A Galilean Gesture: Eating with Dr. Steve Keen

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My talk at the  Cana­di­an Cen­tre for Pol­i­cy Alter­na­tives was attend­ed by an inter­est­ing eclec­tic bunch, with pos­si­bly the most eclec­tic of all being Genevieve Tran, who pub­lish­es the “Mon­ey Big and Small” blog. She asked me about finan­cial lit­er­a­cy, I replied that the con­cept, like so much in eco­nom­ics, has been made non­sense of by neo­clas­si­cal econ­o­mists, and the con­ver­sa­tion con­tin­ued on from there.

This is her record of the evening. For more of Genevieve’s writ­ings, check out her blog (she warns me there’s an approach­ing “Galileo Plays Fris­bee” fol­lowup).

The oth­er Thurs­day, I end­ed up at a pub with Galileo.  Yes, the pre-emi­nent 17thcen­tu­ry Ital­ian astronomer who died while under exten­da-remix house arrest by the Catholic Church for being…right.  Yes, THE Galileo who has since been uni­ver­sal­ly un-begrudged; con­vert­ing through the vision of his tele­scopes, every last flat-earth­ling.

He appeared to me as a ghost.  Here he is sit­ting across the table at the Wolf and Firkin in Toron­to, a halo of white all around his head.  Odd­ly, of all things, he spoke with an Aus­tralian accent.  Between cheek­fuls of sweet pota­to fries and house sal­ad, we dis­cussed Nor­we­gians, real­i­ty TV, the state of fast fash­ion, and the econ­o­my. Yup.  It was 28 degrees on a Toron­to sum­mer patio, just shoot­ing the shit with One of the World’s Most Emi­nent Heretics.  ?!?!??!?!?!??!?!?


(uh, this is a record rewind sound in case you’ve nev­er seen it in print!)

Some of you may be able to iden­ti­fy this fig­ure as Dr. Steve Keen from the Uni­ver­si­ty of West­ern Syd­ney (now rid­ing Toronto’s pub­lic tran­sit).  He’s a Pro­fes­sor of Eco­nom­ics.  What he does has noth­ing to do with reli­gion: scrip­ture inter­pre­ta­tion, the cen­tre of the uni­verse, dog­ma, heresy etc.  But, strange­ly enough, he’s found him­self right back in the 17th cen­tu­ry where the Pope of That’s Who Says So in Eco­nom­ics, wish­es Dr. Keen would just lock him­self up in his house and nev­er come out again.  But here he is in Toron­to, doing some math­e­mat­i­cal work in June 2012, all the way from Oz and he didn’t even fall off the edge of the earth.

So, I’m not being entire­ly abstract.  Dr. Keen IS a ghost of sorts—many in the field of Eco­nom­ics like to pre­tend he doesn’t exist.  These include cer­tain Nobel-Prize-Lau­re­ate-dis­ci­ples and his own Aus­tralian gov­ern­ment.  But at the same time, ghost-hunters like the Cana­di­an Cen­tre for Pol­i­cy Alter­na­tivesBBCUni­ver­si­ty of Oxford and the Fields Insti­tute in Toron­to (U of T) have been hap­py to have him haunt them from time to time to chat and work on stuff.  So, why is it that Dr. Keen is so annoy­ing­ly liv­ing up to his name, accord­ing to many?

Let me quote him from a few hours before the fries and sal­ad:

I’m doing my best to erad­i­cate [the Neo­Clas­si­cal econ­o­mists who dom­i­nate the field]…The rea­son they didn’t see this [pro­longed world debt] cri­sis com­ing is that they leave banks, debt and mon­ey out of their [math­e­mat­i­cal] mod­els.  Now I know when I say that to a non-econ­o­mist, the reac­tion is ‘Huh?, you’ve got to be kid­ding!  They’re econ­o­mists!  Of course they know about debt, banks and mon­ey’  and I say, ‘no they don’t, they left them out of their mod­els so they couldn’t have pos­si­bly seen a cri­sis caused by debt, banks and mon­ey even com­ing.’”

This was the off-putting pitch Dr. Keen start­ed with dur­ing his talk ear­li­er at the Arts and Let­ters Club on Elm St.  And clear­ly, Dr. Keen isn’t half as nice as Galileo (the lat­ter who tried to com­pro­mise with his oppres­sors to say that his sci­ence debunk­ing the God-cre­at­ed-world-as-cen­ter­piece doesn’t have to be at odds with scrip­ture).  Dr. Keen quot­ed Max Planck quite frankly  that “Sci­ence pro­gress­es one funer­al at a time” (not to say that Eco­nom­ics is a sci­ence).

I hadn’t known of him real­ly before this talk.  A friend in Tokyo had urged me to go and upon googling it, I learned that Dr. Keen was THE guy in the world who proved all this eco­nom­ic cri­sis stuff would go down exact­ly as it has gone down, way back in 2005 (and not with divin­ing sticks, but with MATH y’all).  How­ev­er, I RSVP’d on the strength of the open bar and free cheese.  Pow­er­ful lures.

Back to the snake oil.  Obvi­ous­ly, it is dis­may­ing to hear that in this day and age, we can’t turn our backs for a sec­ond, while we go about our dai­ly work, and dare entrust the levers of Pret­ty Impor­tant Shit to blue-rib­boned econ­o­mists to do their job—which is to steer our econ­o­my away from doom–because they are sleep­ing on the job!!  So, if for even plebes like me it is OBVIOUS to fac­tor in banks, debt and mon­ey when try­ing to fig­ure out how the econ­o­my behaves, how could it ever pos­si­bly escape the stratos­pher­ic brain­pow­er of Zeus??  Dr. Keen must be lying!

(Good god….he’s not.  🙁  )

Dear Dr. Keen,  

If what you are say­ing is true, I want to know: to what extent is this assum­ing away (i.e. not includ­ing the fac­tors of ) “debt, banks and mon­ey” done when plan­ning whole coun­tries’ economies by eggheads??   What do you mean “Neo­Clas­si­cists” who think this kind of thing dom­i­nate the field?  How is it pos­si­ble that dude after dude in Eco­nom­ics (gen­der equal­i­ty aside, I can’t imag­ine any woman would want any inclu­sion in this) can car­tel-style leave out such com­mon-sense intu­itive / real-ass fac­tors such as:

- bankers are reward­ed based on the size of loans they are able to ped­dle to bor­row­ers

- they active­ly hot-sell more expen­sive mort­gages than peo­ple can real­ly afford to achieve their rewards; this active­ly dri­ves up the prices of hous­es (because for crissakes, what else would ever cause some of these Chi­nese thumb traps in Toron­to to go for $750,000?!??!); and doesn’t this just serve to expand the size of loans/mortgages (=more rewards) to ped­dle in the future?

- when peo­ple are in debt, many of them (who are respon­si­ble) won’t want to bor­row any more mon­ey

- when peo­ple are in debt, many of them don’t feel like shop­ping

- and if they do (say, for neces­si­ties), it wors­ens their predica­ment of debt (= debt is dan­ger­ous)

- bail­ing out banks so that they will have more mon­ey to lend to the pub­lic (=cre­at­ing more debt) as an answer to the eco­nom­ic cri­sis of debt does not make sense on a per­son­al, micro lev­el (so, how does it on a macro lev­el with­out it per­pet­u­at­ing a death spiral?)

I wonder what there is to gain by overlooking such huge warning signs en masse as economists? 

1. Com­radery? 

2. Is being a dis­sent­ing econ­o­mist a scary and lone­ly thing?

3. Is there school­yard bul­ly­ing, in the field of Eco­nom­ics if you don’t so much as wear your pock­et-pro­tec­tors the same way?

4. Is there real­ly a Pope of Eco­nom­ics that one shouldn’t cross? (I thought I was just kid­ding)

5. Will econ­o­mists lose fund­ing if they don’t say what they’re paid to say?*

*To this end, are econ­o­mists real­ly only wor­ried about their own per­son­al econ­o­my rather than the one shared by the rest of us?

Dr. Keen, your pre­sen­ta­tion includ­ed a lot of nasty, eye-cross­ing math, which didn’t have the effect of con­vinc­ing me (not entire­ly your fault: 2 glass­es of red wine + deriv­a­tives – all I ever learned in under­grad Econ = 0):

(…and some seri­ous­ly unrhyth­mic hyphen­ations)

And I’m sor­ry I squan­dered our con­ver­sa­tion at the pub after­ward on how real­i­ty TV is sure­ly a sign of the world end­ing.  (You may have had a slight­ly more com­pelling anec­dote…).  I shall have to track you down to make you speak Eng­lish to me, Aussie accent notwith­stand­ing. 

Your plebe and trusty eco­nom­ic serf-girl,


*     *     *  

It is too hot right now (32 degrees, plus my Mac­Book is burn­ing up) for me to dig into all this now.  But, it’s hor­ri­ble to think that there are peo­ple out there who are hired by gov­ern­ments (i.e. us tax­pay­ers) to con­sult about where to go with the econ­o­my, who are ^%&*# or just frickin’ *&^&%%$#@.

Kim Kar­dashi­an at least lays bare every last sor­did secret, every week!

I’ll be watch­ing you Dr. Keen!

(I guess you’re watch­ing us too!)

FYI, Galileo’s mid­dle fin­ger is on dis­play at the Museo Galileo in Flo­rence (sure­ly await­ing cer­tain individuals…who then prob­a­bly wouldn’t get it any­way).

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.