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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40 Responses to Revere Award for Economics

  1. ak says:


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

  2. SullaFelix says:

    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”.

  3. goman says:

    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.

  4. ak says:

    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…

  5. Steve Keen says:

    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.”

  6. mahaish says:

    “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

  7. Steve Keen says:

    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.

  8. goman says:

    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.

  9. TruthIsThereIsNoTruth says:

    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.

  10. soho44 says:

    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)?

  11. Steve Keen says:

    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.

  12. GG says:

    Steve, a belated congratulations! Keep fighting!

  13. dwcl says:

    Belated congratulations Steve! The recognition is well deserved.

  14. vv111y says:

    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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