The BIS calls for a revolution in economics

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In the last four decades, there have been only a handful of central bank and Treasury papers that I thought genuinely added to human knowledge. The economic-oriented departments within governments have in general been even more dominated by neoclassical orthodoxy than academic departments – and for good, bureaucratic reasons.

If, by some accident, a non-neoclassical economist gets tenure at a university, then generally speaking, the university is stuck with him or her. The only way to get rid of him is to either drub up a misconduct charge, or to shut the entire department down. So academic economics departments have a core of dissidents within them, and even at the most conservative of institutions – since every now and then a neoclassical economist will spontaneously transmute into a critic (as American economist and economist growth theorist Robert Solow has done since 2000 with his increasingly vehement attacks on DSGE modelling – see for instance his 2003 speech Dumb and Dumber in Macroeconomics).

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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.
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21 Responses to The BIS calls for a revolution in economics

  1. Chris Bell says:

    The Business Spectator website is very annoying! I can’t read the article until I’ve registered and I can’t get past the register page since it doesn’t like the format of my postcode. Can you post your articles somewhere that doesn’t require registration? Best way to get your message out to as many people as possible I’d imagine

  2. Steve Keen says:

    Hi Chris,

    I’ve asked Business Spectator to see what the problem is with your postcode. I expect it’s been set up for Australian postcodes but not UK ones.

    For reasons I’ll explain shortly, I will continue to post blog entries via Business Spectator.

  3. Peter Bretscher says:

    Business Spectator: No login needed from Switzerland.

  4. Mary-Ellen Large says:

    @Chris Bell. I just put in an Australian postcode. They are four numbers –

  5. Chuck Lindeberg says:

    Hi Steve,
    When do you expect your “Minsky” Kickstarter project will go live? The last time I checked, which was a few minutes ago, it was still listed as a draft.

  6. Chris Bell says:

    Thanks Mary-Ellen, I was in a bit of a hurry and got frustrated. A lesson for any software developers out there (and I’m one of them), don’t try to be too clever with your validation!

  7. Janne Haarni says:

    Great stuff. It would be interesting to hear your take on productivity and its relation to GDP growth. I have a strange feeling that a lot of the talk I hear about our need to raise the productivity of the workforce is somehow misguided.

  8. Steve Hummel says:

    Economics and money systems don’t need a revolution, they REQUIRE an evolution.

  9. mahaish says:

    under endogenous money, im not sure what central banks can do to avoid crisis anyway, despite what kind of economists work in them.

    remember all they do is assett swap at a target price.

    they impact on liquidity and protfolio composition, but thats it.

    basel and other regs puts constraints on bank balance sheet leveraging theoretically,

    but as we have seen these represent no constraint at all when profit seeking opps are involved. more leverage equals more profit in a rising market.

    treasury is a different kettle of fish, since they can effect the net assett position of the private sector.

    in oz, im inclined to think we have very practical people working at treasury.

    they advised the government to go early and go big in terms of stimulus, which in hindsight was the right call.

  10. mahaish says:

    steve can correct me on this,

    but the jury is out on whether rising central bank interest rates constrain bank balance sheet leveraging in a rising market.

    all they can control is the price , not the size of the banks balance sheet.

    i’ll be astounded if they ever know what the price should be 😉

  11. Derek R says:

    Agreed, Mahaish. I think that the best way to keep bank balance sheets from getting out of control is with a bank asset tax levied monthly on loans that use land as collateral. If the rate was set correctly that should incentivise banks to lend money to industry for the finance of capital goods rather than to house purchasers for mortgages. You could say that it would favour Schumpeterian finance over Minskyan.

  12. Steve Keen says:

    Hi Chuck,

    It will go live on January 28th (New York time). Jetlag, moving house, Xmas and the nonsense with UWS waylaid starting earlier, and I heard from The Economist that a print article mentioning Minsky was still going to be published–the blog post was a bonus.

    The 28th is the day I get back from six days in Melbourne watching The Australian Open. I’m using the time in between then and now to drastically improve the videos accompanying the campaign.

  13. Steve Keen says:

    Glad to hear that Chris!

  14. DrewRiskManager says:

    Hi Steve, did you see this paper?

    The “Mathematical Equation” Of Asset Bubbles

    Harrison Hong
    David Sraer
    Working Paper 18547

  15. Ales Praprotnik says:

    No login needed for readers from Slovenia (EU) either!

  16. John Watson says:

    Steve, as i understand it, Mark Carney will retain his position as head of BIS even after he takes over from Merv King in London. so, is this not a positive step forward? Would he not of read what the BIS currently publishes and hopefully be in sync with that? What caught my attention a while back was his use of “The Global Minsky Moment” comment a while back. While I don`t have the grey matter or education to put it all together, it seems to me to have the governor of the Bank of England to have written the following is very encouraging

  17. JKH says:

    wrong link to the Borio paper there, Steve

    (397 Lane rather than 395 Borio)

  18. Jack Cribb says:

    Hi DrewRiskManager (and others interested), Your link to “Quiet Bubbles” should be
    Jack Cribb

  19. Attitude_Check says:

    Interesting Oped in the FT on credit bubbles and modern economist’s failure to understand financial credit as a major economic system driver.

  20. Derek R says:

    That’s a highly encouraging speech from Mark Carney, Mr Watson. He has gone up in my estimation. Thanks for drawing it to our attention.

  21. Dean Ashby says:

    When I was studying business, my curriculum requires me to study economics, and have been dealing with it even in my self storage company. Indeed, people will mistook it that when you are an entrepreneur, you would only have to deal with business concepts, and the like, but there are also elements in economics that come into play. I have also heard the same about tenures of professors, but that is not the point. We are managing our own business and we employ hundreds of employees that we could not monitor. We only have one pair of eyes, and one body to monitor our company, let alone the kind of company that I have with a few storage facilities sites. We just have to trust them on what they do, and if they are not performing well and up to our expectations, then we better have a very good, tangible and objective reason that we are putting them on a disciplinary action. I believe that we need to give second chances.

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