Debunking Economics - Revised, Expanded and Integrated

Debunking Economics - Revised, Expanded and Integrated


Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned? [Download] ➺ Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned? By Steve Keen – Capitalsoftworks.co.uk Debunking Economics exposes what a minority of economists have long known and many of the rest of us have long suspected that economic theory is not only unpalatable, but also plain wrong When the fir Debunking Economics exposes what a - Revised, PDF/EPUB À minority of economists have long known and many of the rest of us have long suspected that economic theory is not only unpalatable, but also plain wrong When the first edition was published in , economists basked in the limelight of a seemingly invincible market economy But the economy s performance, as Steve Keen argued, had nothing to do with neoclassical economic theory and gave policy makers the false confidence to begin to dismantle the very Debunking Economics ePUB ´ institutions designed to limit market instability That instability exploded with the devastating financial crisis of , and now haunts the global economy with the prospect of another Depression In this updated and expanded edition, Keen builds on his scathing critique of conventional economic theory whilst explaining what mainstream economists cannot why the crisis occurred, why it is proving to be intractable, and what needs to be done to end it Essential for anyone who has ever doubted the advice or reasoning of Economics - Revised, PDF ✓ economists, Debunking Economics is a signpost to a better future.

  • Kindle Edition
  • 721 pages
  • Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned?
  • Steve Keen
  • English
  • 23 May 2019

About the Author: Steve Keen

Steve Keen is a professor - Revised, PDF/EPUB À in economics and finance at the University of Western Sydney He classes himself as a post Keynesian, criticizing both modern neoclassical economics and Marxian economics as inconsistent, unscientific and empirically unsupported The major influences on Keen s thinking about economics include John Maynard Keynes, Hyman Minsky, Piero Sraffa, Joseph Alois Schumpeter, and Fran ois Quesnay His recent work mostly concentrates on mathematical modeling and simulation of financial instability.



10 thoughts on “Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned?

  1. Whitaker Whitaker says:

    Update 3 December 2011 Steve Keen s done an excellent interview with BBC Hard Talk Check it out on his author profile In summary, he explains that the last 30 years of growth have been fueled by a credit bubble where banks basically went wild making money from lending Where credit is used to fund speculation i.e., making money from the increase of asset prices as opposed to funding new business ventures , it s a Ponzi scheme We were assured by the economists it was all stable because the b Update 3 December 2011 Steve Keen s done an excellent interview with BBC Hard Talk Check it out on his author profile In summary, he explains that the last 30 years of growth have been fueled by a credit bubble where banks basically went wild making money from lending Where credit is used to fund speculation i.e., making money from the increase of asset prices as opposed to funding new business ventures , it s a Ponzi scheme We were assured by the economists it was all stable because the banks knew what they were doing and wouldn t do anything stupid Hah Don t we know now how untrue that was The only way to recovery is for the bad debt to be worked out of the system This means either 20 years of destroyed lives waiting for the debt to be worked out that way or do an Argentina and just refuse to pay the banks who were responsible for this fucking mess in the first place Then we need to rebuild the financial system to stop banks from doing it again Update 17 November 2011 Keen has come up with the second edition of this book He was interviewed for the blog, naked capitalism Part I of the interview can be read here I want to just bookmark that interview here, but if you re interested, here s a snippet that to me was priceless science proceeds by the development of paradigms followed by periods of volatility when the old paradigm strikes a series of anomalies it can t resolve, leading to a scientific revolution in which a new paradigm is formed that can account for the anomalies.But this process requires a degree of dispassionate separation between the empirical data and the theories But in economics, anomalies abound but simply aren t even acknowledged, so attempts to resolve them simply don t occur the neoclassical paradigm just sails on oblivious to them.My favourite here is the conflict between the neoclassical theory of the firm, which requires rising marginal costs, and thethan a hundred studies that have contradicted this Rather than confronting this anomaly , neoclassical economists continue teaching and building models that assume rising marginal costs, and in fact the most in famous paper in methodology Friedman s assumptions don t matter paper was written specifically to advise economists NOT to even read the empirical literature Original ReviewThis one is for Trevor I don t think I can possibly cover this book adequately Certainly I m in no position to assess how valid his economics is What I can say, however, is that he does explain clearly and logically why neo classical economics is a complete bunk He doesn t rely on anecdotes or nifty little stories he relies on a solid analysis of its basic principles and theories First he explains them and then goes on to show their internal contradictions and mathematical inaccuracies Finally, he points us to actual published economic work written by real life or now dead economists working out these concepts Wait Maths you say WTF Sounds like a real snore fest Well, yes, there s math And, yes, math phobes are gonna get a case of hives scratch scratch scratch pass mecamomile lotion please But don t worry You won t die He keeps it to a minimum, and you can keep the damage to a minimum by just skimming it What Keen DoesThis guy doesn t think small He starts off by taking aim at the four pillars of neo classical economics demand, supply, competition and wages Then, after he s limbered up, he goes for the remaining tenets I ll just lay out below how he deals with demand and supply because of the four pillars those were the bits I understood the most All I can do, though, is provide a rough sketch and the arguments below are almost necessarily an unfair caricature of what he s written The demand curve and the principle of utilityWe all know that little graph, you know, the one showing that as the price rises the demand for the goods fall clearly whoever thought up of that one hasn t met the phenomenon of luxury goods where hiking up the price increases demand Well, linked to that is the principle of maximum utility the idea that we maximise the utility we get out of our money by spending it on that combination of goods that gives us the most pleasure Economists then go on from that to derive the principle that all of us doing that very thing in our own little way create a market economy where we arrive at a set of goods and prices which on a collective level arrives at the maximum level of utility or goodness for the entire society Keen shows why that is incorrect The bitty graph we see is for one set of goods What if we start addingThen we get utility curves that show theoretically the maximum and most efficient combination of goods we d buy for the prices they are sold for All very well and good But then you start multiplying people Keen highlights that the utility curve fails to take into account that different people derive different levels of utility i.e., pleasure from the same things and that you can t aggregate that pleasure in a mathematically meaningful way In fact, a utility curve for a society will not be a smooth line but a jagged line that has no theorectical utility whatsoever To keep it smooth, economists have to assume the existence of goods that every consumer will want to buy and will continue to buy in numbers that take up the same proportion to his income regardless of what that income is In real terms, if you drank a beer a day when you were a college student, you d drink a hundred beers a day if you became an executive, and a thousand beers a day if you became a banker, and probably enough beer to sink a ship if you became an investment banker Even economists figured that real people might not behave that way, so they came up with a solution the representative consumer That s not a real person That s an imaginary person You know, imaginary, like leprechauns Or kindly Randians Of course, economists don t use that term They say Sonnershein Mantel Debreu conditions and they use language like, The necessary and sufficient condition quoted above is intuitively reasonable It says, in effect, that an extra unit of purchasing power should be spent in the same way no matter to whom it is given The supply curve and supply side economicsWell, the supply curve is the opposite of the demand curve it shows a graph where as the price for a set of goods goes up, so does the number of goods produced Sounds reasonable right Put it another way If Nike shoes cost 100 each when Nike makes 100 shoes, then they cost 1,000 when Nike makes 1,000 shoes Wait, say that again This situation arises because economists believe that productivity falls incrementally for every extra unit of goods produced So, it coststo produce each extra pair of Nikes Price is determined as cost plus a minimum amount extra So,Nikes sold meanexpensive Nikes Okay, I think even a low wage factory slave in India can see what s wrong with that But if you just focus on the theory, doesn t it sound like it could be true He goes on to note how this critique was put together by Piero Saffra in 1926 who also noted that in an industrialised economy costs tend to remain constant within a normal range of output you tend to get economies of scale asgoods are produced since it costs the same to run the machines to produce 100 goods as it does to produce 1,000 goods I ve always wondered how neo classical economics adapts to the non tangible goods that make up a big part of the world economy Stuff like music, for example, where the cost associated with producing a song is the same regardless of whether you sell one copy or whether you sell 1 million copies I guess now I know It doesn t And Then What As I noted above, he goes on to competition and wages dealing with them in a similar way In summary, he notes with regards to competition that big isn t necessarily bad it gets you economies of scale and with regards to wages that unions and minimum wage can be good things for one thing, workers don t choose between work and leisure but between starving and living He takes aim at other key aspects of neo classical economics He tells us why, for example, the assumptions used in neo classical theory are not a source of strength but a fundamental weakness And also why it s daft that economists ignore time It s all solidly backed with graphs, tables and citations Trevor, what s in this for you Well, I think you ll enjoy the chapter on wages He also has a chapter on why neo classical economists are so stubbornly wed to their theories it s not a vast conspiracy, it s simply cognitive dissonance And he gives an overview of the alternatives a chapter on Marxist economics he thinks it s equally flawed and a chapter on the Austrian, post Keynesian, Sraffian, complexity theory, and evolutionary varieties He lays out their comparative flaws and strengths What I LikedKeen, to give him credit, painstakingly explains the neo classical position, explains the problems with it, explains the neo classicist response, and then explains the problems with the response I can t say he s even handed, but he s not polemical You do get to hear both sides from him, so from that perspective it s worthwhile reading the book Sometime in 2008, I was hoping that neo classical economists were thoroughly discredited Looking at where we stand now in 2011 where the bankers are getting obscenely rich again and people seem to have returned to their old habit of forgetting the crises of the past witness the fad for austerity , and I find myself wholly depressed and disenchanted It seems like nothing less than a complete melt down of the global economic system will see their demise In the meantime, we re just supposed to drink our tea cough Kool aid cough and assume that everything will turn out all right Don t do it Arm yourselves, not with Kalashnikovs but with information like this book And come the revolution, it s not the lawyers we ll kill but the neo classical economists

  2. Sean Fernyhough Sean Fernyhough says:

    Thirty years ago I experienced a highly conventional education in Economics I always had an immense difficulty in reconciling the irreconcible the economics inside the lecture theatre and the seminar room with that in the outside world Without the internet and books like Debunking Economics it would have taken extraordinary luck and perseverance to find the literature I needed to counteract the wrongheadedness of what I was being taught I can even recall one of our lecturers saying that it Thirty years ago I experienced a highly conventional education in Economics I always had an immense difficulty in reconciling the irreconcible the economics inside the lecture theatre and the seminar room with that in the outside world Without the internet and books like Debunking Economics it would have taken extraordinary luck and perseverance to find the literature I needed to counteract the wrongheadedness of what I was being taught I can even recall one of our lecturers saying that it was part of our role as Economics students to defend Neoclassical Economics.What Professor Keen s book demonstrates is that these nuggets were out there at the time, but that the teaching of Economics conspired against these being discovered Keen s description of Economics teaching today makes very familiar reading things do not seem to have moved on that much at all Indeed, just last week I checked out the Economics section for undergraduate textbooks and much of what was presented was eerily familiar So, despite the internet and the present economic crisis Economics undergraduates are likely to find themselves in the same predicament as my younger self If that is the case, then my advice is quite simple buy, read, re read and absorb Debunking Economics Counter the nonsense you are being taught at every level and tool yourself up for building a new academic subject.Read this book and understand that Neoclassical Economics has never been able to successfully aggregate the behaviour of individuals, either as consumers or producers, to the level of a single market let alone a whole economy Read and understand that markets have emergent qualities , i.e that they are greater than the sum of their parts Read and understand that a market or an economy is in a constant state of dynamic equilibrium where decisions are made in conditions of uncertainty about the future values of important economic variables Read and understand that this type of economy cannot be analysed using an equilibrium analysis.Debunking Economics points the Economics student to the way to counteract Milton Friedman s the realism of assumptions doesn t matter dictum that can really cause problems for critical thinking accept it and an effective critique of Neoclassical Economics becomes muchdifficult.The book also shares details of Professor Keen s own research programme in the area of Macroeconomics, with the promise that a further book, to be published in 2013, will develop the ideas This positive contribution to Economics is there to be taken seriously The presentation here is quite accessible to the interested non specialist reader in fact this has been a central shaping of the book throughout It is a launch pad, should the reader wish to take the journey, to a greater understanding of the world around us

  3. Munthir Mahir Munthir Mahir says:

    First off I stopped reading past chapter 9 This book covers a subject that is huge a whole social science field and that is the problem The book is one too many things it talks to too many audiences about too many topics using too many tools It reads like a textbook, scientific paper, dissertation and a non fiction book all at once It certainly requires great concentration to follow the ancillary comments and supplements It is not organized in a manner that is easy to follow because of t First off I stopped reading past chapter 9 This book covers a subject that is huge a whole social science field and that is the problem The book is one too many things it talks to too many audiences about too many topics using too many tools It reads like a textbook, scientific paper, dissertation and a non fiction book all at once It certainly requires great concentration to follow the ancillary comments and supplements It is not organized in a manner that is easy to follow because of the way the author chose to structure his arguments and the methodology he employed I felt at several points the author fell into the same mistakes he be littles his opponents for Both sides of the battles still rely on theoretical concoctions that they both still can t reliably test empirically The first 9 chapters should give any reader the jest of the contested economic topics, beyond that it starts to be philosophical, argumentative and opinionated This book could have beenaccessible topeople if it was designed and structured in a manner that relates and compares the theoretical contests to everyday economic transactions such as, a small business demand and supply realities, tax and interest impacts on consumers and businesses, consumption behaviors, etc

  4. Petter Nordal Petter Nordal says:

    Every adult living in a democracy should read this book The next time someone tells you that rewards for the rich are the way to fix the economy, ask them what the relationship is between private debt and the supply curve If they cannot answer they will likely tell you that private debt is not an important factor in a capitalist economy insane as that sounds then you can whip out some Keen and leave them backpedaling Even if they do answer, you will be prepared to pummel their simplistic, Every adult living in a democracy should read this book The next time someone tells you that rewards for the rich are the way to fix the economy, ask them what the relationship is between private debt and the supply curve If they cannot answer they will likely tell you that private debt is not an important factor in a capitalist economy insane as that sounds then you can whip out some Keen and leave them backpedaling Even if they do answer, you will be prepared to pummel their simplistic, static and imaginary world arguments into the ground.We constantly hear that the economic choices for our economies are lamentably going to result in some short term pain in order to provide long term stability, and it is simply too bad that some people are going to get rich off these measures while ordinary people are going to face unemployment, poverty and uncertainty It s just the way things have to be, we read This book proves such neoclassical hogwash to be unscientific, illogical and completely at odds with reality.Keen, though at times a challenge to follow, brings together different disciplines to critique the lunacy of neoliberal economics He knows economics better than nonprofessionals, he knows economic history better than most historians He knows, applies and explains advanced mathematics He brings philosophy and history of ideas to bear on the problem In short, he is able to look at economic processes as they actually happen in the real world, using the tools that educated people have available to us.I read Marx in 1986 and, though I m no Marxist, I ve found that a Marxist economic analysis serves far better than the Wall Street Journal or Planet Money for explaining what is happening This is the first book since I read Alexander Berkman in 1987 that has added to my understanding of Marx and given me better tools to analyze and understand economics

  5. Muhammad al-Khwarizmi Muhammad al-Khwarizmi says:

    Keen is brilliant but there are two problems with this book on my end it assumes too little mathematical knowledge at the same time as it assumes too much knowledge of the neoclassical theory he is rebutting in general.The result is often a confusing, hard and overly verbose slog As much as I don t like pages and pages of equations like you see in some texts, I see what he s doing sometimes and wish he would just fill it in in a box set apart from the rest of the material He has supplemental Keen is brilliant but there are two problems with this book on my end it assumes too little mathematical knowledge at the same time as it assumes too much knowledge of the neoclassical theory he is rebutting in general.The result is often a confusing, hard and overly verbose slog As much as I don t like pages and pages of equations like you see in some texts, I see what he s doing sometimes and wish he would just fill it in in a box set apart from the rest of the material He has supplemental data on his website but that doesn t fix everything.I wish Keen wereaccessible in the regards I mentioned I have called it quits about midway through

  6. Grig O& Grig O& says:

    5 stars for content, 3 stars for presentation.While Keen s intent to present complex facets of economics in layman terms is certainly laudable, his efforts to bypass mathematical formulas at all costs by use of textual, tabular and graphic illustration even if that occasionally means spelling out formulas in sentence form sometimes go too far.There s quite a bit of redundancy between chapters, as well as less than perfect mixes of the first 2001 edition and the revised 2011, post crash one 5 stars for content, 3 stars for presentation.While Keen s intent to present complex facets of economics in layman terms is certainly laudable, his efforts to bypass mathematical formulas at all costs by use of textual, tabular and graphic illustration even if that occasionally means spelling out formulas in sentence form sometimes go too far.There s quite a bit of redundancy between chapters, as well as less than perfect mixes of the first 2001 edition and the revised 2011, post crash one Considering the massive scope of this book covering pretty much all aspects of economics except world trade it s inevitable that some parts become somewhat of a trudge.On the bright side, there are many enlightening passages and interesting anecdotes I had no idea about Keen points out moments in history where ideology influenced political economy, both to the right did you know Keynes included Marx s M C M circuit in an early draft of his General Theory, even though publicly he denied having read Marx and to the left Marx s early draft of Capital where he considers machinery as a source of value which would have annulled the inevitability of socialism.This is a book of Big Ideas that need urgent consideration whether you decide to read the book, or follow Keen s online media presence, or read a summary maybe start here , you should definitely get to know them if you have an interest in economics or social dynamics.Finally, here s my favourite quote Keynes take on politicians from his General Theory book Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back BOOM

  7. Gregg Wingo Gregg Wingo says:

    This book is a fantastic critique of the neoclassical synthesis and an exploration into the world of heterodox economics Keen bravely attacks static economics at its mathematical roots and assumptions, revives Marx theory of value and crowns him the greatest of Classical economists, defends Keynes against his opponents and heirs, and introduces the elegance and irrationality of dynamic analysis into the inherent instability of the market The author succeeds in trashing the NeoLiberal argument This book is a fantastic critique of the neoclassical synthesis and an exploration into the world of heterodox economics Keen bravely attacks static economics at its mathematical roots and assumptions, revives Marx theory of value and crowns him the greatest of Classical economists, defends Keynes against his opponents and heirs, and introduces the elegance and irrationality of dynamic analysis into the inherent instability of the market The author succeeds in trashing the NeoLiberal argument of supremacy of free markets by discrediting the equilibrium assumption of Walrasian markets and other restrictions of the Sonnenschein Mantel Debreu conditions Keen s basic position is a Marx Keynes Schumpeter Sraffa Minsky synthesis that firmly holds that markets are inherently unstable due to the complex nature of the dynamics of capitalists and financial capital While exploding Marx labor theory of value, Steve Keen lauds Marx theory of value and his dynamic perspective on the nature of economics He integrates this dynamism into the creative nature of Schumpeter s entrepreneurs and the speculation of financial markets so that the nature of the business cycle becomes clearly not balanced to any stable point derived from Minsky s legacy.Having read both the first and second edition I would strongly recommend referencing the graphics from the first edition and now available online in order to provide a nonnarrative basis for analyzing Keen s work This is a book that any serious student of economics and the Great Recession needs to read immediately

  8. Justin Justin says:

    A manifestly important book It s hard to capture the scope of Keen s work his erudition of the real history of economic thought and demolition of the neoclassical house of cards is breathtaking, exciting, urgently necessary.If, like me, you sat in undergrad economics classes thinking or even saying but huh then it may just be that you were quite capable of understanding what was being presented, it simply made no sense.Eagerly await his next book.

  9. Miguel Buddle Miguel Buddle says:

    Fascinating book It would have helped to haveof a grounding in economics at even the undergrad level, but slow consumption and re reading make this possible because of Keen s clear language My basic takeaway is that all of those things that seem a bit ridiculous about economics perfectly rational consumers, assumed equilibrium are actually, provably ridiculous The why and how was definitely the interesting part here.

  10. Tadas Talaikis Tadas Talaikis says:

    This is excellent read and hard work for the brain Highly complex, it is hard to abstract into one sentence, but I thinkappropriate would be following economics is complex dynamic system, so it is unwise to model it with oversimplified static models free quote Thus labor intensive industry III, with a labor to capital ratio of 2 3, earns the highest value rate of profit of 40 percent, while capital intensive industry V, with a 1 20 ratio, makes a value rate of profit o This is excellent read and hard work for the brain Highly complex, it is hard to abstract into one sentence, but I thinkappropriate would be following economics is complex dynamic system, so it is unwise to model it with oversimplified static models free quote Thus labor intensive industry III, with a labor to capital ratio of 2 3, earns the highest value rate of profit of 40 percent, while capital intensive industry V, with a 1 20 ratio, makes a value rate of profit of just 5 percent K Marx because the monetarist experiment in Great Britain wasn t a controlled experiment, monetarist economists could refuse to accept that their theory had been falsified.The same observation can be made about Marxist economists, and their attitude toward the data on Marx s theory that the rate of profit would tend to fall, or the inevitability of socialism, and so on In other words, this isn t just a disease of the political right, but an endemic problem in economics without the ability to undertake controlled experiments, statements which could be falsified will be unfalsifiable in practice Economists of all persuasions are therefore liable to hang on to beliefs that they argue are scientific, but which in the end are ideological Physicists turn to economics and are horrified by neoclassical economics theory free quote

Leave a Reply

Your email address will not be published. Required fields are marked *

10 thoughts on “Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned?

  1. Whitaker Whitaker says:

    Update 3 December 2011 Steve Keen s done an excellent interview with BBC Hard Talk Check it out on his author profile In summary, he explains that the last 30 years of growth have been fueled by a credit bubble where banks basically went wild making money from lending Where credit is used to fund speculation i.e., making money from the increase of asset prices as opposed to funding new business ventures , it s a Ponzi scheme We were assured by the economists it was all stable because the b Update 3 December 2011 Steve Keen s done an excellent interview with BBC Hard Talk Check it out on his author profile In summary, he explains that the last 30 years of growth have been fueled by a credit bubble where banks basically went wild making money from lending Where credit is used to fund speculation i.e., making money from the increase of asset prices as opposed to funding new business ventures , it s a Ponzi scheme We were assured by the economists it was all stable because the banks knew what they were doing and wouldn t do anything stupid Hah Don t we know now how untrue that was The only way to recovery is for the bad debt to be worked out of the system This means either 20 years of destroyed lives waiting for the debt to be worked out that way or do an Argentina and just refuse to pay the banks who were responsible for this fucking mess in the first place Then we need to rebuild the financial system to stop banks from doing it again Update 17 November 2011 Keen has come up with the second edition of this book He was interviewed for the blog, naked capitalism Part I of the interview can be read here I want to just bookmark that interview here, but if you re interested, here s a snippet that to me was priceless science proceeds by the development of paradigms followed by periods of volatility when the old paradigm strikes a series of anomalies it can t resolve, leading to a scientific revolution in which a new paradigm is formed that can account for the anomalies.But this process requires a degree of dispassionate separation between the empirical data and the theories But in economics, anomalies abound but simply aren t even acknowledged, so attempts to resolve them simply don t occur the neoclassical paradigm just sails on oblivious to them.My favourite here is the conflict between the neoclassical theory of the firm, which requires rising marginal costs, and thethan a hundred studies that have contradicted this Rather than confronting this anomaly , neoclassical economists continue teaching and building models that assume rising marginal costs, and in fact the most in famous paper in methodology Friedman s assumptions don t matter paper was written specifically to advise economists NOT to even read the empirical literature Original ReviewThis one is for Trevor I don t think I can possibly cover this book adequately Certainly I m in no position to assess how valid his economics is What I can say, however, is that he does explain clearly and logically why neo classical economics is a complete bunk He doesn t rely on anecdotes or nifty little stories he relies on a solid analysis of its basic principles and theories First he explains them and then goes on to show their internal contradictions and mathematical inaccuracies Finally, he points us to actual published economic work written by real life or now dead economists working out these concepts Wait Maths you say WTF Sounds like a real snore fest Well, yes, there s math And, yes, math phobes are gonna get a case of hives scratch scratch scratch pass mecamomile lotion please But don t worry You won t die He keeps it to a minimum, and you can keep the damage to a minimum by just skimming it What Keen DoesThis guy doesn t think small He starts off by taking aim at the four pillars of neo classical economics demand, supply, competition and wages Then, after he s limbered up, he goes for the remaining tenets I ll just lay out below how he deals with demand and supply because of the four pillars those were the bits I understood the most All I can do, though, is provide a rough sketch and the arguments below are almost necessarily an unfair caricature of what he s written The demand curve and the principle of utilityWe all know that little graph, you know, the one showing that as the price rises the demand for the goods fall clearly whoever thought up of that one hasn t met the phenomenon of luxury goods where hiking up the price increases demand Well, linked to that is the principle of maximum utility the idea that we maximise the utility we get out of our money by spending it on that combination of goods that gives us the most pleasure Economists then go on from that to derive the principle that all of us doing that very thing in our own little way create a market economy where we arrive at a set of goods and prices which on a collective level arrives at the maximum level of utility or goodness for the entire society Keen shows why that is incorrect The bitty graph we see is for one set of goods What if we start addingThen we get utility curves that show theoretically the maximum and most efficient combination of goods we d buy for the prices they are sold for All very well and good But then you start multiplying people Keen highlights that the utility curve fails to take into account that different people derive different levels of utility i.e., pleasure from the same things and that you can t aggregate that pleasure in a mathematically meaningful way In fact, a utility curve for a society will not be a smooth line but a jagged line that has no theorectical utility whatsoever To keep it smooth, economists have to assume the existence of goods that every consumer will want to buy and will continue to buy in numbers that take up the same proportion to his income regardless of what that income is In real terms, if you drank a beer a day when you were a college student, you d drink a hundred beers a day if you became an executive, and a thousand beers a day if you became a banker, and probably enough beer to sink a ship if you became an investment banker Even economists figured that real people might not behave that way, so they came up with a solution the representative consumer That s not a real person That s an imaginary person You know, imaginary, like leprechauns Or kindly Randians Of course, economists don t use that term They say Sonnershein Mantel Debreu conditions and they use language like, The necessary and sufficient condition quoted above is intuitively reasonable It says, in effect, that an extra unit of purchasing power should be spent in the same way no matter to whom it is given The supply curve and supply side economicsWell, the supply curve is the opposite of the demand curve it shows a graph where as the price for a set of goods goes up, so does the number of goods produced Sounds reasonable right Put it another way If Nike shoes cost 100 each when Nike makes 100 shoes, then they cost 1,000 when Nike makes 1,000 shoes Wait, say that again This situation arises because economists believe that productivity falls incrementally for every extra unit of goods produced So, it coststo produce each extra pair of Nikes Price is determined as cost plus a minimum amount extra So,Nikes sold meanexpensive Nikes Okay, I think even a low wage factory slave in India can see what s wrong with that But if you just focus on the theory, doesn t it sound like it could be true He goes on to note how this critique was put together by Piero Saffra in 1926 who also noted that in an industrialised economy costs tend to remain constant within a normal range of output you tend to get economies of scale asgoods are produced since it costs the same to run the machines to produce 100 goods as it does to produce 1,000 goods I ve always wondered how neo classical economics adapts to the non tangible goods that make up a big part of the world economy Stuff like music, for example, where the cost associated with producing a song is the same regardless of whether you sell one copy or whether you sell 1 million copies I guess now I know It doesn t And Then What As I noted above, he goes on to competition and wages dealing with them in a similar way In summary, he notes with regards to competition that big isn t necessarily bad it gets you economies of scale and with regards to wages that unions and minimum wage can be good things for one thing, workers don t choose between work and leisure but between starving and living He takes aim at other key aspects of neo classical economics He tells us why, for example, the assumptions used in neo classical theory are not a source of strength but a fundamental weakness And also why it s daft that economists ignore time It s all solidly backed with graphs, tables and citations Trevor, what s in this for you Well, I think you ll enjoy the chapter on wages He also has a chapter on why neo classical economists are so stubbornly wed to their theories it s not a vast conspiracy, it s simply cognitive dissonance And he gives an overview of the alternatives a chapter on Marxist economics he thinks it s equally flawed and a chapter on the Austrian, post Keynesian, Sraffian, complexity theory, and evolutionary varieties He lays out their comparative flaws and strengths What I LikedKeen, to give him credit, painstakingly explains the neo classical position, explains the problems with it, explains the neo classicist response, and then explains the problems with the response I can t say he s even handed, but he s not polemical You do get to hear both sides from him, so from that perspective it s worthwhile reading the book Sometime in 2008, I was hoping that neo classical economists were thoroughly discredited Looking at where we stand now in 2011 where the bankers are getting obscenely rich again and people seem to have returned to their old habit of forgetting the crises of the past witness the fad for austerity , and I find myself wholly depressed and disenchanted It seems like nothing less than a complete melt down of the global economic system will see their demise In the meantime, we re just supposed to drink our tea cough Kool aid cough and assume that everything will turn out all right Don t do it Arm yourselves, not with Kalashnikovs but with information like this book And come the revolution, it s not the lawyers we ll kill but the neo classical economists

  2. Sean Fernyhough Sean Fernyhough says:

    Thirty years ago I experienced a highly conventional education in Economics I always had an immense difficulty in reconciling the irreconcible the economics inside the lecture theatre and the seminar room with that in the outside world Without the internet and books like Debunking Economics it would have taken extraordinary luck and perseverance to find the literature I needed to counteract the wrongheadedness of what I was being taught I can even recall one of our lecturers saying that it Thirty years ago I experienced a highly conventional education in Economics I always had an immense difficulty in reconciling the irreconcible the economics inside the lecture theatre and the seminar room with that in the outside world Without the internet and books like Debunking Economics it would have taken extraordinary luck and perseverance to find the literature I needed to counteract the wrongheadedness of what I was being taught I can even recall one of our lecturers saying that it was part of our role as Economics students to defend Neoclassical Economics.What Professor Keen s book demonstrates is that these nuggets were out there at the time, but that the teaching of Economics conspired against these being discovered Keen s description of Economics teaching today makes very familiar reading things do not seem to have moved on that much at all Indeed, just last week I checked out the Economics section for undergraduate textbooks and much of what was presented was eerily familiar So, despite the internet and the present economic crisis Economics undergraduates are likely to find themselves in the same predicament as my younger self If that is the case, then my advice is quite simple buy, read, re read and absorb Debunking Economics Counter the nonsense you are being taught at every level and tool yourself up for building a new academic subject.Read this book and understand that Neoclassical Economics has never been able to successfully aggregate the behaviour of individuals, either as consumers or producers, to the level of a single market let alone a whole economy Read and understand that markets have emergent qualities , i.e that they are greater than the sum of their parts Read and understand that a market or an economy is in a constant state of dynamic equilibrium where decisions are made in conditions of uncertainty about the future values of important economic variables Read and understand that this type of economy cannot be analysed using an equilibrium analysis.Debunking Economics points the Economics student to the way to counteract Milton Friedman s the realism of assumptions doesn t matter dictum that can really cause problems for critical thinking accept it and an effective critique of Neoclassical Economics becomes muchdifficult.The book also shares details of Professor Keen s own research programme in the area of Macroeconomics, with the promise that a further book, to be published in 2013, will develop the ideas This positive contribution to Economics is there to be taken seriously The presentation here is quite accessible to the interested non specialist reader in fact this has been a central shaping of the book throughout It is a launch pad, should the reader wish to take the journey, to a greater understanding of the world around us

  3. Munthir Mahir Munthir Mahir says:

    First off I stopped reading past chapter 9 This book covers a subject that is huge a whole social science field and that is the problem The book is one too many things it talks to too many audiences about too many topics using too many tools It reads like a textbook, scientific paper, dissertation and a non fiction book all at once It certainly requires great concentration to follow the ancillary comments and supplements It is not organized in a manner that is easy to follow because of t First off I stopped reading past chapter 9 This book covers a subject that is huge a whole social science field and that is the problem The book is one too many things it talks to too many audiences about too many topics using too many tools It reads like a textbook, scientific paper, dissertation and a non fiction book all at once It certainly requires great concentration to follow the ancillary comments and supplements It is not organized in a manner that is easy to follow because of the way the author chose to structure his arguments and the methodology he employed I felt at several points the author fell into the same mistakes he be littles his opponents for Both sides of the battles still rely on theoretical concoctions that they both still can t reliably test empirically The first 9 chapters should give any reader the jest of the contested economic topics, beyond that it starts to be philosophical, argumentative and opinionated This book could have beenaccessible topeople if it was designed and structured in a manner that relates and compares the theoretical contests to everyday economic transactions such as, a small business demand and supply realities, tax and interest impacts on consumers and businesses, consumption behaviors, etc

  4. Petter Nordal Petter Nordal says:

    Every adult living in a democracy should read this book The next time someone tells you that rewards for the rich are the way to fix the economy, ask them what the relationship is between private debt and the supply curve If they cannot answer they will likely tell you that private debt is not an important factor in a capitalist economy insane as that sounds then you can whip out some Keen and leave them backpedaling Even if they do answer, you will be prepared to pummel their simplistic, Every adult living in a democracy should read this book The next time someone tells you that rewards for the rich are the way to fix the economy, ask them what the relationship is between private debt and the supply curve If they cannot answer they will likely tell you that private debt is not an important factor in a capitalist economy insane as that sounds then you can whip out some Keen and leave them backpedaling Even if they do answer, you will be prepared to pummel their simplistic, static and imaginary world arguments into the ground.We constantly hear that the economic choices for our economies are lamentably going to result in some short term pain in order to provide long term stability, and it is simply too bad that some people are going to get rich off these measures while ordinary people are going to face unemployment, poverty and uncertainty It s just the way things have to be, we read This book proves such neoclassical hogwash to be unscientific, illogical and completely at odds with reality.Keen, though at times a challenge to follow, brings together different disciplines to critique the lunacy of neoliberal economics He knows economics better than nonprofessionals, he knows economic history better than most historians He knows, applies and explains advanced mathematics He brings philosophy and history of ideas to bear on the problem In short, he is able to look at economic processes as they actually happen in the real world, using the tools that educated people have available to us.I read Marx in 1986 and, though I m no Marxist, I ve found that a Marxist economic analysis serves far better than the Wall Street Journal or Planet Money for explaining what is happening This is the first book since I read Alexander Berkman in 1987 that has added to my understanding of Marx and given me better tools to analyze and understand economics

  5. Muhammad al-Khwarizmi Muhammad al-Khwarizmi says:

    Keen is brilliant but there are two problems with this book on my end it assumes too little mathematical knowledge at the same time as it assumes too much knowledge of the neoclassical theory he is rebutting in general.The result is often a confusing, hard and overly verbose slog As much as I don t like pages and pages of equations like you see in some texts, I see what he s doing sometimes and wish he would just fill it in in a box set apart from the rest of the material He has supplemental Keen is brilliant but there are two problems with this book on my end it assumes too little mathematical knowledge at the same time as it assumes too much knowledge of the neoclassical theory he is rebutting in general.The result is often a confusing, hard and overly verbose slog As much as I don t like pages and pages of equations like you see in some texts, I see what he s doing sometimes and wish he would just fill it in in a box set apart from the rest of the material He has supplemental data on his website but that doesn t fix everything.I wish Keen wereaccessible in the regards I mentioned I have called it quits about midway through

  6. Grig O& Grig O& says:

    5 stars for content, 3 stars for presentation.While Keen s intent to present complex facets of economics in layman terms is certainly laudable, his efforts to bypass mathematical formulas at all costs by use of textual, tabular and graphic illustration even if that occasionally means spelling out formulas in sentence form sometimes go too far.There s quite a bit of redundancy between chapters, as well as less than perfect mixes of the first 2001 edition and the revised 2011, post crash one 5 stars for content, 3 stars for presentation.While Keen s intent to present complex facets of economics in layman terms is certainly laudable, his efforts to bypass mathematical formulas at all costs by use of textual, tabular and graphic illustration even if that occasionally means spelling out formulas in sentence form sometimes go too far.There s quite a bit of redundancy between chapters, as well as less than perfect mixes of the first 2001 edition and the revised 2011, post crash one Considering the massive scope of this book covering pretty much all aspects of economics except world trade it s inevitable that some parts become somewhat of a trudge.On the bright side, there are many enlightening passages and interesting anecdotes I had no idea about Keen points out moments in history where ideology influenced political economy, both to the right did you know Keynes included Marx s M C M circuit in an early draft of his General Theory, even though publicly he denied having read Marx and to the left Marx s early draft of Capital where he considers machinery as a source of value which would have annulled the inevitability of socialism.This is a book of Big Ideas that need urgent consideration whether you decide to read the book, or follow Keen s online media presence, or read a summary maybe start here , you should definitely get to know them if you have an interest in economics or social dynamics.Finally, here s my favourite quote Keynes take on politicians from his General Theory book Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back BOOM

  7. Gregg Wingo Gregg Wingo says:

    This book is a fantastic critique of the neoclassical synthesis and an exploration into the world of heterodox economics Keen bravely attacks static economics at its mathematical roots and assumptions, revives Marx theory of value and crowns him the greatest of Classical economists, defends Keynes against his opponents and heirs, and introduces the elegance and irrationality of dynamic analysis into the inherent instability of the market The author succeeds in trashing the NeoLiberal argument This book is a fantastic critique of the neoclassical synthesis and an exploration into the world of heterodox economics Keen bravely attacks static economics at its mathematical roots and assumptions, revives Marx theory of value and crowns him the greatest of Classical economists, defends Keynes against his opponents and heirs, and introduces the elegance and irrationality of dynamic analysis into the inherent instability of the market The author succeeds in trashing the NeoLiberal argument of supremacy of free markets by discrediting the equilibrium assumption of Walrasian markets and other restrictions of the Sonnenschein Mantel Debreu conditions Keen s basic position is a Marx Keynes Schumpeter Sraffa Minsky synthesis that firmly holds that markets are inherently unstable due to the complex nature of the dynamics of capitalists and financial capital While exploding Marx labor theory of value, Steve Keen lauds Marx theory of value and his dynamic perspective on the nature of economics He integrates this dynamism into the creative nature of Schumpeter s entrepreneurs and the speculation of financial markets so that the nature of the business cycle becomes clearly not balanced to any stable point derived from Minsky s legacy.Having read both the first and second edition I would strongly recommend referencing the graphics from the first edition and now available online in order to provide a nonnarrative basis for analyzing Keen s work This is a book that any serious student of economics and the Great Recession needs to read immediately

  8. Justin Justin says:

    A manifestly important book It s hard to capture the scope of Keen s work his erudition of the real history of economic thought and demolition of the neoclassical house of cards is breathtaking, exciting, urgently necessary.If, like me, you sat in undergrad economics classes thinking or even saying but huh then it may just be that you were quite capable of understanding what was being presented, it simply made no sense.Eagerly await his next book.

  9. Miguel Buddle Miguel Buddle says:

    Fascinating book It would have helped to haveof a grounding in economics at even the undergrad level, but slow consumption and re reading make this possible because of Keen s clear language My basic takeaway is that all of those things that seem a bit ridiculous about economics perfectly rational consumers, assumed equilibrium are actually, provably ridiculous The why and how was definitely the interesting part here.

  10. Tadas Talaikis Tadas Talaikis says:

    This is excellent read and hard work for the brain Highly complex, it is hard to abstract into one sentence, but I thinkappropriate would be following economics is complex dynamic system, so it is unwise to model it with oversimplified static models free quote Thus labor intensive industry III, with a labor to capital ratio of 2 3, earns the highest value rate of profit of 40 percent, while capital intensive industry V, with a 1 20 ratio, makes a value rate of profit o This is excellent read and hard work for the brain Highly complex, it is hard to abstract into one sentence, but I thinkappropriate would be following economics is complex dynamic system, so it is unwise to model it with oversimplified static models free quote Thus labor intensive industry III, with a labor to capital ratio of 2 3, earns the highest value rate of profit of 40 percent, while capital intensive industry V, with a 1 20 ratio, makes a value rate of profit of just 5 percent K Marx because the monetarist experiment in Great Britain wasn t a controlled experiment, monetarist economists could refuse to accept that their theory had been falsified.The same observation can be made about Marxist economists, and their attitude toward the data on Marx s theory that the rate of profit would tend to fall, or the inevitability of socialism, and so on In other words, this isn t just a disease of the political right, but an endemic problem in economics without the ability to undertake controlled experiments, statements which could be falsified will be unfalsifiable in practice Economists of all persuasions are therefore liable to hang on to beliefs that they argue are scientific, but which in the end are ideological Physicists turn to economics and are horrified by neoclassical economics theory free quote

Leave a Reply

Your email address will not be published. Required fields are marked *