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Quote by Steve Keen

“I am often asked what I would keep of Neoclassical economics in a new paradigm. My answer is that I would keep as much of Neoclassical economics as modern astronomy kept of Ptolemaic astronomy – which is to say, nothing at all.”

Quote by Steve Keen

Book:The New Economics: A Manifesto
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The New Economics: A Manifesto

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Steve Keen
Steve Keen

Steve Keen is an Australian economist known for his research on economic cycles and the role of debt in financial crises. His work challenges some fundamental assumptions of mainstream economics and proposes alternative economic models. more

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“As Thorstein Veblen correctly surmised over a century ago, the failure of economics to become an evolutionary science is the product of the optimizing framework of the underlying paradigm, which is inherently antithetical to the process of evolutionary change. This is the primary reason why the neoclassical mantra that the economy must be perceived as the outcome of the decisions of utility-maximizing individuals must be squarely rejected.”

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“An essential pedagogic step here is to relegate the teaching of mathematical methods in economics to mathematics departments. Any mathematical training in economics, if it occurs at all, should come after students have at the very least completed course work in basic calculus, algebra and differential equations (the last being one about which most economists are woefully ignorant). This simultaneously explains why neoclassical economists obsess too much about proofs and why non-neoclassical economists, like those in the Circuit School, experience such difficulties in translating excellent verbal ideas about credit creation into coherent dynamic models of a monetary production economy.”

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“Neoclassical economics has effectively insulated itself from the great advances made in science and engineering over the last 40 years. This self-imposed isolation must come to an end. For while the concepts of neoclassical economics appear difficult, they are actually quaint in comparison to the sophistication evident in today's mathematics, engineering, computing, evolutionary biology and physics. In order to advance, economics must humbly submit to learning from disciplines that it has studiously ignored for so long. Some researchers in outside fields have called for the wholesale replacement of standard economics curricula, using at least the building blocks of modern thought inherent in other disciplines.”

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“When welfare is discussed in microeconomics textbooks, it is only in the domain of economic exchange in markets. The discussion in such places sets total welfare maximization as the virtuous end or criterion. In first-degree price discrimination adopted by a monopolist, there is no welfare loss. However, there is no consumer surplus either despite having optimal efficiency. Economics is neutral between desirable or undesirable equilibrium from the point of view of equity.”

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“As is often noted, and only partially in jest, economists seek to explain why people choose to commit suicide, while sociologists explain why they have no such choice. On suicide, the sociologists have been rather more successful than the economists. For their part, economists have proposed a “rational” theory of suicide that posits that people kill themselves in order to “maximize utility.”

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“The CDOs that sliced up and then spliced together disparate debts belonging to a heterogeneous multitude of families and businesses were put together on the basis of certain formulae, whose purpose was, supposedly, to calculate their value and their riskiness. These formulae were developed by financial engineers working for Wall Street (e.g. for J. P. Morgan, Bank of America, Goldman Sachs, etc.). To render the formulae solvable, certain assumptions had to be made. First and foremost was the assumption that the probability that one slice of debt within a CDO would go bad was largely unrelated to the probability of a similar default by the other slices in the same CDO. That is, it was assumed that what happened in 2007–08 was…impossible! That it was unnecessary to factor in the possibility of some crisis, during which Bob lost his house for reasons that increased the chances that Jane would lose her job and eventually also default on her mortgage.”

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“Mathiness: British economic journalist John Kay defines mathiness as a “use of algebraic symbols and quantitative data to give an appearance of scientific content to ideological preconceptions.” Expressing an idea in mathematical symbols instead of straightforward literary terms helps legitimize it in the minds of many people, thanks to a seeming similarity with natural science. In this respect math is basically a form of numerical rhetoric. “The American economist Paul Romer has recently written of ‘mathiness,’ by analogy with ‘truthiness,’ a term coined by American talk show host Stephen Colbert. Truthiness presents narratives which are not actually true, but consistent with the world view of the person who spins the story. It is exemplified in rightwing fabrications about European health systems – their death panels and forced euthanasia.” Paul Samuelson, for instance, trivialized economics in terms that give the outward appearance of science by being expressed mathematically, even when its assumptions are purely hypothetical (and not all realistic)and there are no quantitative statistics to illustrate its categories.”

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