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on 5 February 2016
Like many non-economists, although I had a sense that bankers were greedy and corrupt and had helped cause the last crash, I had never imagined that the very economic theory allowing the finance sector to get away with this – the "neoclassical economics" which Keen so brilliantly describes and exposes, and which apparently continues to dominate economic academia and public policy even after the crash – could be, itself, not just flawed, but outright ridiculous. I had always assumed that most, if not all, economists, were in effect scientists, that their work was highly sophisticated, mathematically rigorous, and that any major theories they still relied on were checked and informed by a balance of empirical findings, and subject to a constant culture of scepticism, peer-reviewing and improvement. I had assumed economists, like scientists, must be updating their theories when evidence flatly contradicted them. I had also assumed I was too stupid and economically (and mathematically) ignorant to understand, in detail myself, any better.
Unfortunately, the truth is the reverse, and staggeringly so. You don't need advanced mathematics (or any at all, really) to understand Keen's simple descriptions of the glaring flaws in neoclassical economics. Six-year-olds could improve on some of it, if it was presented to them in terms they could grasp. For instance, Keen explains that neoclassical economic theory assumes that all consumers have identical taste; that there is, in effect, only one consumer in society, or in the economy. There are more and more of these flaws, all, to me, equally ridiculous. Keen shows how devastating such flawed assumptions can be, in a way that backs up his general claim that the economic layman could actually take better charge of the economy than the neoclassical economist could, and does.
If these staggering flaws in, outwardly, so respectable-seeming a "science", deeply saddened and concerned me, I was much more glad to have had my eyes opened to this calamity. Keen goes a good way to explaining how on earth this shocking reality has been allowed to evolve – or not evolve. He is also fair to the small percentage but considerable number of previously neoclassical economists, or indeed neoclassical economists, who have not shied away from problems they have identified in their field, but done their best to expose them. Keen is not some lone nutter – instead, there are many other economists like him (as well as yet other rival schools), but he shows how the economic establishment has repeatedly refused not only to budge, but in most cases even to listen seriously to opposing views. He shows how most modern economics is and has been the very reverse of a science, and at a grave cost to modern societies. Keen also pays due recognition at every stage to the work of numerous other economists, living and dead – a reminder and a validation that Keen, and you the reader if you find his book makes complete sense, are not stupid, or missing something. Keen’s book is also a reminder that it’s not just corrupt and incompetent bankers harming our economies – this flawed neoclassical economics also continues to govern much of our modern public economic policy, thanks to more than a generation of bad economics education.
Lastly, Keen’s writing is superb, and very funny. Think economics is boring? Much of it is, but Keen is just the reverse, and lightens the reader's enlightenment to this intellectual darkness with an articulate, varied, page-turning style full of concrete illustrations, and just the right amount of humour.
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on 23 October 2011
I've been reading economics for over 20 years and the more I read the more difficult the subject seems to get. One despairs at times as to whether one knows anything. Largely because so much economics is compartmentalised - like books on individual human diseases.

Steve Keen's book is a tour de force in getting a handle on the big picture of core issues which underwrite economics if you think the conventional account limited or unsatisfactory - does supply and demand work, for example.

At towards 500 pages of often intricate argument, it's hardly a light read. But the subject is not a light one or ever going to be easy to comprehend. I'm not sure I could get far with this book at all without a substantial economics background.

Keen says his book is really two. One examining the deficiencies of conventional economics and another laying out different perspectives.

It will take me a long time to do full justice to everything in Debunking Economics. In fact, you might as well put all other books aside for the duration if you are setting out to understand the economy as a whole.

Steve Keen is a blinking hero of economics in my eyes! Not many of them around are there? Most 'economists' appear to be in the pay of one or another commercial interest.
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on 12 October 2011
Read this book. Simply put, Keen's book should be required reading for economists, investors, and bankers, and most especially for central bankers. It should also be read by economics students, to street-proof them against neo-classical economics doctrine. The neo-classical synthesis has for some decades been so dominant that it is presented as fact, and most students will never even hear that there are alternative schools of economic thought. It is high time for people to realise that neo-classical economics is not a useful simplification, but rather, it is an irrealist dogma that is wrong root and branch, a dogma that has led and continues to lead to profound mistakes in outlook and policy guidance.

A crucial part of the book explains that the root of both the Great Depression of the 1930s and the crisis we are in today is a result of the fact that aggregate demand in the macro-economy is composed of income plus the change in debt. Prof. Keen explains (as has long been understood in specialist circles, and every central banker knows) that when banks make loans, they are actually creating new money, not merely redistributing money from depositors to borrowers. When too many loans are issued and a debt mountain gets too great (as it has recently throughout the OECD, driven by enormous quantities of "Ponzi debt", i.e. debt-money created by banks by loaning to each other and to non-bank financial companies for speculative investment in asset bubbles), then private citizens, as well as governments, begin "deleveraging" en masse, i.e. paying down debt instead of spending on consumption or investment in real-economy infrastructure. As a result, the economy goes into a tailspin. The only way to get out of this mess is either to default on much of the accumulated debt, or to endure lower standards of living and a depressed economy for a decade or so, as the debtor class (the great majority) attempts to pay down debt, to the benefit of the creditor class.

The latter is the strategy government leaders are knowingly or unknowingly following -- they are doing everything they can to protect the creditor class at the expense of the debtor class. We are facing a decade of higher taxes, lower government services, deferred investments in crucial new infrastructure (e.g. clean energy systems), and a lower standard of living, all in an effort to pay off debts many of which should never have been incurred: derivatives-trading bets on rising asset bubbles created by leveraged hedge funds and mortgage speculators, among others, debts which were (and are again being, as I write this) transferred onto the shoulders of taxpayers via bank bail-outs when the bets went sour. Yet simply shuffling debt from the books of derivatives-trading banks onto the public Treasury is proving to be insufficient. The debt bubble hanging over the entire OECD is just too big. The banks offloaded so much debt onto sovereigns that several sovereigns now are tottering into insolvency, which in turn threatens the same banks that have been dumping their bad loans onto the sovereigns, since much of the money owed by sovereigns is owed to those same banks! Yes, we are being ripped off, at the grandest possible scale. The trouble is that systemic risk occasioned by excessive accumulated debt isn't lessened by squeezing the debt-balloon in one place, only to have the bubble re-appear in another part of the systemic debt balloon; systemic risk from our vast private plus public over-indebtedness can be lessened only by letting air out of the balloon. What is really needed is some kind of debt jubilee -- a write-down, a cancellation of a large fraction of our collective debts, so that money can once again get spent on real-economy goods and services and much-needed real infrastructure investments, rather than rewarding the shareholders and managers of banks for their incompetence and irresponsibility.

As Keen's book explains, the trouble is that policy-makers and their neo-classically trained economist-advisors have a very hard time seeing this, because according to neo-classical economics, long-lasting recessions and depressions are impossible; the maths of their model do not allow for depressions. The economy is assumed never to move far from equilibrium and to be quickly self-correcting, and debt is simply ignored, left out of the model. This is complete nonsense. Prof. Keen explains in detail why and how it is nonsense, and how and why debt matters. That is why this book should be required reading for bankers, especially central bankers: they are continuing to make policy mistakes based on a fundamental misunderstanding of the nature of the economy, because they've all been indoctrinated into the neo-classical school, and few if any of them appear to genuinely understand the importance of accumulated debt (and its relationship to aggregate demand) in the economy they are supposed to be managing.

Prof. Keen's book thoroughly debunks what sadly has become the mainstream branch of economics since the mid-1970s. Neo-classical economics is a laughably unrealistic and mathematically provably incorrect static model of an imaginary economy whose assumptions and results bear no comfortable relationship with the real economy at all. The book explains in detail the mistakes at the root of this intellectual cult, a cult that has underlain the broad thrust of policy for decades and brought us to the macro-economic impasse we are in now. I think Keen's book may be the seminal work that sounds the death-knell for the neo-classical synthesis, and the emergence into public consciousness of competing schools, above all the realist, data-driven post-Keynesian economic modelling that Prof. Keen himself is working on, and key results of which are outlined in the later chapters of the book. (However, the latest Rijksbank Nobel Memorial Prize in Economics was once again allocated to a pair of neo-classical economists: the high priests of the neo-classical order will not give up their faith merely because it's been clearly and indisputably shown to be nonsense and to have paved the way for fantastic debt mountains, Wall Street mega-swindles and ongoing crises.

Those who manage our economies, ostensibly in the public interest, need to understand the issues outlined in Debunking Economics, as a first step to acquiring the economic literacy needed to understand that we (well: they, on our behalf) must re-write the rules of finance, and banking in particular, to make speculative lending by banks on paper assets illegal. Otherwise we will eventually exit the current asset-price-bubble driven debt crisis only to start the game over, and soon enter a new cycle of over-indebtedness and financial mega-fraud. Hopefully, developing a prescription for a new set of banking and financial laws will be the subject of future work by non-neoclassical economists.
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on 2 January 2016
Steve Keen is a virtuoso economist who takes the Keynsian / Austrian economics debacle and resets it into a real world functionality based in actual observations, not crass economic theory. It is 'Theory' (currently the apalling Keynsian) that has made us all guinea pigs in this gigantic economic experiment for the last 80 years ... and is probably the reason you are buying his book in the first place ...

So ... the book is unmatched in it's contemporary interpretation of real economics, and Keen may be seen as the new Guru of economics in the coming Bankster storms.

However ... DON'T buy the Kindle version ... It comes with NO diagrams, charts or graphs! ... and Keen has the unadulterated gall to suggest that the deliberate elimination of these in the Kindle addition is a BENEFIT !! ... Trying to read text explanations in an un-illustrated format is like driving blindfold, and detracts massively from the reading experience.

It baffles me that other reviewers don't comment - perhaps they are predominantly into paper versions ... which Keen then suggests I purchase "if I want the Charts and Diagrams". The idea I need to buy two copies of a work just to have a complete copy seems trite ... and also appears to add significantly to the author's revenues perhaps ? ... In fairness he also says I can download the Charts free as a pdf ... but I sooo love having to swap between two Apps continuously just to complete my reading delectation !

Note: the charts in the pdf are un-numbered and nearly impossible to relate to the text ... perhaps it's becuase I'm not as intelligent as an Economist to be able to do this ... or indeed ... to even read a book without being so flummoxed and distracted by those liney-graphiccy things on the same page .. that I suffer spontaneous dyslexia and lose all rationale ...

Boy ... I hope Keen reads this review and then personally apologises by shouting down to me from the window in his Ivory Tower ...

DON'T BUY THE KINDLE VERSION !
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on 30 October 2011
Steve Keen's "Debunking Economics" is a thorough and most challenging document in the ongoing struggle to understand the limitations of modern social science and economics in particular. It deserves a most careful reading and comparison with other credible studies of economics listed below.

It is similar to, but much longer than Hill and Myatt's "The Economics Anti-Textbook" in that they both follow the main topics of undergraduate textbooks (micro only in EAT). Hill and Myatt present the orthodox textbook economic positions clearly, succinctly and sufficiently to understand their eclectic critique. By comparison, for the depth and extent of Keen critique I doubt his summaries of the orthodoxy will truly be understood by the non-economically trained general reader, and therefore his critique might also not be fully appreciated: One still needs to study an economics textbook to understand Keen's critique.

But what a critique it is! Eminiently clear and precise it is hard to find fault with it.

Taken overall, Keen's is the far more comprehensive, deeper, more integrated, and more cogent critique. Both are helpful to grasp the weakness of positivist economics with its false and fictional 'value free' status (concealed value judgements abound in every choice made in every textbook!) and the urgency of the need to radically revise it, as mentioned above, for truth sake and the public interest. One question: Does the self-referencing throughout the text help or hinder the argument?

Perhaps a second, shorter simpler version for the general public (say between 50-250pp with a catchy title like "The Market Mechanism: Why it doesn't work and what does." might penetrate the mass media, and then the public consciousness more directly and lead the policy elites to take note of the larger work. What is most needed is a radical re-examination of economics (and social science altogether) to see how we can improve it, both for the sake of truth and the common good (after all economics like politics is a practical knowledge).

But, I would like to recommend a book that penetrates more deeply into the political and economic philosophy behind the modern "science" of economics by examining Hobbes, Locke, Smith, Marshall, Keynes, Hayek, Myrdal, and Rational Expectations Economics partly in the light of Aristotle.

That book is "Deductive Irrationality. A Commonsense Critique of Economic Rationalism" 073911624X) by Stephen McCarthy and David Kehl based on the teaching and writings of Dr. Richard W. Staveley here in Brisbane, Australia from the 1960s to the end of the last century.

Together, Deductive Irrationality and Debunking Economics are complementary and deserve assiduous study as part of the renovation of the social sciences.

Other books of interest reviewing economics include:

1. Deductive Irrationality.A Commonsense Critique of Economic Rationalism
2. The Economics Anti-Textbook by Rod Hill and Tony Myatt;
3. The Skeptical Economist by J. Aldred;
4. Economics for the Rest of Us by Moshe Adler;
5. How Markets Fail by John Cassidy;
6. Animal Spirits by George Akerloff and Robert Schiller.

It is indeed an exciting time to think through the meaning of economics and consider what must eventually come after the failure of positivist social science.

Happy reading!
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on 20 September 2012
Coz' if they cannot do that, in as plain language and logic as those in which Steve Keen leads his assault on mainstream economic theory, then that theory is not only irrelevant to policy-making, but outright harmful to it, and therefore to us all.

At times, I could not believe my eyes when I read the book.

I sure hope that someone comes with that explanation soon ...
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on 28 February 2013
. Steve Keen trashes virtually every orthodox economic theory held by mainstrean economists. Of course this appeals to me because I believe that M Freidmans wisdom is in tatters.I have to declare my bias by saying I am already searching for a new type of capitalism on the grounds of the failure of the current system.
Much of this book gives a rational argument that discredits the basis of economic theories built on the utility of a single consumer. If you can accept his argument (which I obviously do) it seems logical that other theories constructed on a falacy must be called into disrepute. To non-economist such as myself this argument seems patently obvious. The reality that economists don't really understand economics seems a reasonable assumption when you consider their miserable failure to predict the mess they have made. The bogus notion that economics has a scientific foundation needs to disproved and I think Keen does this well.
His theories may not represent the absolute answer to our problems but they are a refreshing alternative to the current failure of debt and the absence of any future growth. If you are a mainstream neo-classical economist you might reject this book wholesale. But then I doubt very much that you predicted the economic meltdown and delude yourself we have just strayed from the "great moderastion". The real absence of peer reviewed journals predicting this is indicative of the failure of the current hegomony.

However the book itself was not an easy read to a curious non-economist such as myself. His discussions around diagrams and graphs may have been helped by giving some illustration. It took me two efforts of reading this book to reach a good understanding of his challenges.
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on 5 January 2012
This book is academic and you have to be really interested in the subject.
That said, I've enjoyed dipping in and out of it and savouring the fine wisdom of Professor Keen. This book contains new thinking, so new that it even seems bizarre.People who are looking for new solutions to old problems will see the sense of it.I would encourage any person who is concerned about the global financial crisis to read it. Professor Keen is the financial messiah for the 21st century.
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on 26 August 2016
Haven't read it properly yet but have read his other powerful articles and although bought as 'used' it's pretty much brand new so 5 stars for that angle.
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on 8 January 2014
A difficult read but very worth the effort.

Despite the populist title of this book and the scale of error in current thinking being suggested the ideas in this book are very lucid and pragmatic. They are well argued and backed up by extensive references and reasoning. As well as his own ideas Steve summarises the ideas of other economists who's work he builds on.

If you want to here and explanation of why the financial crash of 2007/8 happened and why mainstream economists did not predict it but why a few unorthodox economists did then this is a book for you.
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