the book
wiley.com 12-2021 The New Economics: A Manifesto – by Steve Keen
In 1517, Martin Luther nailed his 95 theses to the wall of Wittenberg church. He argued that the Church’s internally consistent but absurd doctrines had pickled into a dogmatic structure of untruth. It was time for a Reformation.
Half a millennium later, Steve Keen argues that economics needs its own Reformation. In Debunking Economics, he eviscerated an intellectual church – neoclassical economics – that systematically ignores its own empirical untruths and logical fallacies, and yet is still mysteriously worshipped by its scholarly high priests. In this book, he presents his Reformation: a New Economics, which tackles serious issues that today’s economic priesthood ignores, such as money, energy and ecological sustainability. It gives us hope that we can save our economies from collapse and the planet from ecological catastrophe.
Performing this task with his usual panache and wit, Steve Keen’s new book is unmissable to anyone who has noticed that the economics Emperor is naked and would like him to put on some clothes.
presentations/interviews
thegreatsimplification/podcast/pdf 8-2022 Steve Keen: “Mythonomics”
youtube/natehagens/podcast 12-2022 @ProfSteveKeen in conversation with @njhagens
renegade/youtube 4-2022 Ross Ashcroft, met up with Keen to discuss his new book, The New Economics: A Manifesto.
youtube/forumneweconomy 3-2022 The New Economics: A Manifesto – Steve Keen, Ann Pettifor, Peter Bofinger
youtube/inet/ox 3-2022 Correcting the economic blindspot on energy – Prof Steve Keen
reviews
goodreads – amazon – below by date
paecon/rwer – econstar – gg/pdf 12-2022 Steve Keen’s The New Economics: A Manifesto – review by Shimshon Bichler and Jonathan Nitzan
…”…This is a brilliant book. It deals with a crucial subject, and it does so with precision, wit and accessible prose (though some parts are more demanding than others). We recommend it highly to anyone who wants to understand the key challenges of our time. Even neoclassicists might find it educational!
But the book also has one important limitation: it is about economics. Keen offers to replace neoclassical dogma with a new way of thinking, researching and engaging with the economy. And while we agree that neoclassicism is a religion dressed as a science, in our view, what should come in its stead is not a different type of economics, but a new theory of capitalism more broadly.
This isn’t semantic nit-picking. All All economic theories – including neoclassicism – engage with non-economic entities and forces. They all agree, willingly or reluctantly, that politics, sociology, anthropology, psychology, international relations and other aspects of society affect the economy. But these effects, whether supportive or distortive, are assumed external to the economy proper. And this assumption is pivotal. Although the effects of these so-called external factors alter economic outcomes, they leave the economic categories themselves intact. And this bifurcations, we argue, is the Achilles heel of the economic theories, orthodox and heterodox, old and new.
In our view, capitalism is not an economic system, but a conflictual mode of power. Those who rule this mode of power – its dominant capitalists, politicians, mainstream academics, opinion makers and the various organizations they control make every effort to conceal its power features. This is why neoclassical economics, beholden to its masters, can never be a science.
But the problem besieges every and any economic theory that keeps power external to its basic categories. In our opinion, it is only when the study of capitalism substitutes for the narrow understanding of its economy that power can assume centre stage to reveal what economics is structured to conceal.
Hopefully, Steve Keen’s next project can expand in that direction.”
australianbookreview.com 9-2022 Antinomian economics – Steve Keen’s affront to received wisdom – by Benjamin Huf
tandfonline 5-2022 Some Constructive Comments on Steve Keen’s Manifesto for a New Economics – by Giancarlo Bertocco, Andrea Kalajzić
spe.org.uk 3-2022 The New Economics A Manifesto Steve Keen – Reviewer: Kevin Gardiner
“Steve Keen is a senior academic at UCL and a long-standing advocate of heterodox economic analysis. In this short and engaging book he explains why he thinks a “manifesto” is needed, arguing that conventional (“neoclassical”) analysis is flawed on many counts. In particular, he questions the mainstream’s treatment of money and the environment; its fascination with equilibrium; and the lack of interest in epistemology. He finishes by urging readers to “Be the change”, and offers some thoughts on how they might start to do that. I cheered him on at several points. Money is excluded or misunderstood in many mainstream models, and it was refreshing to see him citing approvingly (p24) a 2014 Bank of England article stating bluntly (at last) that “bank lending creates deposits”. …
Some of his criticisms seem wide of the mark. Establishment economists might argue that the Global Financial Crisis was a failure of prediction, not understanding: market seizure is surely always possible, if not likely? And was the pre-pandemic global economy doing as badly as he suggests? He overstates his case on money, and he labours the point on debt. He says “We need to reduce private debt back to its levels during that Golden Age…” (p65), but those good old days were much poorer. He seems to believe that borrowing deprives tomorrow’s generations of real resources. Unfortunately, his proposals, if adopted, might repeat some of today’s mistakes. And despite his iconoclasm, he has far too much respect for the commonplace observations of people writing when ideas were produced under monopolistic conditions, by a small group of privileged suppliers.
Ultimately, he simply wants a better-articulated mathematical model – one centred around complex system dynamics. The hunger for such a model may be the problem. His criticism of economics as not being scientific enough is a classic case of physics envy. He wants a new paradigm to “be consistent with the fundamental physics known as the Laws of Thermodynamics” (p18). The parallel may not hold, and he seems not to be aware that the understanding of scientific method may have moved on from Kuhn’s work. In the free world, economies are driven by people. People are emotional. Emotions cannot be modelled. There are income effects, and substitution effects. That’s about it. So for me, a genuinely “new” economics might be more modest.”
peofdev.wp.com 12-2021 Steve Keen’s manifesto for a new economics – review by Nick Johnson
see also Steve Keen on Marx on capitalism: flawed but exciting – by Nick Johnson
ft.com 11-2021 Cogs and Monsters and The New Economics — quests for a new model – Two books start with the premise that our present understanding of capitalism is wrong but offer radically different solutions – review by Felix Martin
The question of whether economics needs reform never seems to go away. The reason is simple. It is that the ultimate subject matter of economics is of intense, universal interest: nothing more nor less than how human society really works — and how it might be made to work better.
For equally obvious reasons, every new social and economic crisis gives the debate a fresh dose of adrenaline — and the Covid-19 pandemic has been no exception. There could not be a better time, therefore, for Diane Coyle and Steve Keen to set out their respective visions of how to make economics fit for the 21st century in their new books, Cogs and Monsters and The New Economics.
Both authors are distinguished academic economists. But there the similarities end. Coyle is the establishment insider, both in intellectual (Harvard PhD, Cambridge chair) and professional (ex-UK Treasury, CBE, numerous public appointments) terms. Her past critiques of economics have been subtle, measured and practical. Previous salvos, though rich in serious argument, have travelled under playful titles: The Soulful Science and GDP: A Brief but Affectionate History.
Keen, by contrast, is an inveterate maverick. A leading light of heterodox economics, he carved out his academic career in unfashionable university departments (the University of Western Sydney in Australia; Kingston in the UK). The closest he has deigned to come to the establishment is his current tilt at the Australian Senate under the banner of the mould-breaking New Liberals party. Rather than diplomatic niceties, he revels in Antipodean bluntness: the title of his most famous book is Debunking Economics.
These two very different authors share an identical starting point. This is that contemporary macroeconomics — the part of the discipline that grapples with national output, unemployment and inflation — is in a truly lamentable state.
From this point of unanimity, they take off in opposite directions. Coyle dismisses macroeconomics as a lost cause, and so focuses almost entirely on microeconomics — the analysis of individual and company-level behaviour. Keen, by contrast, deems the analytical framework used by bond investors and central banks far too important to write off. The new economics of his title is therefore primarily a reconstruction of macroeconomics.
Coyle’s book has two central themes — neatly summarised in its title. The first is a criticism of modern microeconomics as preoccupied with an inappropriate conception of human beings as mechanical and individualistic — as discrete “cogs” in a giant social machine — and of a misplaced confidence in the separability of positive and normative analysis.
Pristine analyses recommending optimal economic solutions that are nonetheless politically unachievable are useless
The second is a vision of a reformed discipline able to successfully guide public policy in the increasingly digital economy of the 21st century — one in which phenomena such as “network externalities” and increasing returns are not the rare and exceptional “monsters” they appear as in today’s economic models, but the default assumptions on which tomorrow’s theories are built.
Coyle’s treatments of both these themes are eloquent. But against the background of policymaking during the coronavirus crisis, the first, the “cogs”, is especially thought-provoking. Two arguments stood out.
The first is that when trying to direct social behaviour, policy interventions that do not properly account for the innate ability of human beings to understand, adapt to and ultimately also to game those interventions are doomed to failure. A second, related, point is that pristine analyses recommending optimal economic solutions that are nonetheless politically unachievable are useless — often counterproductive. Economics without political economy, as the joke goes, is like mixology without hangover theory.
In my view, Coyle is correct that confronting these two points is essential if microeconomics is to have a future as the premier framework for the development of public policy.
Keen’s manifesto for the reform of macroeconomics is also structured on the need for the discipline to confront a combination of both longstanding and more contemporary challenges. Three in particular take priority: how to incorporate money and finance into macroeconomic modelling realistically; how to understand the intrinsic complexity of social processes; and how to reconnect economic analysis with the increasingly urgent constraints imposed by energy use and the environment.
The result is a book that is more constructive, but also considerably more technical, than Coyle’s. More constructive because it devotes less space to spelling out what is wrong with the existing framework and more to putting forward a concrete alternative. More technical because that concrete alternative is embodied in a novel computer-based method of modelling the economy as an unstable dynamic system.
I don’t know which of these two theories of change will prove correct — but I hope one of them does. I think most readers will come away from both these books convinced by their shared thesis that economics needs reform, even if they find Coyle a bit too vague on the details of what that the economics of the future should look like, and Keen a bit too specific. Yet there remains the biggest question of all: how any reform will actually come about.
Coyle argues that the digital revolution will eventually force economists’ hands — so though change may be slow, it is more or less inevitable. Keen is less optimistic. He sees modern macroeconomics as having proved consistently immune to glaring falsifications of some of its fundamental hypotheses. Hence The New Economics’ revolutionary subtitle, A Manifesto. It is written not to interpret economics, but to change it.
I don’t know which of these two theories of change will prove correct — but I hope one of them does. As the pandemic has just demonstrated — and the climate crisis now threatens — if the ability of economics to provide convincing guidance on social policy continues to slip, other disciplines, much less troubled by its noble ambition to integrate the totality of human welfare into decision-making, will simply take its place.
see also
- Felix Martin is the author of ‘Money: The Unauthorised Biography’
- Cogs and Monsters: What Economics Is, and What It Should Be by Diane Coyle
- enlightenmenteconomics.com 10-2021 Reforming economics – the heterodox manifesto – Diane Coyle on Steve Keen’s book
yorkshirebylines 10-2021 Steve Keen’s book ‘The New Economics: A Manifesto‘ covers neoclassism, debt, and financial crashes like the Great Depression and Recession – review by Natalie Bennett
braveneweurope 10-2021 The New Economics – A Manifesto by Steve Keen – Book Review by Dirk Bezemer
…”…Keen’s orientation on the sciences is at odds with the nature of economics, which is a social science. Seen this way, the multiplicity of theories, articulating radically different views of society, is not an aberration but a necessary feature of economics, just as it is in political science, anthropology, and sociology.
Keen’s approach to economics however is the method borrowed from physics: model it mathematically in order to understand it. He is an excellent writer and teacher, also for those who feel uneasy around equations. In fact, there are hardly any in the book. Almost all of the explanations of models are verbal, with the help of graphs and figures. This is a huge achievement in itself. His empathy with non-initiates shows in remarks such as ‘If you don’t have mathematical training, this might be a good point to take a coffee break (when explaining chaotic behaviour, p. 88).
In his second chapter ‘Money Matters’, Keen translates rival theories of money into the terms of his own modelling software – called ‘Minsky’, after the great financial economist – to show that money creation by banks ’ex nihilo’ has macroeconomic significance. The arguments are laid out crystal clear, though the ‘Minsky’ tables that illustrate this are not. Keen has done original work in this area himself, for instance showing how credit creation is compatible with the existence of profit. He also highlights the need for complex and system-level models rather than linear or micro-founded models. He uses this to understand Minsky’s financial instability hypothesis in modelling terms, something he first did in a breakthrough 1992 paper. His ‘Minsky’ modelling software is available for free, and continues to be improved. Like other so-called ’stock-flow consistent’ dynamic models, this approach could become the future standard for generic macroeconomic modelling. …
…The chapter on climate science is perhaps the most innovative… …Keen can explain why economic growth is not only financially unstable but physically unsustainable. Here Keen benefits most from his wide reading in the sciences. Production theory which ignores energy as input, or which pretends there is no energy waste in the production process, clashes with the Second Law of Thermodynamics – in the real world, an impossibility. He justly ridicules the conventional wisdom of mainstream climate economists, among them William Nordhaus who received the 2018 Nobel Prize for his efforts….
…This book is an advertisement for interdisciplinarity and a very, very good read. Steve Keen is still going strong, both in lambasting neoclassical economics and in breaking new ground. Let others add balance to the discussion and change the academic world from within. We need Keen to keep the pressure on.”
seekingalpha.com 10-2021 Book Review by John Lounsbury – The New Economics, A Manifesto By Steve Keen
- summary
- Steve Keen’s latest book is succinct and wide-ranging.
- This book provides a clear direction for economics.
- Meaningful macroeconomic models must be based on reality.
- Equilibrium for modeling nonlinear, uncertain, and chaotic systems is not reality.
- The known universe obeys the Laws of Thermodynamics – Economics cannot be an exception.