Revere Award for Economics

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This has just been post­ed on the Real World Eco­nom­ics Review

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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