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Steve Keen

Steve Keen - Wikipedia

Steve Keen (born 28 March 1953) is an Australian-born, British-based economist and author. He considers himself a post-Keynesian, criticising neoclassical economics as inconsistent, unscientific and empirically unsupported. The major influences on Keen's thinking about economics include John Maynard Keynes, Karl Marx, Hyman Minsky, Piero Sraffa, Augusto Graziani, Joseph Alois Schumpeter, Thorstein Veblen, and François Quesnay. Hyman Minsky's Financial Instability Hypothesis forms the main basis of his major contribution to economics[1] which mainly concentrates on mathematical modeling and simulation of financial instability. He is also a notable critic of the Australian property bubble, as he sees it.

Keen was formerly an associate professor of economics at University of Western Sydney, until he applied for voluntary redundancy in 2013, due to the closure of the economics program at the university.[2] In autumn 2014 he became a professor and Head of the School of Economics, History and Politics at Kingston University in London. He is also a Fellow at the Centre for Policy Development.

Early life and education

Keen was born in Sydney in 1953. His father was a bank manager. Keen graduated with a Bachelor of Arts in 1974 and a Bachelor of Laws in 1976, both from the University of Sydney. He then completed a Diploma of Education at the Sydney Teachers College in 1977.

In 1990, he completed a Master of Commerce in Economics and Economic History at the University of New South Wales. He completed his Doctor of Philosophy in Economics at the University of New South Wales in 1998.[citation needed]

Financial instability and debt deflation

Most of Steve Keen's recent work focuses on modeling Hyman Minsky's financial instability hypothesis and Irving Fisher's debt deflation.[3][4] The hypothesis predicts that an overly large private debt-to-GDP ratio can cause deflation and depression. Here, the falling of the price level results in a continually rising real quantity of outstanding debt. Moreover, the continued deleveraging of outstanding debts increases the rate of deflation. Thus, debt and deflation act on and react to one another, resulting in a debt-deflation spiral. The outcome is a depression. Steve Keen argues that the current global economic crisis is the result of too much private debt.

Debunking Economics

Keen's full-range critique of neoclassical economics is contained in his book Debunking Economics.[5] Keen presents a wide variety of critiques on neoclassical economic theory, and argues that they show neoclassical assumptions are fundamentally flawed. Keen claims that several neoclassical assumptions are empirically unsupported (that is, they are unsupported by observable and repeatable phenomena) nor are they desirable for society at large (that is, they do not necessarily produce either efficiency or equity for the majority). He argues that economists' overall conclusions are very sensitive to small changes in these assumptions.

Keen has attempted to counter Marx's theory (in his view Marx's pre-1857 view, specifically) from a post-Keynesian perspective, by arguing that machines can add more product-value over their operational lifetime than the total value of depreciation charged during those asset lives. For example, the total value of sausages produced by a sausage machine over its useful life might be greater than the value of the machine. Depreciation, he implies, was the weak point in Marx's social accounting system all along. Keen argues that all factors of production can add new value to outputs. However he gives credit to Marx for contributing to the "financial instability hypothesis" of Hyman Minsky.[6][full citation needed]

Keen's book closes with a survey of various schools of heterodox economics, concluding "None of these is at present strong enough or complete enough to declare itself a contender for the title of ‘the’ economic theory of the 21st century." However, he argues that neoclassical economics is a degenerative research program, not generating new knowledge but growing a belt of protective auxiliary hypotheses to shield its core beliefs from critique. There is an accompanying web site which provides more detailed mathematical expositions.

Critique of neoclassical theory of the firm

Keen's work (as opposed to his popularisation) has also focused on refuting the neoclassical theory of the firm, which argues that firms will set marginal revenue equal to marginal cost.

Keen notes that empirical research finds real firms set price well above marginal cost: they charge a markup, often cost-plus pricing.

 

Minsky software project

Main article: Minsky (economic simulator)

Recently, Keen commissioned the development of a software package called Minsky for visually modelling national economies, in a way that is intended to be more accurate than mainstream macroeconomic models – which he contends do not properly include debt and banking. He envisages it being used for both educational and research purposes.

The first phase of the development was funded by an academic research grant, as is typical for academic research projects – but in February 2013 Keen launched a crowdfunding project on Kickstarter to allow members of the public to contribute towards taking MINSKY to the next level of development.[12] In the first 24 hours, this project raised approximately 15% of its funding target, and has since fully achieved its initial funding goal of $50,000.00.

Criticisms

,,,Matthijs Krul[14] maintains that Keen, while broadly accurate in his criticism of the neoclassical synthesis, generally misrepresents Marx's views in Debunking Economics and in earlier work when asserting that, in the production of commodities, machinery produces more value than it costs.[15]

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Published on Aug 28, 2016

Professor Steve Keen (Kingston University) says property prices could fall up to 70%, and why Australia will be hit by a recession in 2017.



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