Revere Award for Eco­nom­ics

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Revere Award for Eco­nom­ics for the 3 econ­o­mists who warned the world


For Imme­di­ate Release

13 May 2010

Keen, Roubini and Baker win Revere Award for Eco­nom­ics

Steve Keen (Uni­ver­sity of West­ern Syd­ney), receiv­ing more than twice as many votes as his near­est rival, has been judged the econ­o­mist who first and most cogently warned the world of the com­ing Global Finan­cial Cri­sis. He and 2nd and 3rd place fin­ish­ers Nouriel Roubini (New York Uni­ver­sity) and Dean Baker (Cen­ter for Eco­nomic and Pol­icy Research) have won the Revere Award for Eco­nom­ics.  The award, spon­sored by the Real World Eco­nom­ics Review Blog is named in hon­our of Paul Revere and his famous ride through the night to warn Amer­i­cans of the approach­ing British army.

In announc­ing the win­ners, Edward Full­brook, edi­tor of the Real World Eco­nom­ics Review, said:

KeenRoubini and Baker have been judged in a poll by their peers, over 2,500 of them, to be the three econ­o­mists who first and most cogently warned of the approach­ing Global Finan­cial Col­lapse.

If the pow­ers of the world had lis­tened to these guys or any of the other final­ists, instead of Greenspan, Sum­mers and that lot, the col­lapse and all the human mis­ery and lost oppor­tu­nity it caused and is still caus­ing would have been avoided.

More than 2,500 peo­ple voted — most of whom were econ­o­mists them­selves from the 11,000 sub­scribers to the real-world eco­nom­ics review. With a max­i­mum of three votes per voter, a total of 5,062 votes were cast.  The vot­ers were asked to vote for:

  • the three econ­o­mists who first and most clearly antic­i­pated and gave pub­lic warn­ing of the Global Finan­cial Col­lapse
  • and whose work is most likely to pre­vent another GFC in the future.

The poll was con­ducted by Poll­Daddy.  Cook­ies were used to pre­vent repeat vot­ing.

Com­ment­ing on the results, Full­brook said:

The gen­eral fail­ure to warn of the approach­ing Global Finan­cial Col­lapse showed that in the eco­nom­ics pro­fes­sion today the gen­eral level of com­pe­tence at real-world eco­nom­ics is griev­ously less than what soci­ety requires.

Worse, some peo­ple in the eco­nom­ics estab­lish­ment have attempted to evade all respon­si­bil­ity for the Col­lapse by call­ing it an unpre­dictable, “Black Swan” event.

Such state­ments are plainly untruth­ful. Some econ­o­mists did–and on the basis of deep analysis–foresee the cri­sis and warn the pub­lic of its approach.  At the time they were widely ridiculed for doing so.

Hope­fully the Revere Award will give these econ­o­mists some of the pro­fes­sional and pub­lic recog­ni­tion they deserve, and encour­age oth­ers to uti­lize their meth­ods, and increase the like­li­hood that, for the ben­e­fit of humankind, empir­i­cally respon­si­ble econ­o­mists, instead of faith-based ones, will be lis­tened to in the future.

I must empha­size that it is not just for the win­ners’ sake but for everyone’s that KeenRoubini and Baker should be given pub­lic credit for their com­pe­tence and courage.

Revere Award Cita­tions

Steve Keen (1,152 votes)

Keen’s 1995 paper “Finance and eco­nomic break­down” con­cluded as fol­lows:

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.

In Decem­ber 2005, draw­ing heav­ily on his 1995 the­o­ret­i­cal paper and con­vinced that a finan­cial cri­sis was fast approach­ing, Keen went high-pro­file pub­lic with his analy­sis and pre­dic­tions. He reg­is­tered the web­page ded­i­cated to ana­lyz­ing the “global debt bub­ble”, which 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 and how to avoid it.  In Novem­ber 2006 he began pub­lish­ing 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 Global Finan­cial Col­lapse that he was pre­dict­ing and then its real­iza­tion.

Nouriel Roubini (566 votes)

In sum­mer 2005 Roubini pre­dicted that real home prices in the United States were likely to fall at least 30% over the next 3 years.  In 2006 he wrote on August 23:

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

And 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…”

In Novem­ber 2006 on his blog he wrote:

[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.

Dean Baker (495 votes)

In August 2002 Baker pub­lished “The Run-Up in Home Prices: Is It Real or Is It Another Bub­ble?” in which he con­cluded that it was the lat­ter. In Decem­ber 2003 he pub­lished in the Los Angles Times “Who to Blame When the Next Bub­ble Bursts”. This was the first of dozens of columns appear­ing in US news­pa­pers that Baker wrote on the bub­ble. In one from May 2004, “Build­ing on the Bub­ble”, 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.

In 2006 he put out repeated warn­ings of the sys­temic impli­ca­tions of the hous­ing bub­ble, and in Novem­ber pub­lished the paper “Reces­sion Looms for the U.S. Econ­omy in 2007” in which he 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.

The vote totals for the other final­ists were:

  • Joseph Stiglitz  480
  • Ann Pet­ti­for 435
  • Robert Shiller  409
  • Paul Krug­man 399
  • Michael Hud­son 351
  • Wynne God­ley 281
  • George Soros 262
  • Kurt Richebächer  168
  • Jakob Brøch­ner Mad­sen 64

More infor­ma­tion about the con­tri­bu­tions of the win­ners and final­ists is avail­able at Fore­sight and Fait Accom­pli: Two Time­lines for the Global Finan­cial Col­lapse

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  • ak


    This loop is called a pos­i­tive feed­back loop. That’s why the sys­tem is inher­ently unsta­ble.

  • Sul­laFe­lix

    Dear Steve,

    I have sent charts and data to your e-mail through your address on Debunk­ing Eco­nom­ics web site. The mes­sage is titled “From Sul­laFe­lix”.

  • goman

    Con­grats Steve,

    About the 2nd place fella, Has any­one read Roubini’s new book, Cri­sis Eco­nom­ics?

    I haven’t had the chance yet but I did read a review on here

    and it seems that he is versed in Post-Key­ne­sian eco­nom­ics.

    Here is part of the review that reminded me of Steve’s writ­ing.

    Today it is fash­ion­able to see the econ­omy as a self-reg­u­lat­ing entity that, left alone, sta­bi­lizes at full employ­ment and low infla­tion. A promi­nent exam­ple is Alan Greenspan, who took his basic eco­nom­ics lessons from philoso­pher Ayn Rand. Karl Marx was the first thinker to see cap­i­tal­ism as inher­ently unsta­ble; Marx also con­tended that cap­i­tal­ism would inevitably plunge into chaos because own­ers con­tin­ual cost-cut­ting would even­tu­ally leave so many unem­ployed that a rev­o­lu­tion would result. Marx’s ‘bot­tom-line — cap­i­tal­ism con­tains the seeds of its own demise. ‘Behav­ioral econ­o­mists’ try to explain why mar­kets are inef­fi­cient — expla­na­tions include jump­ing on the band­wagon and var­i­ous other biases and irra­tional incli­na­tions. Keynes also under­cut con­ven­tional wis­dom, stat­ing that defla­tion will occur and demand will fall if wages are cut and work­ers fired. Keynes’ solu­tion was to have the gov­ern­ment cre­ate the needed added demand. Mil­ton Fried­man, et al (the Chicago school), explained the Great Depres­sion as a result of the decline in bank deposits and reserves, cou­pled with the Fed­eral Reserves’ fail­ure to cut the dis­count rate. Hyman Min­sky revi­tal­ized Key­ne­sians by point­ing out that cap­i­tal­ism con­tains the poten­tial for run­away expan­sion pow­ered by an invest­ment boom. The prob­lem is due to an excess of bor­row­ers — ‘hedgers’ can cover their inter­est and prin­ci­pal pay­ments, but ‘spec­u­la­tors’ can only cover their inter­est pay­ments and ‘Ponzi’ bor­row­ers can’t cover either. Irv­ing Fisher added the idea that gov­ern­ment should revive a stag­nant econ­omy by flood­ing it with easy money (‘refla­tion’) — that’s what we did in 2007 and 2008. Finally, the Aus­trian school (Schum­peter et al — ‘cre­ative destruc­tion’) argue that even Hoover did too much in the Great Depres­sion, and our recent actions only ensured the sur­vival of zom­bie banks and firms need­ing end­less lines of credit and spe­cial leg­is­la­tion. This bur­den, how­ever, even­tu­ally causes the gov­ern­ment to default or inflate its way out of debt. Deposit insur­ance and the ‘Greenspan put’ are folly, per Shum­pete­ri­ans.

  • ak

    An inter­est­ing arti­cle about the hous­ing bub­ble in China and the pos­si­ble impact on Aus­tralia.

    The last time Bei­jing turned the screws on prop­erty invest­ment the world woke up to find China’s heavy indus­try sec­tor had been flat­tened and the resources boom had turned to bust. Rio Tinto jumped into the arms of Chi­nalco, banks pulled the rug from under OZ Min­er­als and the Reserve Bank slashed inter­est rates by four per­cent­age points in a lit­tle over five months.
    No sur­prise, then, that investors are fret­ting about the fresh round of tight­en­ing which began a month ago. Chi­nese banks lifted min­i­mum mort­gage deposits from 20 to 30 per cent for first home buy­ers, and from 40 to 50 per cent for sec­ond home buy­ers. Bei­jing and some other cities went an extra step by sus­pend­ing all third mort­gages, ban­ning mort­gage lend­ing to non-city res­i­dents and float­ing threats of a new prop­erty tax. Chi­nese media were required to report “the suc­cess of gov­ern­ment pol­icy tight­en­ing” and oth­er­wise guide “healthy mar­ket expec­ta­tions”.
    The result was that the aver­age new apart­ment price in Shen­zhen dropped 26 per cent in the first week of May from the last week of April, accord­ing to data from E-House. Shang­hai prices fell 28 per cent. Bei­jing fell less, but only because their price plunge began ear­lier.”

    John Gar­nault thinks that this is it for the bub­ble there. But he also thinks that the Chi­nese lead­er­ship is firmly in con­trol.

    Bei­jing, Shang­hai and Shen­zhen — where real-estate excite­ment has been most fre­netic — only account for 8 per cent of Chi­nese res­i­den­tial con­struc­tion, accord­ing to UBS. House­hold debt is ris­ing fast but remains minus­cule when com­pared with Aus­tralia. Chi­nese incomes con­tinue to out­pace the rise in house prices.
    Slow­ing real-estate invest­ment will assist with China’s eco­nomic rebal­anc­ing project, so that Bei­jing will not become Dubai. Most impor­tantly, when pol­i­cy­mak­ers find they have over-applied the brake — as they prob­a­bly will — they can sim­ply repeat the global finan­cial cri­sis recov­ery pro­gram.”

    So accord­ing to Gar­nault the bub­ble burst may not do too much harm to the real Chi­nese econ­omy as long as they don’t fol­low the neo­clas­si­cal eco­nomic text­books.

    It is yet to be seen how this see-saw impacts our local Aus­tralian debt addicts and whether our gov­ern­ment can pull yet another stim­u­lus just before the elec­tions…

  • Yes goman, our ideas are very com­pat­i­ble.

    There’s now a very good inter­view with Roubini at that link, with state­ments like the fol­low­ing:

    Unsus­tain­able pri­vate-debt prob­lems must be resolved by defaults, debt reduc­tions, and con­ver­sion of debt into equity. If, instead, pri­vate debts are exces­sively social­ized, the advanced economies will face a grim future: seri­ous sus­tain­abil­ity prob­lems with their pub­lic, pri­vate, and for­eign debt, together with crip­pled prospects for eco­nomic growth.”

  • mahaish

    Sure it makes sense that credit growth con­tributes to demand, I’m not actu­ally dis­miss­ing that. But it makes equal if not more sense that employ­ment dri­ves demand for credit, are you dis­miss­ing that idea and why”

    hi titint,

    i dont think there is any dis­agree­ment with what you are sug­gest­ing. basil moore would cer­tainly agree with you.

    in that busi­ness deci­sions about sav­ings and invest­ment, which effect changes in employ­ment and the wages that are paid, drive the demand for credit.

    busi­ness needs for work­ing cap­i­tal given the asy­met­ric nature of their cost struc­ture, lots of finan­cial input up front, with the pay off com­ing later, dri­ves this process.

    but its this very sym­bi­otic con­nec­tion between busi­ness demand for credit in order pay for wages, that cre­ates this con­nec­tion or cor­re­la­tion in my opin­ion.

    may be steve can cor­rect me on this if im wrong

  • Many thanks Svi­atoslav,

    That data is very curi­ous, given the extreme jumps in debt lev­els (“Other” dou­bling in a year for instance). I also took a look at the mon­e­tary sta­tis­tics via the web link, and the growth rates there are also huge. I expected to see a col­laps­ing exchange rate at that time, but it was rel­a­tively sta­ble, so this implies an incred­i­ble rate of growth of debt.

    I would appre­ci­ate you shar­ing your analy­sis of this with the Debt­watch dis­cus­sion list.

  • goman

    Hi Steve, I also saw stacks of his book at our local Costco (big box retailer) yes­ter­day. So his ideas are being pre­sented to the masses. It is not just Glenn Beck and Karl Rove non­sense books. That made me opti­mistic. 😉

    Also Steven Mihm is his co-author and I remem­ber read­ing the fol­low­ing arti­cle last year.

    It is basi­cally Min­sky 101.

  • TruthIs­ThereIs­NoTruth

    hi mahaish

    thanks for the reply

    It makes sense what you are say­ing and it’s yet another way credit and employ­ment are cor­re­lated. In my view a lot of the demand for credit comes from the employ­ment con­di­tions and is dri­ven by the indi­vid­u­als in the econ­omy. Strong employ­ment means peo­ple feel more secure about future cash­flows and are there­fore will­ing to take on more debt and more debt is avail­able to them. This is a sim­ple and direct mech­a­nism. Yes there is feed­back the oth­er­way, but it is not as sim­ple and direct. Makes it very dif­fi­cult to claim that credit dri­ves employ­ment and not the other way around, what I am say­ing is that it is both.

  • soho44

    Hi Steve,

    Have you ever had a chance to debate Roubini? Any chance your uni­ver­sity could arrange this (for an online live stream/You Tube clips later)?

  • No, but I’ll be in New York between June 29 and July 10 so I hope we can meet up. In fact if any­one can organ­ise a sem­i­nar or pub­lic meet­ing there, I’d be avail­able. I’ll put a note up on the blog about this in a while.

    BTW every­one, I’ll reg­u­larly be post­ing a blog entry derived from my con­ver­sa­tions with Busi­ness Spec­ta­tor, which they’re now putting up every week.

    It’s the eas­i­est way for me to get a post done in a hurry while spend­ing most of my time on the mod­el­ling and the book (the mod­el­ling is going very well by the way), since a quick phone call and some edit­ing of the tran­script results in a blog post in a cou­ple of hours.

    How­ever the top­ics will reflect the inter­ests of Busi­ness Spec­ta­tor read­ers more than they will my intrin­sic inter­ests. Since prop­erty is still the obses­sion du jour, there will be an inor­di­nate num­ber of posts on this topic–including the next one.

    I just want to empha­sise that this doesn’t mean that prop­erty issues are dis­tract­ing my from my core interests–in fact exactly the reverse. Blog­ging this way is “buy­ing me time” (fig­u­ra­tively speaking–I’m not being paid for the arti­cles) to work on the core top­ics of mod­el­ling Min­sky and debt defla­tion.

  • GG

    Steve, a belated con­grat­u­la­tions! Keep fight­ing!

  • dwcl

    Belated con­grat­u­la­tions Steve! The recog­ni­tion is well deserved.

  • vv111y

    Con­grat­u­la­tions Steve!
    And con­grat­u­la­tions to all the run­ner ups.

    ps I bought your book a while ago and hope­fully, soon, some­day, I will have the time to read it. 

    all the best.

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