tem ignores and leaves behind, which makes up more than 50% of the human pop­u­la­tion. I won­der what the stan­dard of liv­ing is like for the human being right on the 50% point.

  • Re #5 5bil­lk­err,

    Wel­come aboard Bill. I think the absence of nom­i­na­tions for Marx­ists may be the root cause–check the dis­cus­sion to see whether any were nom­i­nated.

    I see Minsky’s work as dis­till­ing the best in Marx on finan­cial dynam­ics, and I find most so-called Marx­ist attempts to under­stand money rather pedes­trian: they seem to stick with the first 7 chap­ters of Cap­i­tal I where Marx delib­er­ately used a gold money model to remove the extra com­plex­i­ties caused by credit.

    At some stage I’ll post a lengthy entry on Marx and Marx­ists here. In a nut­shell, I think some of Marx’s great­est ene­mies are those who call them­selves his friends. Though there are hon­ourable excep­tions (Hil­fer­d­ing, Ros­dol­sky, Magd­off, Meek come to mind), much of what was writ­ten by self-described Marx­ists took Marx’s own logic back­wards rather than for­wards.

  • noah cross

    George Soros backs Oxford to refresh eco­nom­ics

    It is part of an attempt to steer the dis­ci­pline away from the cham­pi­ons of the free mar­ket and dereg­u­la­tion who, the bil­lion­aire financier believes, share the blame for the global eco­nomic cri­sis.

    The insti­tute, as yet unnamed, is being funded by the New York-based Insti­tute for New Eco­nomic Think­ing (Inet), a think-tank and edu­ca­tional and grant-giv­ing organ­i­sa­tion founded last Octo­ber with a $50 mil­lion pledge from Mr Soros to stim­u­late debate about the role of gov­ern­ment reg­u­la­tion in the econ­omy and finan­cial mar­kets.

    It could be time to send him a pro­posal…

  • bur­rah

    Ambrose Evans-Pritchard muses on the great conun­drum of our times; who was right, Mil­ton Fried­man or the cred­i­tists, those who think the credit mech­a­nism mat­ters most.
    Defla­tion on the prowl as Bernanke shuts down his print­ing press

  • Philip

    On the topic of Marx and Marx­ists, I would have to say that the econ­o­mist Michael Perel­man came very close to hav­ing some “insight” to when an eco­nomic cat­a­stro­phe was going to occur.

    He pub­lished a book in 2007 called The Con­fis­ca­tion of Amer­i­can Pros­per­ity: From Right-Wing Extrem­ism and Eco­nomic Ide­ol­ogy to the Next Great Depres­sion. The most inter­est­ing chap­ter in my opin­ion was towards the end where he exam­ines the cur­rent state of eco­nomic the­ory and finds it lack­ing in any real­ism to ana­lyz­ing the real world.

  • Lyon­wiss

    noah cross

    Blind Freddy could now see that the eco­nom­ics or more pre­cisely the eco­nom­ics that under­lies pub­lic pol­icy is seri­ously flawed. But few can see that the orga­ni­za­tion struc­tures for eco­nomic stud­ies, pub­lic pol­icy, edu­ca­tion and pub­lic ser­vice gen­er­ally are so flawed that they are respon­si­ble for pro­duc­ing the non­sense and chaos around us.

    Another think-tank will solve the prob­lem? There must be hun­dreds of eco­nomic think-tanks around the world already. Has any of them pro­duced any orig­i­nal eco­nomic thought that really mat­tered? The fact that the global finan­cial cri­sis has been allowed to hap­pen puts a big ques­tion mark over such orga­ni­za­tions. They get bogged down for one rea­son or another.

    My gen­eral the­sis in sim­ple terms is that power and money destroy cre­ativ­ity. Power is exer­cised in hier­ar­chi­cal struc­tures such as bureau­cra­cies and large orga­ni­za­tions. Money con­trols orga­ni­za­tions and the heads of such hier­ar­chies. Lit­tle cre­ativ­ity is pos­si­ble, per­mit­ted or encour­aged in most cen­tral­ized struc­tures. Not sur­pris­ingly this is true even in some sci­en­tific orga­ni­za­tions (e.g. the story of peni­cillin).

    The answer per­haps lies with decen­tral­ized struc­tures along the lines of Braf­man and Beckstrom’s book: “The starfish and the spi­der”. Exam­ples already exist: the inter­net and this blog in par­tic­u­lar! George Soros should spend his money, not in ways which have proven to lead to fail­ures, but in ways which might just lead to suc­cess.

  • speckie

    Hello Steve

    You were my top choice of the many listed can­di­dates. Not sure about some of the other can­di­dates though. Namely, Paul Krug­man and George Soros, (for Soros on the basis that he is not an econ­o­mist). On that point, if non-econ­o­mists are to be included then what about peo­ple like Nas­sim Taleb. 

    There are many other omis­sions. For a start finan­cial econ­o­mists and prac­ti­tion­ers such as Peter Schiff , Marc Faber or even Robert Pretcher. Hell! I can cite a dozen mono­graphs prog­nos­ti­cat­ing finan­cial Armaged­don and none of the authors are cited. Schiff and Faber are sig­nif­i­cant since they draw their the­o­ret­i­cal per­spec­tive from the tra­di­tion of von Mises and Hayek.

    But there are many oth­ers who reported and early analy­sis of and pre­dic­tion of a crash by Mark Thorn­ton, includ­ing him­self. I’ve listed the com­men­ta­tors on his hon­our role below. Most of the words are his. The hyper­link to his arti­cle is

    1. Mark Thorn­ton: Mark Thorn­ton pre­sented such warn­ings of the bust and an analy­sis of the credit bub­ble in pub­lic lec­tures, radio broad­casts, and news­pa­per arti­cles and on the Inter­net

    In a lec­ture in Hous­ton on July 15, 1999, he deliv­ered a lec­ture on Alan Greenspan’s “luck” in increas­ing the money stock with­out price infla­tion, and warned that the Fed’s actions inevitably would have neg­a­tive eco­nomic con­se­quences.

    2. James Grant: One of the ear­li­est prog­nos­ti­ca­tions regard­ing the boom and bust was ana­lyst James Grant, who closed his book The Trou­ble with Pros­per­ity, writ­ten in May 1996 as fol­lows:
    “at what may or may not prove to be the ulti­mate peak of the spec­u­la­tive frenzy,”
    Grant con­tin­ued to warn investors about the stock-mar­ket bub­ble in his invest­ment newslet­ter, to pro­vide detailed expla­na­tions of the cause of the bub­ble, and to chron­i­cle

    3. Tony Deden: at Sage Cap­i­tal Man­age­ment, who wrote in 1999

    We fully expect a decline in secu­ri­ties prices and the almighty dol­lar over the next years.… There is no new par­a­digm. Eco­nomic sins have con­se­quences. Hope­fully, per­haps even econ­o­mists will learn that infla­tion is mea­sured by the growth in money and credit rather than in an idi­otic index of con­sumer prices. They might even learn that growth achieved with smoke and mir­rors ulti­mately leads to ruin. Is the incred­i­ble rise in secu­ri­ties prices since 1995 a reflec­tion of real value cre­ated or is it merely a bub­ble? Is this really a sec­ond Indus­trial Rev­o­lu­tion that changes our very basic eco­nomic assump­tions or is it not? Is it a “new par­a­digm”? A world of fast growth, record unem­ploy­ment and no appar­ent infla­tion? Have eco­nomic laws been sus­pended? And if not, how could so many peo­ple be so wrong? “

    4. Jorg Huls­mann:

    Econ­o­mist Jorg G Huls­mann, in August 1999, pro­vided an analy­sis and pre­dic­tion of the stock-mar­ket bub­ble based on the post-1980 mon­e­tary regime in the United States. He con­cluded that the mar­ket boom had been cre­ated arti­fi­cially and that it was doomed to fail: 

    You do not need a rocket sci­en­tist to pre­dict the bit­ter end of this evo­lu­tion.… Just as any other state of affairs that has been arti­fi­cially cre­ated and main­tained by infla­tion, the present sys­tem bears in itself the germs if its own destruc­tion. It will expe­ri­ence a flat land­ing of which even the most recent crises in South-East Asia, Rus­sia, and Latin-Amer­ica only give a weak fore­taste’ (1999, 140).”

    Thorn­ton notes that Hüls­mann is not the only econ­o­mist who traced this busi­ness cycle back to the post-1980 mon­e­tary regime of dereg­u­la­tion.

    5. Frank Shostak: Thorn­ton writes that 

    At the height of the bull mar­ket, allies of the Aus­trian school of eco­nom­ics held a con­fer­ence at which most par­tic­i­pants empha­sized the role of the Fed in cre­at­ing the boom. In par­tic­u­lar, Frank Shostak high­lighted the impact of the cen­tral bank’s poli­cies”

    6. Sean Cor­ri­gan: Another nota­bles is the Irish eco­nomic and stock ana­lyst, Sean Cor­ri­gan who in 1999 “…pro­vided well-timed prog­nos­ti­ca­tion of the bub­ble and deep insight into its cause. He com­pared con­di­tions dur­ing the fall of 1999 to those dur­ing the late sum­mer of 1987, the Japan­ese bub­ble of the late 1980s, and the ‘roar­ing Twen­ties’ in the United States. He dis­missed the idea that tech­nol­ogy and all the mus­ings of a ‘new par­a­digm’ could have been respon­si­ble for the run-up in stock prices in the late 1990s. In his view, debt of all kinds was expand­ing at high rates at a time when the sav­ing rate was plum­met­ing.”

    In short Thor­ton also notes that the:
    ”…sec­ond group of cor­rect pre­dic­tions came from out­side the main­stream of the eco­nom­ics pro­fes­sion and that most came from econ­o­mists asso­ci­ated with the Aus­trian school of eco­nom­ics, includ­ing aca­d­e­mic econ­o­mists, finan­cial econ­o­mists, and fel­low trav­el­ers of the school. These pre­dic­tions began to come forth in 1996 and con­tin­ued until after the down­turn in the stock mar­ket, but most of them occurred close to the peak in the stock mar­kets. Aus­tri­ans tend to have a neg­a­tive view in gen­eral, and they
    are quick to empha­size the neg­a­tive aspects of eco­nomic con­di­tions, but they also dis­tin­guish bub­bles and busi­ness cycles clearly from other eco­nomic phe­nom­ena and
    trends. Given that the Aus­trian econ­o­mists are both rel­a­tively few in num­ber and mar­gin­al­ized in the pro­fes­sion, their dom­i­nance in mak­ing cor­rect pre­dic­tions seems to
    be some­thing of an ele­phant in the soup bowl, espe­cially in light of their gen­eral dis­dain for fore­cast­ing and for the mainstream’s require­ment of accu­rate pre­dic­tion.”

    Thornton’s arti­cle is a great read but he also pre­sented it as the Mur­ray N. Roth­bard memo­r­ial lec­ture at the Aus­trian Schol­ars Con­fer­ence recently. The link appears below for those inter­ested.

    My apolo­gies for such a long winded com­ment.

  • bil­lk­err

    31- Phillip
    Thanks for Michael Perel­man ref­er­ence, he has an impres­sive bio , I plan to fol­low his blog.

    28- Steve
    Thanks. I also saw your com­ment about Marx on the other (Topsy) thread. Agree with com­ments about marx­ists not under­stand­ing marx. I’ve read some of your mate­r­ial which adds dialec­tics to Minsky’s work (The Min­sky The­sis: Key­ne­sian or Marx­ian). As far as I can tell that is your work, not Minsky’s. I’ve bought a cou­ple of Minsky’s books and have encoun­tered what I think is an error in his inter­pre­ta­tion of Marx. On p. 24 of his Keynes bio he says “In Marx it was the inabil­ity of work­ers to pur­chase back what they pro­duced that led to the sur­plus”. What Marx said was that the sur­plus arose from direct exploita­tion of labour power.

    From that my impres­sion is that Min­sky had sim­i­lar views to Marx as Keynes. Joan Robin­son com­mented that Keynes would have done bet­ter if he had under­stood Marx or Kalecki more.

    I’m still read­ing Min­sky and Marx which I have neglected over the years and have taken up in earnest now due to the cri­sis which seems to show that at least one of them or per­haps both were on the right track. If your point is that Min­sky had a bet­ter marx­ist view of money dis­cov­ered inde­pen­dently of Marx and marx­ists then I would not argue with that.

    7- ak
    Inter­est­ing com­ment about China’s over­pro­duc­tion fate in the next round of the GFC.

    Here is a 2009 paper by Robert Bren­ner where he dis­cusses the cri­sis in terms of over accu­mu­la­tion, answers a direct ques­tion about the Min­sky inter­pre­ta­tion of the cri­sis and also looks at the pos­si­ble future of China (pretty much a Marx­ist inter­pre­ta­tion):
    Over­pro­duc­tion not Finan­cial Col­lapse is the Heart of the Cri­sis: the US, East Asia, and the World 

  • bil­lk­err

    sorry I for­got to com­plete the link to Steve’s pdf: The Min­sky the­sis: Key­ne­sian or Marx­ian

  • bur­rah

    and fel­low trav­el­ers of the school.”
    The most notable of whom is Nas­sim Taleb

  • nick­mak­well

    I voted Steve, then Robert Shiller and George Soros. Good luck Steve!

  • Philip

    Lyon­wiss @ 32,

    You’re start­ing to sound some­what anar­chis­tic!

  • Lyon­wiss

    Philip, I fol­low the evi­dence wher­ever that leads! Above all I value free think­ing and avoid car­ry­ing other peo­ples bag­gage.

  • Lengthy but inter­est­ing arti­cle in the Monthly Review regard­ing, Keynes, Marx, Min­sky and defla­tion.

    Lis­ten Key­ne­sians, It’s the Sys­tem! Response to Pal­ley
    John Bel­lamy Fos­ter and Robert W. McCh­es­ney

  • Thanks Bil­lK­err,

    You should also take a look at the two pre­ced­ing pub­lished papers (here and here) plus this unpub­lished one to get a fuller take on my inter­pre­ta­tion of Marx.

  • noah cross

    Lyon­wiss @ 32…Soros’s new think tank may not be highly effec­tive, and not instantly, but as a plu­to­crat he is look­ing after his future rep­u­ta­tion. An invest­ment in one may cre­ate the long term, gen­er­a­tional debate, to re-exam­ine and under­stand things bet­ter. We don’t know yet. At least in a plural soci­ety, think tanks ( left right cen­tre, green) are intended to drive ideas. It’s true that whether chang­ing ideas are adopted or not is another thing as the deci­sion mak­ers do not want dis­rup­tion. In the finan­cial con­text it could take another 2–3 crises for real change to occur, not just in eco­nom­ics, but in finan­cial mar­kets too.
    As you say think tanks may not be use­ful, not to the left wing of pol­i­tics any­way; but in the last 30 years, right wing and gen­uinely con­ser­v­a­tive think tanks have pro­moted ideas in tax­a­tion, invest­ment, reg­u­la­tion and social pol­icy in the anglo-saxon world. None of that is to my polit­i­cal out­look but their effect has been real.
    Your view that “Lit­tle cre­ativ­ity is pos­si­ble, per­mit­ted or encour­aged in most cen­tral­ized struc­tures.” could have been said by Ayn Rand, (Greenspan’s men­tor) and may well be true, as cor­po­ra­tions are dead­en­ing places. Her book The Foun­tain­head is mak­ing a come­back in the US now. It is a bizarre piece of work.
    And just clos­ing, while the Net and this forum are use­ful media to share and com­mu­ni­cate, they lack direct influ­en­tial power, that still resides within con­ven­tional chan­nels, whether uni­ver­si­ties, think tanks and/or main­stream media.