Debunking Economics: The Naked Emperor Dethroned? Paperback – 22 Sep 2011
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'Economics still awaits its Darwin. Keynes came close, but not close enough. Keen comes closer still. Economics, like biology used to be, remains mostly faith-based. No book poses a bigger threat to that faith than the second and expanded edition of Debunking Economics.' - Edward Fullbrook, Editor, Real World Economics Review 'The new edition of 'Debunking Economics'... provide[s] a more persuasive account of the causes of the crash and of its likely evolution than anything that has yet emerged from Constitution Avenue or Threadneedle Street. This is complicated, but it's in your interests to understand it.' George Monbiot 'It is notorious that only the most mediocre students have the stomach to stick with graduate economics degree. The assumptions become so narrow-minded and tunnel-visioned that reality-based minds drop out. But economics obviously is important too much so to be left to economists. Fortunately, Steve Keen is an empirical mathematician who views the economy logically and systematically. Having made a pioneering explanatory statistical model, he looked through the literature to review the history of economic thought and saw how little today's assumptions had to contribute to Reality Economics. So his book does two things. First, it explains some of the most wrong-headed logical paths that led today's 'free market' economics down its detour to rationalize the status quo. Second, it explains how to view the economy from a more realistic, cause-and-effect light.' - Michael Hudson, Distinguished Research Professor of Economics, University of Missouri 'You would be hard-pressed to find an individual whose pre-crisis analyses of both the world financial system and the economics profession were more dead on than Steve Keen's. The original edition of this book not only demonstrated the irrelevance of modern theory, but it predicted the major economic and social crisis that occurred. This second edition updates earlier chapters and adds new ones that directly address the causes of the collapse and the reasons why standard solutions have been useless. This book is an absolute must read for anyone wondering what caused this catastrophe and how we can truly put it behind us.' - Prof. John T. Harvey, author of 'Currencies, Capital Flows, and Crises: A Post Keynesian Analysis of Exchange Rate Determination' 'Redemption is this book's greatest gift to a world that grew dependent on the thinly disguised forms of mathematised superstition which, over the past thirty years, managed to dominate economic theory and policy. Keen's book is a tour de force that grants its reader the chance of immunity from these, still dominant, economic superstitions.' - Yanis Varoufakis, Professor of Economics, Athens University 'Professor Keen has written a book that will shake the economics community to its core, and for good reason. It could not have been written at a better time.' - Andrew Leeming, author of The Super Analysts 'Much more than simply explaining the causes of the crisis, Keen takes us through a thorough dissection of mainstream neoclassical economics, and the result does not leave the discipline looking in good shape.' - Tanweer Ali, Empire State College, State University of New York, in Heterodox Economics Newsletter
About the Author
Steve Keen is Associate Professor of Economics & Finance at the University of Western Sydney. 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.
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Top customer reviews
This book explains the economic principles well but it uses a lot of mathematics which was for me was easier to understand in Steve's graphical representations of the maths.
Steve also explains how modelling techniques can be used to help predict alternative economic outcomes without claiming that any form of economics is able to predict the future from a scientific point of view.
Once again this is not good bed time reading but neither is the Economist.
However the parts of the book that i could understand and did care about were well worth it. Keen argues that Keynes and Fisher and other post Great Depression economists were completely misinterpreted by the majority of economists. While Keynes and Fisher saw capitalism as an inherently unstable system which was prone to cyclical booms and busts and required strict government regulation to work to the advantage of the majority, the majority of economists have tried to pretend that a completely deregulated capitalist system tends towards constant equilibrium or balance.
He goes on to point out that in trying to predict the future of an economy there are simply too many variables and too many unpredictable developments for any calculated risks to be taken - what we're dealing with isn't risk (calculable) but uncertainty (incalculable).
The core of his argument (backed up with plenty of real world examples and figures) is that most economic growth is based on credit (which is also debt on the other side of the coin) - credit provided by private banks to businesses and individuals, with most money also the result of private banks providing it as credit (loans/mortgages etc). Without strict regulation banks start lending carelessly, without worrying about whether they've been repaid, during economic booms caused by the gradual expansion of credit. Frauds ('ponzi schemes') develop under cover of the boom. Then when everyone realises many loans have been made which the debtors can never repay and that there has been fraud, there's a bust and banks stop giving out loans, leading to a credit crunch.
If inflation is allowed to stay relatively high this leads to only a short-lived recession since inflation reduces the value of money and so of debts too, making debts shrink to manageable sizes.
If inflation is kept low (as economic orthodoxy would demand) the debts remain high and the recession becomes a depression as in the Great Depression and the current one.
The only other way to get out of a depression is to forgive all debts, especially as the debtors can't repay them anyway (a 'Jubilee' based on the ancient Babylonian festivals which included debt forgiveness).
Unlike most economics, this all makes sense and fits in with real world events. The only reason I don't give the book 5 stars instead of four is that it's too long and includes too many mathematical and theoretical exercises which will put off many readers and made the book longer and more difficult to read than it needs to be.
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