As an economist, I do something very unusual: I treat money seriously.
Though this may be hard for those who have not done an economics degree to believe, economists have it schooled into them that “money doesn’t matter”–that it is just a “veil over barter”, there to make it easier to swap commodities than it would be if you actually had to find someone who had what you wanted, and wanted to sell what you wanted to buy.
The argument that persuades them goes something like this: ”what would happen if you simultaneously doubled all prices and all incomes? Nothing!” In other words, if consumers are rational (now there’s a much abused word, but I digress), they shouldn’t care about the absolute prices of goods, just their relative prices. So doubling all prices and doubling a consumer’s income shouldn’t cause her to do anything different (but of course, changing relative prices would alter behaviour).
Bollocks. Double all prices and my income, and I’d be much better off because my mortgage payments would take less of my income (even if interest rates were also doubled). That’s because I’m in debt–I have a mortgage. And you can’t simply double interest rates to reach the same outcome as doubling prices, because debt repayment dynamics make the whole thing “nonlinear”: include debt seriously in your analysis of consumption, and the “veil over barter” vision of money collapses. But this “inconvenient truth” is omitted from economics–not because economists are deliberately hiding it, but because they have deluded themselves about the nature of money.
I take it into account, and as a result I get a very different picture of how the economy operates than do conventional (“neoclassical”) economists.
I use this blog to post monthly reports on debt levels in Australia and the USA.
The best means of communication is via the blog, but if you want to send me an email then do so to my gmail account, which is debunking (AT [written this way to get around automated email scanners] gmail.com).
I get numerous requests from media and conference organisers for photos and a biography. Anyof following can be used freely.
Steve Keen is Professor of Economics & Finance at the University of Western Sydney, and author of the popular book Debunking Economics, a second edition of which has just been published (Zed Books UK, 2011; www.debunkingeconomics.com).
Steve predicted the financial crisis as long ago as December 2005, and warned that back in 1995 that a period of apparent stability could merely be “the calm before the storm”. His leading role as one of the tiny minority of economists to both foresee the crisis and warn of it was recognised by his peers when he received the Revere Award from the Real World Economics Review for being the economist who most cogently warned of the crisis, and whose work is most likely to prevent future crises.
He has over 60 academic publications on topics as diverse as financial instability, the money creation process, mathematical flaws in the conventional model of supply and demand, flaws in Marxian economics, the application of physics to economics, Islamic finance, and the role of chaos and complexity theory in economics. His work has been translated into Chinese, German and Russian.
In Debunking Economics, Steve let the general public in on a little-known secret: that many widely believed economic models have been shown by economists to be wrong—hence the subtitle to his book, “the naked emperor of the social sciences”.
This is emphatically the case with the so-called “Efficient Markets Hypothesis”, which still dominates academic thinking about finance today—even after the Global Financial Crisis. Since 1995, Steve’s main research focus has been the development an alternative, empirically grounded theory, known as the “Financial Instability Hypothesis”, which argues that finance markets are inherently unstable. Steve’s forthcoming book on this topic, Finance and Economic Breakdown, will be published by Edward Elgar (UK) in 2012.
From November 2006 till March 2010, he published Debtwatch, a monthly report which explains the dangers of excessive private debt. In March 2007, he started the blog Steve Keen’s Debtwatch, which now has over 13,000 members and more than 60,000 unique readers each month.
Steve’s excellent communication skills were honed in his pre-academic career, which included stints as a school librarian, education officer for an NGO, conference organizer, computer programmer, journalist for the computer press, and economic commentator for ABC Radio National and Radio Australia.
- This blog. I started it in 2006, when I concluded that a serious debt-driven financial crisis was inevitable, and someone had to raise the alarm about the possibility of one happening. Here you will find:
- The Debtwatch Report which come out just before the RBA meets each month to set rates, and takes a topical look at economics and the rate decision in particular;
- Academic papers that focus on the topics of debt deflation and the monetary system;
- A Podcast recorded after each DebtWatch report by Stuart Cameron of Rife Media
- My report And Deeper in Debt published by the Centre for Policy Development last September.
- Debunking Economics, a website that supports my book of the same name, and stores my lectures on economics and finance at the University of Western Sydney.
- Blogs by other commentators whom I believe have a handle on what has happened. For a decade or more, these writers have been “contrarians”, railing against the stupidity of Wall Street and accommodative Central Banks while the rest of the pundits applauded such financial innovations as … subprime loans:
- Doug Noland and the Credit Bubble Bulletin for the Prudent Bear mutual fund;
- iTulip, a website first set up by Eric Janszen to critique and satirise the Internet Bubble, and revived when the US housing bubble supplanted it. Eric frequently interviews academic and industry specialists; check out in particular:
- Robert Shiller’sexcellent empirical analysis. Robert coined the phrase “irrational exuberance” that was later made famous by a speech by Alan Greenspan–who unfortunately understood the issues there about as well as Donald Rumsfeld understood Iraq.
- Shiller maintains a historical database on finance, with freely downloadable data
- The US Housing Crash Blog
- Global House Price Crash Blog
- Housing Affordability Blog
- Lest it be thought that I’m a critic of everything the RBA does:
- Most of my Australian data comes straight from the RBA Bulletin Statistical Tables
- The RBA Conference on Asset Prices and Monetary Stability had some excellent papers. I only wish that the orientation set in this conference had guided subsequent RBA policy.
- This RBA paper comparing the Great Depression to the 1890s Depression is one of the most informative historical analyses I’ve ever read
- Ditto for the US Federal Reserve. While I believe that the “Greenspan Put” has encouraged “moral hazard” behaviour that has made this the worst financial bubble ever, the Fed has also been a bastion of free and accessible data. My US data largely comes from its Flow of Funds report.