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Steve Keen: Harvard Starts its Own PAECON Against Mankiw

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By Steve Keen, Associate Professor of Economics & Finance at the University of Western Sydney, and author of the book Debunking Economics. Cross posted from Steve Keen’s Debtwatch.

Several correspondents have just told me that some of Greg Mankiw’s students at Harvard are staging a walkout from his first year class. They’ve written an open letter to Mankiw to explain why:

An Open Letter to Greg Mankiw

I applaud them for this move. Mankiw’s various economics texts are among the most simplistic of the many neoclassical textbooks that parade this flawed paradigm as a flawless jewel of human reasoning. I’m delighted that his students have taken the rebellion against this paradigm to one of its key promulgators.

I did likewise forty years ago–against far less well-known advocates of neoclassicism. At the time, I probably knew as much as these students do today of the enormous literature that establishes how fallacious neoclassical theory is, and which of course neoclassical texts like Mankiw’s completely ignore.

These students will undoubtedly be told that they have misunderstood and misjudged both the theory and Mankiw’s course–which I was also told when I revolted against Simkin’s economics at Sydney University back in 1972. They are certainly lacking knowledge of the literature–and they rightly attribute this to the “education” they are receiving in Mankiw’s course:

A legitimate academic study of economics must include a critical discussion of both the benefits and flaws of different economic simplifying models. As your class does not include primary sources and rarely features articles from academic journals, we have very little access to alternative approaches to economics

.
Already, another student has published a rebuke to these rebels along the lines that they don’t appreciate the depth and wisdom in the subject:

In Defense of Ec 10

The following extract from this defence is worth highlighting–for the sake of the argument being made by the rebels. The author observes that much of the course follows Mankiw’s text, in which there is a summary of ten main points of neoclassical wisdom:

Sections largely follow The Principles of Economics by N. Gregory Mankiw, and to reconstruct what students learn at these class meetings, I dug out my notes from freshman year. Here are the supposedly biased takeaway points that Mankiw’s propaganda machine pounds home in section:

Trade and specialization of labor can make society better off.
Demand curves slope downward and supply curves slope upward (usually).
Sometimes, things happen that make demand curves and supply curves shift.
Comparative statics can be a useful way of thinking about how changes in some variables will affect changes in other variables.
Some goods are elastic–more volatile to changes in quantity consumed for a given price change–and some goods are inelastic.
Taxes, subsidies, price floors, and price ceilings can change equilibrium outcomes, and sometimes this causes deadweight loss.
Tariffs and quotas often cause a loss in total social surplus.
Externalities cause free-market outcomes to be different from socially optimal outcomes.
Public goods are neither excludable nor rival.

I won’t indulge in a root-and-branch critique of the entire list, but there are just a few that are provably false:

“Demand curves slope downward”

There is a convoluted procedure used to prove that individual demand curves slope downwards, but it has been proven, in what are known as the Sonnenschein-Mantel-Debreu conditions, that a market demand curve can have any (polynomial) shape at all. Here’s an extract from the Handbook of Mathematical Economics on that one:

First, when preferences are homothetic and the distribution of income (value of wealth) is independent of prices, then the market demand function (market excess demand function) has all the properties of a consumer demand function . . .

Second, with general (in particular non-homothetic) preferences, even if the distribution of income is fixed, market demand functions need not satisfy in any way the classical restrictions which characterize consumer demand functions…

The importance of the above results is clear: strong restrictions are needed in order to justify the hypothesis that a market demand function has the characteristics of a consumer demand function. Only in special cases can an economy be expected to act as an ‘idealized consumer’. The utility hypothesis tells us nothing about market demand unless it is augmented by additional requirements. (Shafer, W. & Sonnenschein, H., (1982). ‘Market demand and excess demand functions’, in K.J. Arrow, and M. D. Intriligator (eds), Handbook of Mathematical Economics (Vol. II), North-Holland, Amsterdam, pp. 671-693)

“supply curves slope upward (usually)”

This has been empirically disproven by so many researchers that it’s simply an insult to intelligence that economists continue peddling this. The last one to empirically falsify this propostion–unintentionally I might add!–was Alan Blinder:

The overwhelmingly bad news here (for economic theory) is that, apparently, only 11 percent of GDP is produced under conditions of rising marginal cost…

Firms report having very high fixed costs-roughly 40 percent of total costs on average. And many more companies state that they have falling, rather than rising, marginal cost curves. While there are reasons to wonder whether respondents interpreted these questions about costs correctly, their answers paint an image of the cost structure of the typical firm that is very different from the one immortalized in textbooks.” (105) (Blinder, A. S. (1998). Asking about prices: a new approach to understanding price stickiness. New York, Russell Sage Foundation., pp. 102, 105; emphases added)

“Comparative statics can be a useful way of thinking about how changes in some variables will affect changes in other variables”

Comparative statics assumes that the economy is normally in equilibrium, and will return to it after a disturbance. That is utterly ignorant of the wisdom now accumulated in the area known as complex systems, in which the norm is for most dynamics systems to be in a state of permanent disequilibrium.

So, “Concerned students of Economics 10″, you have every reason to be concerned. Now, as the uninformed advocates of neoclassical economics try to brow-beat you into submission, dive in and learn the literature that establishes that your gut-feelings about the theory are right.

I wrote Debunking Economics for people like you, and I’d be delighted to send you a copy. If you read this, please get in touch with me at debunking@gmail.com and I’ll arrange to have a copy sent your way.

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199 comments

  1. Memory

    Taught upper division undergraduate courses at Harvard recently and found that students who had taken Ec. 10 (all of my students had) did not know what the Keynesian multiplier effect was. None of them had even heard of it. They had heard of the IS-LM model, but not one of them felt comfortable explaining it. It is generally understood by most faculty and graduate students in the social sciences there that Ec. 10 is intended primarily as an exercise in elite replication (moreso than the background level of most of the university’s courses, I mean) rather than education.

    1. aletheia33

      here is the full text of the economics 10 walkout students’ letter to mankiw:
      ______________________________

      Wednesday November 2, 2011

      Dear Professor Mankiw—

      Today, we are walking out of your class, Economics 10, in order to express our discontent with the bias inherent in this introductory economics course. We are deeply concerned about the way that this bias affects students, the University, and our greater society.

      As Harvard undergraduates, we enrolled in Economics 10 hoping to gain a broad and introductory foundation of economic theory that would assist us in our various intellectual pursuits and diverse disciplines, which range from Economics, to Government, to Environmental Sciences and Public Policy, and beyond. Instead, we found a course that espouses a specific—and limited—view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society today.

      A legitimate academic study of economics must include a critical discussion of both the benefits and flaws of different economic simplifying models. As your class does not include primary sources and rarely features articles from academic journals, we have very little access to alternative approaches to economics. There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory.

      Care in presenting an unbiased perspective on economics is particularly important for an introductory course of 700 students that nominally provides a sound foundation for further study in economics. Many Harvard students do not have the ability to opt out of Economics 10. This class is required for Economics and Environmental Science and Public Policy concentrators, while Social Studies concentrators must take an introductory economics course—and the only other eligible class, Professor Steven Margolin’s class Critical Perspectives on Economics, is only offered every other year (and not this year). Many other students simply desire an analytic understanding of economics as part of a quality liberal arts education. Furthermore, Economics 10 makes it difficult for subsequent economics courses to teach effectively as it offers only one heavily skewed perspective rather than a solid grounding on which other courses can expand. Students should not be expected to avoid this class—or the whole discipline of economics—as a method of expressing discontent.

      Harvard graduates play major roles in the financial institutions and in shaping public policy around the world. If Harvard fails to equip its students with a broad and critical understanding of economics, their actions are likely to harm the global financial system. The last five years of economic turmoil have been proof enough of this.

      We are walking out today to join a Boston-wide march protesting the corporatization of higher education as part of the global Occupy movement. Since the biased nature of Economics 10 contributes to and symbolizes the increasing economic inequality in America, we are walking out of your class today both to protest your inadequate discussion of basic economic theory and to lend our support to a movement that is changing American discourse on economic injustice. Professor Mankiw, we ask that you take our concerns and our walk-out seriously.

      Sincerely,

      Concerned students of Economics 10
      ____________________________________

      1. Fíréan

        Thank You for posting the full text of the open letter from Harvard students to Mankiw, referred to within above article (I reply to aletheia33 says) : I was unable to find a working link in within the text of the blog post at time of reading.

        The direction taken by some replies yesterday refrained from any acknowledgement of, or reference to, the actions taken by these Harvard students and their intended support and joining “a Boston-wide march protesting the corporatization of higher education as part of the global Occupy movement”.

      2. Fíréan

        Thank You for posting the full text of the open letter from Harvard students to Mankiw, referred to within above article (I reply to aletheia33 says) : I was unable to find a working link in within the text of the blog post at time of reading.

        The direction taken by some replies yesterday refrained from any acknowledgement of, or reference to, the actions taken by these Harvard students and their intended support and joining “a Boston-wide march protesting the corporatization of higher education as part of the global Occupy movement”.
        ( excuse me if this reply is duplicated, i cannot see my first time posting)

    2. Richard Kline

      So Memory, exactly. Mankiw’s synthesis is political propaganda designed to socialize candidates for the ruling class in what their acceptable worldview is to be, nothing more. Analysis would interfere with that, as would contrast-and-compare exercises; thus, both are omitted. What Mankiw is doing is political indoctrination, his snuffling remark in his response to the walk out that “I leave my politics at the door” when teaching notwithstanding. Maybe he does—since all he shows _is_ a political perspective, he can leave ‘I’ statements out and simply point, disingenuously, at this syllabus. —And it wouldn’t matter who was teaching this class, no; the function is exactly the same. Kind of like catechism, really . . . .

    3. Knut

      About a year and a half ago I was asked to referee a version of McConnell’s introductory textbook, which has been around for a half century and at one time was a decent introductory textbook used in second-tier colleges and universities as a somewhat simpler version of Samuelson. Although I have refereed sevceral intermediate macro books in my lifetime, this was the first introductory text I’d looked at in a long time (I don’t use textbooks when I teach introductory econ). I couldn’t believe how ideological McConnell’s text had become over the past five decades. As I wrote the publisher, there was no way a beginning student with an open mind could come away with any understanding of how economic theory works as a set of tools for thinking about real economies. It was made for memorizing talking points, some of which obviously came directly from the Heritage Foundation (cited in several places as a reliable source).

      The students at Harvard are dead right. They are not being taught economics, they are being taught a secular theology. Mankiw represents all that is wrong with the profession. He got promoted early because he is or was clever, and that’s what counts nowadays. But like most of his contemporaries, he is very shallow.

  2. Lloyd Blankstein

    Mankiw is world famous economist. Steve Keen is only a nameless blogger, who teaches economics in his spare time. I want to stay on the side of the titans – Mankiw, Summers, Krugman, Greenspan, Bernanke. The only purpose of economics is to justify and legalize theft. If Steve Keen cannot do that, he is a BAD economist. Why listen to him?

    1. Travizm

      oh c’mon – on this blog you need a little more class when you troll.

      lift your act you unisexual bitch…or gush somewhere else…like CNN

      Cheerio

    2. Jane Doe

      If you are going to use a logical fallacy like “appeal to authority” as your basis for acting, you aren’t likely to pass economics regardless of who teaches it.

      1. steelhead23

        Fellow bloggers. This guy gets it. Didn’t you notice the nom de plume? Now, I mildly disagree with Lloyd’s assertion that the purpose of economics is theft, but you would expect Lloyd to think that way, wouldn’t you?

        BTW – based on his academic credentials at the time of his publication of the General Theory of Relativity, Albert Einstein should not have been listened to. He was a nobody. And yes, I just compared Steve Keen to Albert Einstein. And hey, I understand Keen can play the guitar.

    3. Lefty

      So famous equals right? Is that how it works? Marx was a famous economist, the last great classical economist. The man almost by himself caused a paradigm shift in the profession. I’m sure most neoclassical economists would agree that since he’s famous his economics should be taught too, right? I like how you call Dr. Keen names but say nothing about anything he’s written. Would you consider Joan Robinson famous? Piero Sraffa? How about the 2009 winner of what is called the Nobel in economics, Elinor Ostrom? Michal Kalecki? Karl Polanyi? Gunnar Myrdal? Herman Daly? I would bet that most undergraduate economics students haven’t heard of any of those economists. Is that because they had nothing to add? Is it because they had little impact on the profession? Or are there are reasons for this?

      If you are working on “New Keynesian growth models” I am sure we will all be discussing your work in no time. Maybe you’ll be “famous” too. Hey, if you want to make a name for yourself (and if you want to score some points with your neoclassical teachers), critique Keen’s work. Don’t just dismiss him out of hand, anyone can do that. Write a well thought out critique of his work, get it published, send it to a well known journal and show everyone how wonderful your brain is.

      1. Brito

        Um, Lloyd Blankstein is NOT ME. I repeat, Lloyd Blankstein IS NOT ME, stop confusing him with me. I never said anything about him being non famous.

      2. Lloyd Blankstein

        Marx died poor. That’s the usual fate of honest (i.e. BAD) economists and Steve Keen is heading there. None of Summers, Bernanke, Greenspan, Mankiw, Krugman will die poor. They discovered early in their life that it does not make sense to study the world of money and not have any.

        Mankiw is doing God’s work and is helping us stay at the forefront of financial innovation. God will defend him from all troubles.

        1. David Lance

          Interesting observation. Count Keynes in that group too. He filled his coffers by speculating on foreign currencies. He also wrote “The Economic Consequences of the Peace” in 1919.

          It was his analysis and predictions of the long-term effects of the reparations levied against Germany in the wake of World War One. Read this quote from that book (below) with the benefit of hindsight and keep telling yourself we ought to ignore Keynes. From his most famous (and most ignored work):

          “If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not be limp. Nothing can then delay for very long that final Civil War between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing, and which will destroy, whoever is victorious the civilization and progress of our generation.”

          1. Nathanael

            Keynes was a genius.

            He knew that he could tell the world exactly what he’d discovered, and that — even with his reputation! — few enough people would listen that he could still make a fortune by betting on currencies (etc).

            Really wish powerful people had listened to him, though. Would have saved a lot of pain.

    4. scraping_by

      The only purpose of economics is to justify and legalize theft.

      Only Mit Romney is this blatant. And I don’t think he’d down anything so close to labor as to read this blog.

      Though, to be fair to the pitchfork and torches response, it’s often labor to separate satire from simple reality, and real words and deeds from the most over-the-top send-up. The public letter from the Oakland Police Department was published with warnings that it wasn’t from the Onion. And that was necessary.

      1. Praedor

        Romney is only that blatant by accident. At the next presser he will have switched his tune to the prefered music of the audience.

    5. Winston Smith

      Of course this is satirical, but why is Paul Krugman included on the list? I’m not a connoisseur of economics textbooks, but I had thought that his is far from total agreement with Mankiw’s.

      1. wunsacon

        >> Of course this is satirical, but why is Paul Krugman included on the list?

        My guess: thrown in just because he’s famous and the extra reference *shoulda* made the snark more obvious to our fellow readers.

        Do we need a “snark” icon like on hoocoodanode? C’mon, people! Look sharp!

        1. orionATL

          yeah, the inclusion of krugman in this list seems contemptibly gratuitous.

          there really is no more intellectually honest opinion columnist writing than krugman.

          and his writing indicates he cares about educating his fellow citizens -

          amazing behavior amoung the chattering class.

    6. digi_owl

      sad thing is that i have seen more or less the same response when i mentioned Keen in relation to Krugman. Seems having a Swedish national price and a NYT blog makes one infallible…

      1. digi_owl

        Ugh, national [b]bank[/b] price! Sorry about that. Seems the most clever thing the neo-classics ever did was to get the “Nobel” price in economics set up.

    7. alex

      Majestic Master of the Universe Blankstein,

      My apologies if many of the denizens of this blog are satire impaired. I humbly beg you forgiveness.

  3. MyLessThanPrimeBef

    First, when preferences are homothetic and the distribution of income (value of wealth) is independent of prices, then the market demand function (market excess demand function) has all the properties of a consumer demand function

    If you can elaborate a little more on this.

    Thanks.

    1. Praedor

      Please, for the love of Cthulhu, don’t. Don’t elaborate on gibberish. Econ is ALL gibberish, made up post hoc to apply to what has already occurred. Elaboration on such points are necessarily Byzantine and tortured in form.

      Stick to physics, chemistry, biology. Real sciences with real laws and rules of the road that never change for political expedience.

  4. Brito

    Steve Keen is a hack who selectively picks research to suite his agenda (including debt hysteria, I recently saw his nonsense about debt posted in Zero-Hedge of all places).

    Evidence for upward sloping supply curves (seriously denying supply curves is upward sloping is effectively denying almost every instance of inflation that has ever happened in developed countries): http://www.jstor.org/pss/2118493

    1. Travizm

      my understanding was that he is attacking the dogmatic stance that this is the only shape?

      am I wrong here?

      I have always found Steve Keen’s gloves-off criticism to be useful in finding the weak points in what is an incomplete model of economics.

      I would agree that a dogmatic following of Keen is just as problematic.

      Actually my whole ethos is that dogma is the problem.

      Feel free to shred me on this……im happy to be wrong.

      1. Brito

        It’s really technical semantics though, under what situation are we really going to say “prices are too low right now, we need to raise them by lowering demand”, he’s just far too dramatic.

          1. Brito

            As opposed to developing newer and better models that are appropriate for a first year undergraduate (sure there are plenty better and more sophisticated ones out there, but enormously complex and inappropriate for an undergraduate with absolutely no experience in economic literature).

          2. Travizm

            yeah ok….simple model for freshers….im happy with that as long as its spelled out to the poor buggers so they dont finish uni with a 4-bit resolution and think its 16-bit….or worse infinite bit as seems to be the case with some of the professionals i have come across.

            i mean economics is the poor cousin of science because of its complexity….it is incredibly stupid to not make this loud and clear to any poor bugger who is peering down the rabbit hole.

            reductionists…have their place but should be spat on every now and again…or not?

            i really see economics as a central science. Its like a giant intellectual shiva with experts screaming at each other from each arm. I take objection to any one of these arms being dominant……actually if economic science acted on free market principles it would be much better off…….hmmm….

            Thats how it appears to me at least.

            I also think macroeconomics is like abstract crack….very addictive.

      2. JTFaraday

        “Actually my whole ethos is that dogma is the problem.”

        Yeah, like could you imagine “deficits don’t matter” in the hands of Dick Cheney?

        Oh wait. We don’t to imagine it.

    2. KnotRP

      …because real economic activity can never ever be more complex than a quadratic equation, in your mind? You have met the enemy, and it is you.

      1. Brito

        What are you talking about? Almost everything I’m doing right now involves highly complex New Keynesian growth models on the theory side, which involves very high levels of calculus and complicated constrained optimisation and what not. On the empirical side, I’m doing Bayesian vector autoregressive models, this is significantly more complex than any quadratic equation, not that mathematical complexity has anything at all to do with the quality of the model.

        1. Hugh

          So what does a New Keynesian approach have to say about kleptocracy and wealth inequality? And if it does not address these things, the core isssues of our times, who cares what it has to say about anything else?

          1. Brito

            There is much research on these issues that incorporate modern robust macro models with micro-foundations, but I cannot hope to understand the literature unless I understand the basics first.

          2. Hugh

            I think you are too invested in a field that has nearly been entirely debunked by events. So when you speak of robust macro models or make similar appeals to the strength of your field, it raises more than a few eyebrows. There have been a few studies on wealth inequality but none that I know of that explicate its mechanisms and how they operated in the context of the last 40 years. The only economist I know of, and there might be a few others, who has even mentioned occasionally kleptocracy is Michael Hudson. Even Bill Black does not go so far referring rather to a criminogenic environment, a substantially different perspective from an economic system as criminal enterprise. I would just say that the basics are not to be found in mathematical constructs that do not correspond to current events but in those events themselves.

          3. Brito

            I cannot take you seriously when you say that centuries of research and millions of papers and studies on a huge amount of topics ongoing for CENTURIES has been ‘debunked’ by events (especially given that’s almost fucking impossible to get a paper published today if it isn’t econometrically tested to see if the events actually match up with the model). In fact, like Krugman, I would argue that even basic undergraduate Hicksian macro is very capable of explaining recent ‘events’. If you don’t think things like ‘kleptocracy’ have been sufficiently discussed in the field than I and I’m sure anyone else would happily welcome contributions on the subject. But really it’s not hard to find the research with a basic google search, I remember reading stuff about corruption incorporating principle-agent models from the IMF, it was very interesting and informative stuff, it might be in one of the papers listed here: http://www.google.co.uk/search?q=imf+study+corruption&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-GB:official&client=firefox-a

            Also, I’m a sucker for empirical analysis. The funny thing is, the only people I see actually doing insightful empirical analysis on the economy of any use is economists! And I read a huge amount of blogs from all over the spectrum, and yet stuff like http://www.econbrowser.com/ will always be far more informative and robust than 99% of the stuff I see on blogs without any knowledge of economics.

          4. Yves Smith Post author

            Brito,

            I wrote an entire book on this topic, which no one has disputed in its critique of economics. And the authorities I cite are all economists, including Nobel Prize winners who have publicly said that what passes for empirical research in economics is weak from a methodological standpoint and further undermined by its restriction to clean data sets of sufficient size. I suggest you read my book. We might be able to have an intelligent conversation.

            In addition, if you are in the discipline, you should be aware of the Stalinist methods used to enforce a failed orthodoxy. No real science has a hierarchy of journals the way economics does, and has top journals that refuse to publish articles that fail to toe the party line (Jamie Galbraith, among others, can give you the long form on that one). Over 25% of graduate economic research budgets come from the Fed, which is one axis for enforcing neoliberal bunk.

            In addition, your assertion regarding “centuries of research” is patently false. It says a great deal about your level of honesty. All I see are appeals to authority and brandishing of the math card. That is a poor substitute for a real rebuttal.

            Keen himself is a pretty accomplished mathematician, and he stresses that economics has considerably restricted itself in the type of mathematics it uses in its analyses. Moreover, despite the discipline’s fetishization of math, analyses of papers have found that in most cases, the key part of the argument is in the narrative, and the math-up parts are trivial (contrary to the norms of pure mathematics, where proofs will skip over steps that are understood to be easy to demonstrate, and will lay out the thorny parts in careful detail).

            As for the validity of economic models, ever heard of Poincare’s and Sundman’s solutions to the three body problem? The implications are devastating to economic modeling. Or ergodicity? Samuelson himself said you needed to make the ergodic assumption for economic to be a “science”. That assumption is demonstrably false in financial markets, and given the interaction of financial markets with the real economy, makes it dangerously misleading for any sort of macro modeling.

            Your defense is actually funny. Economists could have foreseen the crisis, with the benefit of hindsight. Do you expect us to take that seriously?

            Go read my archives, my record on this is clear. I wrote extensively on the fact that investors weren’t demanding enough in the way of risk spreads in early 2007 (which meant financial assets were overvalued and due for a nasty correction), called the credit contraction in July 2007, and called the oil bubble of 2008 (I even went short when oil was over $140).

            Frankly, your post reads like someone defending his union card.

          5. Lefty

            Brito, I thought you were going to bed. I just wanted to mention that you didn’t list many of the assumptions of the dominant theories they teach.

            By the way, Michael Hudson did am amazing job of smashing the IMF into tiny pieces in Superimperialism. Robin Hahnel, Eric Toussaint, Cheryl Payer, amongst many others, have done the same. Just because YOU haven’t read solid critiques of IMF policies, and I would think you’d have to work very hard to shield yourself from those criticisms, doesn’t mean there aren’t any. Hell, the freaking IMF itself has said has admitted its policies have many times made bad situations much worse. Read its reports about what damage it did to the economies in Asia in the late 90′s. It admitted it made the situation worse, it has admitted it since and nothing has changed.

        2. Skippy

          How do you factor in natural disasters, what supporting historical evidence do you use to support it and how far back does it look.

          Skippy…when you done with the time machine…can I have a ride?

          1. Richard Kline

            So Brito, I foresee two, distinct, but equally unhappy futures for you. Most probably, you will wake up 12-15 years from now at 4:00 AM one day and realize that you have squandered the best years of your intellectual life on a pocketful of mumbles and a few pieces of dragon gold. And you will despair because I suspect you actually do have intellectual capacity, and you could have done something useful or at least fun with this part of your too short time on Earth. Alternatively, you will _not_ wake up that day, and you will BE Greg Mankiw once he’s no longer around to fill that particular slot on the pseudo-academic gamecard. I don’t wish that on you.

            Or you could get off your ass so you could pull your head out and take a look around. There is just so much interesting in socioeconomics or human mass behavior to examine and model, mathematically or otherwise, that for you to waste your abilities, such as they may be, on the worthless gewgaws you’ve been socialized to value is . . . regretable. See you in 20 years, pal.

        3. psychohistorian

          So do any of your fancy models include the cost of American imperialism as in the hidden military, state department, and CIA costs associated with resource extraction and labor “use”?

          If they don’t, what connection to reality do they have?

          Do you model fear? How about the effectiveness of propaganda?

        4. Fiver

          Has it never occurred to you that formulating policy to fit these models, then re-constructing models to fit the emergent realities has become an intensely destructive feedback loop that is crushing everything human out of existence? That the logic of all these system equations serve only the system qua system and nothing else?

          That’s how you end up pushing buttons to loose drones on people who pose no threat whatever a world away on the basis of someone’s bought hearsay, finger-point ‘evidence?

        5. Lidia

          “Almost everything I’m doing right now involves highly complex New Keynesian growth models on the theory side, which involves very high levels of calculus and complicated constrained optimisation and what not. On the empirical side, I’m doing Bayesian vector autoregressive models”

          Brito, may I ask why you are doing that?

          It’s a nice day outside…!

        6. Praedor

          Err…all that math shit misapplied to a nonscience is why we are currently where we are today. It was mathematicians unable to work in math who created “models” for CDS’, CDOs, etc. All shit that fit some strained mathematical model but had no basis whatsoever in the REAL world. Throwing mathematical equations at nonsense cannot make sense of it. All you get for that is nonsensical math for nonsensical personal preferences (ie, economics).

          Here is all you need to know to understand economics:

          People need shit. People who have excess income (whatever form) will buy shit. People who produce shit will acquire the excess income spent to buy their shit. People who have no excess income wont buy shit. Ergo, you must pay people enough money so they can buy your shit.

          There you go. All you need to know to “get” economics. No one in government/finance ANYWHERE has this simple grasp of economics. Hence, the huge and growing spread between the thieving rich self-appointed elite and people who work for a living.

          1. Joe Rebholz

            ” …Throwing mathematical equations at nonsense cannot make sense of it. All you get for that is nonsensical math for nonsensical personal preferences (ie, economics)…”

            But, but, … that great economist Milton Friedman said assumptions don’t matter.

        7. KnotRP

          Between this:

          > Almost everything I’m doing right now involves highly complex New
          > Keynesian growth models on the theory side, which involves very
          > high levels of calculus and complicated constrained optimisation
          > and what not.

          and this:

          > Utter nonsense, shifts in supply curves, even when they are flat
          > (yes flat supply curves have been considered in my class before,
          > amazing isn’t it?) are well accounted for in economics

          ,,,,I’ve mistakenly decided to engage in pig wrestling, but I
          will try once more since my earlier reference didn’t seem to
          reach the reflective area of your brain, which I presume you have. One (especially a teacher) should be aware that complex systems produce “curves” (hint: you can’t really call them that when they get really complex) which one cannot drive with the calculus hammer. Or were you under the impression that simply uttering the word “calculus” itself somehow carries water in this debate?

          I would say you are in love with your tools, and have forgotten
          that the point of tools is to build or repair *something useful*.

          I think Richard Kline gave you some excellent advice around Nov 4th 2:34am….I recommend you consider it.

    3. charles 2

      Thank you for providing a link that can only be read by people who have access to a university library ( and where there is an economic department). When one brings a discussion in public, a basic level of courtesy is to bring documents that everybody can read.
      And please spare me the usual rant about “publishing and editing research is not free”: publishing on the internet is practically free and both authors and editors are for the vast majority on the public payroll (especially when they specialize in “New Keynesian Bayesian autoregressive growth models”) so all their work should be FOIed by default.

    4. Philip Pilkington

      “…seriously denying supply curves is upward sloping is effectively denying almost every instance of inflation that has ever happened in developed countries…”

      I don’t see why that might be. If you have a flat supply curve and map that against rising demand you’d get inflation so far as I can see.

      1. Philip Pilkington

        Okay, let’s consider the oil price hikes in the 1970s leading to higher input costs for firms (certainly one of the causes of the stagflation crisis).

        So, we have a company that makes plastic chairs. One of the main inputs is oil. The supply curve for the chairs is flat. Now the price goes up as oil prices increase. The supply curve simply remains flat but moves upward in response to the price increase.

        Note the assumptions here. The firm operates with excess capacity and not in line with marginal cost etc. One of their key inputs goes up so they have to pass on the price to consumers. But they still have excess capacity.

        I think what’s really going on here is typical neoclassical solipsism. If supply curves were flat YOUR THEORY OF INFLATION WOULD BECOME INVALID. But maybe your theory of inflation is, in fact, invalid.

        This is what Keen always says: attack just one of neoclassical economics’ totems and the whole system falls apart. If these come unstuck trained neoclassicals become completely bewildered.

        1. Praedor

          No Mr Pilkington, they do not become “bewildered”. That would be the normal response to an HONEST person with no personal vested interest in their neoliberal/neoclassical economic religious beliefs. What in a functional and normal HUMAN BEING would cause befuddlement and even personal examination leads these entrenched clowns to double down. They either use the tried and true psychological trick of ignoring the “faulty” reality that clearly renders their beliefs utter nonsense and explain it all away as a “special case” or “fluke”. Like any fundamentalist religion, reality can never intrude to force comportment with actual objective reality. Reality will be forced (by ignoring it, usually) to comport with the pre-held, dearly cleaved to belief.

        2. Brito

          Utter nonsense, shifts in supply curves, even when they are flat (yes flat supply curves have been considered in my class before, amazing isn’t it?) are well accounted for in economics and it wouldn’t be bewildering to me in the slightest, despite your offensive stereotyping. Perhaps I should have been more clear, cost push inflation can still happen, demand pull inflation on the other hand would be effectively impossible if supply curves were flat everywhere. No economist denies excess capacity, that is why often in Keynesian economics the supply curve is drawn flat for a while as more and more idle capacity is utilized, meaning shifts in demand will not raise prices, until all capacity is utilized, leading to rising costs in the short run,

          1. Philip Pilkington

            Well then why did you say this?

            “…seriously denying supply curves is upward sloping is effectively denying almost every instance of inflation that has ever happened in developed countries…”

            I just pointed to one of the key instances of inflation in the latter 20th century. So…

            You’re jumping around the place. Your criticisms are incomprehensible and vague. And every time you’re called on something tangible you jump around like a sophist. Look at the criticisms of ISLM and DSGE modelling below. Falls on deaf ears.

            You’re not really having a conversation. You’re just spouting rhetoric.

          2. Philip Pilkington

            ME: “You’re jumping around the place. Your criticisms are incomprehensible and vague. And every time you’re called on something tangible you jump around like a sophist. Look at the criticisms of ISLM and DSGE modelling below. Falls on deaf ears.”

            I’m just going to pull a comment from below up here to demonstrate what I’m saying. This is a comment Brito completely ignored. He criticised Keen for pulling out a bunch of ‘random’ economists criticising the ISLM and DSGE models. Of course, this showed that Brito does not even have a cursory knowledge of the primary sources or the original evolution of the arguments.

            Needless to say, Brito has yet to respond…

            DEREK: “Brito, I think you missed the point there slightly. Hicks isn’t just an eminent economist: he’s the inventor of IS/LM. Now this is just a guess, but he probably knows more about it than any other economist. So if he says it’s crap…

            Likewise, Solow isn’t just an eminent economist he’s the inventor of the theory that DSGE is based on. If he says DSGE is an invalid use of his mathematics, you should listen since he is presumably the leading expert on his own theory.

            That is why you should accept their opinions as evidence of something in these cases. They aren’t just eminent economists, they are, directly or indirectly, the creators of the models concerned.”

          3. Philip Pilkington

            Just to finish this up.

            (1) Brito’s first statement was that ‘pretty much all inflation in the 20th century’ couldn’t be accounted for if supply curves were flat. I gave a counter-example. Brito admitted that he was engaging in vague rhetoric.

            (2) Brito’s original characterization of Keen’s argument was but a caricature, anyway. But we won’t go into that.

            (3) But this is where Brito gets really incomprehensible and weird. Remember that he said: “seriously denying supply curves is upward sloping” was crazy?

            Well, he then goes on to say:

            “No economist denies excess capacity, that is why often in Keynesian economics the supply curve is drawn flat for a while as more and more idle capacity is utilized, meaning shifts in demand will not raise prices…”

            Now, if we assume that excess capacity is the norm, then Brito has just “seriously denied that supply curves are upward sloping”. Yes, if a major injection of demand into the economy occurs and firms are run past excess capacity we will then get an upward sloping supply curve as price rises. But that’s not the norm.

            Keen is pretty specific on this in the book. He shows that UNDER NORMAL CIRCUMSTANCES supply curves are flat as firms operate with excess capacity. Keen doesn’t deal with inflationary situations in the book.

            Now, what Brito has done is erect a very vague strawman. He has started talking about inflation in very vague terms. He has asserted that Keen has said that supply curves are ALWAYS flat. When what Keen is arguing is that UNDER NORMAL CIRCUMSTANCES supply curves are flat.

            In the meantime, Brito has conceded that what he originally thought ‘crazy’ was actually part of his theory. Amazing!

            Here you get a good glimpse inside the mind of a neoclassical. Their heads are so bunged up with supply and demand curves that they cannot even keep track of their own arguments properly.

    5. Foppe

      Dear Brito,
      Have you yet learned the difference between making assertions and offering arguments? I realize that you must feel that the latter is unnecessary, given the obvious truth of your beliefs, and I’m sure that it gave you great satisfaction to post what was on your mind here, but given that you don’t actually (and apparently can’t, given your later posts) offer any convincing substantive arguments that back up this rather bold claim of yours, you’re not very likely to impress anyone.

  5. monte_cristo

    I studied 101 economics in 1981, I seem to recall. The analytic component was easy, it’s like arithmetic, maths, logic, you know we have the axioms and we proceed.
    The ‘descriptive component’ .. basically unions versus management I choked on.
    I had a sweet lecturer. He actually held to a marxist analysis: roi/s the logic etc etc. It made a lot more sense than the reqired ‘understanding’ that the course required.
    Right at this moment I find myself in awesome agreement with the Harvard protesters. Mankiw is my opinion (and who am I(?)) is just a semi-second rate academic that rode the wave with his text book. Nearly any fool can do it given the auspicious historical circumstances. That doesn’t make it right, in fact it just makes him cheap, opportunistic, and confused. Just to expand this criticism I have an interest in clinical psychology. Any idiot that believed Freud after he sold himself out when his m/c//r/c audience kicked up when he told them that their childrens problems were the result of their abuse needs to be hanging their heads in shame, as should have Freud. Freud was brilliant but a disgrace to himself.
    It is a beautiful analog this moment. You either get this or you don’t.
    My message is “Screw the rich.” Analogue: Screw the abusers.

  6. craazyman

    Does this mean they get their tuition back too? LOL

    Probly not.

    Or maybe they’ll get paid to teach? That happened to me once, honestly, a dude took over my 11th grade math class while the teacher watched.

    I guess if these are Harvard kids, maybe they’ve already gone to Economics summer camp and can model non-stochastic genral equilibria with abstract algebra.

    I think this is like Ingres vs. Delacroix, or Oedipus Rex. But I think too much as it is.

    1. craazyman

      Rite wen I hung up the fone it occurred to me that if Harvard were like Best Buy these kids cud get their monie bak, or trade it in for the “do it yourself” kit at half price.

      How would that impact supply and demand, if both the supply and the demand revert to the pre-transaction state? Like travelling backward in time? The entire curve disappears and the graph too and maybe even the textbook? it’s just a theoretical framework. ha ahhahah.

      Beef I think this line of thinking is right up your alley.

    2. Praedor

      The proper way for modern college students to deal with college debt is to run that debt up as high as they can get it, get their degree, then skate out of the country for foreign shores and blow off their student debt. Pretend they never had any student loans.

      THAT is how students should be dealing with their student debt in the USA.

  7. Nyeve

    I recall reading the edition of Mankiw’s Macroeconomics that was written just before the dot-com implosion a few years after the event. Everything I read seemed so reasonable and yet missed all the problems that were discovered afterward.

    1. scraping_by

      You’ve put your finger on the drawback of the vast majority of business/economic writing. The latest, greatest new thing is everything, the answer to all questions, the solution to all problems, the way of the future, until it falls off the table. But at least it’s the party line.

      Think of it as Darwinian. The people who buy into that bunk are the ones who hang with the full course and graduate to run the economy. This is professionalism, expertise, getting your head around the body of knowledge, etc. The mental equivalent to tribal scars.

  8. F. Beard

    Professor Keen,

    Thanks for the work you do. I ordered your book about a week ago. I’m looking forward to reading it.

  9. Adrian Haiwei

    Ec 10 does hit smart kids at a vulnerable time. To call bullshit for most is to risk their freshman GPAs and future prospects in the Econ department – usually one of the largest majors at Harvard.

    Of course, the whole point is to teach students to either A) shut down their critical faculties – and like it – or B) stay the hell away from Econ…

    1. Lefty

      It worked liked that in former Communist States too. Didn’t want to have the wrong ideas, to be called a capitalist roader or a neo-Malthusian. I’m sorry, but reality has to enter into the economics profession sometime soon. In case no one has noticed, neoclassical ideas haven’t worked so well in practice. Sad too. I really enjoy reading classical, (non-neoclassical) ecological and post-Keynesian economists. Economics has far more to offer, had far more to offer, than what we’ve seen since the neoclassical economists took back power. To most people, this horrible mess is “economics”, not just one, failed, reality less school of economics.

  10. Lefty

    Brito, I love your thinking!

    “As opposed to developing newer and better models that are appropriate for a first year undergraduate ”

    Great idea. Teach them economics based on assumptions that have no basis in reality. Teach them a school of economics that has been a disaster in practice. Then, the ones who make it to graduate school can get into the stuff that is more complex and, I assume, “realistic”. Lots of complex math which really intimidates people.

    I would be willing to bet that the geniuses at the ECB have studied the higher level neoclassical economics you’re talking about. The guys who gave Latin America that wonderful advice from about the 1960′s up until the recent turn to the left, I’m sure they studied it too. It did wonders for the region. The geniuses behind the “Chilean Miracle” and the reforms in the former USSR? Helicopter Ben Bernanke is an expert on the Great Depression, thank GOD we’ve got him in charge. All this higher level economics knowledge put to good use.

    1. Brito

      You’re assuming I think the assumptions have no basis in reality, I disagree, they are a simplification and do not hold under all circumstances, but I still regard them as a fair approximation. I think Krugman has explained pretty well that even knowledge of a simple IS/LM model enables you to understand much about the dynamics of the economy, you should go read his writings on it. I’m not going to address your obnoxious political rhetoric and massive generalisations. And you learn a great deal of stuff, not just ‘neoclassical’ stuff at postgrad.

      1. Lefty

        Give me, just for kicks, five assumptions that underlie some of the theories you are studying. Give me five assumptions they teach to most undergraduate students. I know them, I have a degree in the subject and I AM have taken graduate classes. Taking a class in ecological economics this fall. I want you to list five of the most mentioned assumptions. If you don’t I will. We both know they have no basis in reality, they aren’t even close approximations.

        “I’m not going to address your obnoxious political rhetoric and massive generalisations.”

        I am so impressed by your econospeak, did I mention that? You sound so scholarly. What I brought up is the simple fact that the economics profession has been dominated by neoclassical ideas. The practitioners of these ideas studied the higher level stuff, they have been in charge of institutions that have put these ideas into practice and they have been miserable failures. The people at the ECB undoubtedly have shiny degrees from well thought of universities and they studied exactly the stuff you are referencing. Same with the Chilean Boys, same with their equivalents in Russia 20 years later, same with the big wigs at the IMF, the US Treasury. Again, what these ideas have done in practice, REALITY, matters.

      2. Yves Smith Post author

        You can dish it out, but you sure can’t take it, can you? People question you and you get rude and dismissive. See my comment earlier. You aren’t wiling to engage in a real discussion.

        Learning lots of “stuff” in grad school is irrelevant if the discipline fails to deliver. Mainstream (neoclassical) economics dominates policy thinking. To pretend otherwise is intellectually dishonest.

        1. Lefty

          Thank you Yves. I am honestly too poor to go to grad school full time, have to get the money together to take a class here and there. I have had to teach myself the subject. I was lucky to find non-orthodox economists early enough in my undergraduate degree to not get brainwashed like Brito here. I can thank people like yourself and Dr. Keen for that. Keep up the great work. Economists like yourself are allowing people to intellectually defend themselves from the charlatans in the profession and in positions of power.

      3. Philip Pilkington

        “I think Krugman has explained pretty well that even knowledge of a simple IS/LM model enables you to understand much about the dynamics of the economy…”

        No it doesn’t. The Post-Keynesians pointed out for years that Hicks’ model was deeply flawed. In the early 1980s Hicks came to see that ISLM (or, ISLAM as it’s known to dissenters) was in fact completely useless.

        It’s creator abandoned it quite publicly. Yet Krugman et al continue to plug it as if they know better than the originator.

        I think it is you that has some reading to do. Stop trusting your mechanic.

        1. Philip Pilkington

          I mean, it’s not like Hicks’ critiques are a secret. They’re on the bloody Wikipedia page for God sake:

          http://en.wikipedia.org/wiki/IS/LM_model#History

          “Hicks later agreed that the model missed important points from the Keynesian theory, criticizing it as having very limited use beyond “a classroom gadget”, and criticizing equilibrium methods generally: “When one turns to questions of policy, looking towards the future instead of the past, the use of equilibrium methods is still more suspect.”[3] The first problem was that it presents the real and monetary sectors as separate, something Keynes attempted to transcend. In addition, an equilibrium model ignores uncertainty – and that liquidity preference only makes sense in the presence of uncertainty “For there is no sense in liquidity, unless expectations are uncertain.”[4] A shift in the IS or LM curve will cause change in expectations, causing the other curve to shift. Most modern macroeconomists see the IS/LM model as being at best a first approximation for understanding the real world.”

          To the best of my knowledge Hicks came to agree that teaching this ‘classroom toy’ to undergrads was counterproductive. He saw that it would weigh them down with, as he put it, ‘problematic’ equilibrium perspectives. Once you adopt the equilibrium perspective, you’ll never get free. And I think Hicks came to appreciate this in his later years — hence why he published critiques of his own earlier work (albeit NOT in the mainstream journals who, presumably, wouldn’t have him…).

          1. Nathanael

            To be fair to Krugman, he seems to have the right attitude toward equilibrium analyses — all he ever uses them for is to point out in what direction the system will move.

            (Because the system is never in equilibrium and never will be thanks to endless “shocks”. But finding the equilibrium states is akin to finding maxima and minima on a one-dimensional function — it tells you the direction of movement if you’re between the equilibrium states and there aren’t any “shocks” (outside variables) right this second.)

            Most economists seem to, dementedly, believe that equilibrium states are actually real, rather than merely a mathematical tool, but Krugman doesn’t seem to have made that mistake.

          2. Philip Pilkington

            As Keen always says: even if we consider equilibrium a purely idealistic state — and most economists don’t, they fetishize it — it’s still an outdated tool.

            Economies are not able to be modeled on the basis of equilibrium. We must start from the premise of pure disequilibrium. If this destroys the nice little logical ‘toy models’ then so be it. Something better arises when you start thinking like this.

  11. Brito

    I don’t want to get into a debate about some boring discussion on some technical crap about the validity of intransitive preferences and other such stuff (and most of these assumptions are only acquired for these models to be perfectly mathematically precise, not for them to be generally describe the directional influence of certain factors) because I’m absolutely certain that you look at certain models and reject the ones that do not fit into your ideology and come up with pseudo-scientific ad hoc justifications for doing so, I simply have no interest in that. I only raised it because you were strawmanning me into thinking that all the assumptions were complete lies, if you think that fine, but I don’t so what you said was a strawman, let’s just agree to disagree on that since stuff like this certainly will not get resolved in a comment section of a blog, I will not pursue if further.

    I also think that’s insane to attribute the problems in various countries to things like New Keynesian modelling, when it can almost always be shown empirically that it’s actually a result from massive levels of corruption and corporate capture, leading to policies certainly counter to what not only modern economics would suggest but even common sense. Secondly, just because you knowledge of postgraduate economics does not mean you will be able to solve the worlds problems, that’s an insane standard and I would never hold anyone to that just because they have a fucking degree. Of course people are going to make mistakes, why? Because economics is VERY VERY VERY hard: http://www.perimeterinstitute.ca/News/Howard_Burton_Articles/Economics_is_very,_very_hard/

    1. Lefty

      “I don’t want to get into a debate about some boring discussion on some technical crap”

      I do. I am saying that the assumptions that get mentioned continuously throughout an undergraduate and graduate education have no basis in reality. If you can’t prove they do then what exactly are you arguing?

      “I’m absolutely certain that you look at certain models and reject the ones that do not fit into your ideology and come up with pseudo-scientific ad hoc justifications for doing so, I simply have no interest in that.”

      Except when you’re the one doing it. You dismissed Dr. Keen’s work out of hand. You haven’t shown that you have even a passing knowledge of what he’s written. I DO have an ideology, as do you. I can at least admit it. I read those I disagree with however and try to keep an open mind. Neoclassical economics is very ideologically rigid and you know it. We both also know how non-neoclassical economists are treated by economics schools, and it has nothing to do with the soundness of their ideas.

      “when it can almost always be shown empirically that it’s actually a result from massive levels of corruption and corporate capture, leading to policies certainly counter to what not only modern economics would suggest but even common sense.”

      All of the empirical evidence shows this, huh? The US, New Zealand, Australia, most countries in Europe, they’ve all moved to the right on economic policy in recent decades. They have privatized services & resources, lowered individual and corporate taxes, deregulated finance, liberalized trade. Left wing, right wing, centrist parties have implemented these policies. Higher, moderate and middle income countries. All are in horrible shape as a result, and it is because of “corruption”. the ECB’s massive policy failures? All the empirical evidence shows this? Same with with most countries in Latin America. Have many countries in the region seen growth increase, inequality decrease, access to basic services vastly improve, happiness with democracy increase (take a look at latinobarometro polls during and after neoliberal governments took power), because they tackled corruption? Is it just a coincidence that they have largely turned their backs on neoliberal economic policies?

      “just because you knowledge of postgraduate economics does not mean you will be able to solve the worlds problems”

      Never said that, wasn’t my point. Economists, once again, almost without exception, have studied neoclassical economics. It has been their jobs to craft economic policy. Not to solve the world’s problems, to craft economic policy. Their policies have been miserable failures, for decades. In the developed, developing and underdeveloped world. Their job has been to draw up and implement economic policy and they have done a horrible job. We can pretend that something other than neoclassical and neoliberal economics is to blame if you’d like.

      1. Brito

        This is stupid, you’re turning this into a political/sociological debate, I am not interested in that. I hate the term neoliberal, it’s utterly meaningless and ideological, it pigeon-holes people who are completely different from each other into the same group. Nobody would think it was a good argument for me to say “look at the soviet union, look at Maoist China, these countries were run by Marxists, who were massively influenced by the writings of Marx, therefore everything Marx said was wrong”. Such a stupid argument. Likewise, mainstream economists vary hugely in their politics, someone like Paul Krugman couldn’t disagree more with someone like John Cochrane. In fact I far more often see criticism of mainstream economics from the right on the basis of them championing the welfare state and constant Keynesian interventionism and being anti free-market. It’s actually refreshing to see criticism from the left for a change, further exposing how completely untrue your lies are about economists being rigidly right wing. It’s just insane to think of economists constantly being in a state of agreement and constantly championing privatisation, even in Britain during the height of Thatcherism you had things like this: http://econjwatch.org/articles/a-list-of-the-364-economists-who-objected-to-thatcher-s-macro-policy I’ve been studying mainstream economics for four years, and I’ve learned a huge amount JUSTIFYING things like regulation and welfare and macroeconomic intervention, indeed studying economics has put me significantly to the left to what I was before I began studying, whereupon I was relying on crap by ancient Austrians who rejected empiricism for ideology. It is a lie to say that modern economics imply excessive free markets, although I would concede that it had much to say about the famine inducing economically destructive policies of direct central planning of all means of production, which has been a far worse disaster. Nevertheless, economists are constantly disagreeing with each other, it is not a rigid cult, get over it. This is the last I have to say to you, I’m too tired and cannot think straight, this is probably mostly incoherent as I am highly exhausted.

        1. Yves Smith Post author

          If you think calling people stupid, getting dismissive, using jargon to cow others, making unsubstantiated and in cases counterfactual assertions (in those rare instances when you deign to try a real argument), and trying to drown out others is a way to win arguments, you are sorely mistaken. You’ve revealed yourself to be angry and unwilling, perhaps incapable of engaging in an honest discussion.

          Your invocation of Austrians is a tell. You know full well no one in academia or policy circles takes them seriously. And just because you’ve moved to the left does not mean the discipline has. Do you have ANY sense of history? Have you read journal articles or popular articles by economists from the 1950s to 1970s? The shift to the right is undeniable, as is the limited range of views tolerated in top journals. The fact that there is some diversity of opinion among the mainstream types does not refute the general trend.

          And invoking Krugman is disingenuous. You have to know that despite his Nobel, he’s now seen in the discipline as a much more of a political writer rather than a Serious Economist.

          Frankly, you are confirming the negative stereotypes about your profession. Keep it up!

          1. Brito

            I agree there has been a shift to the right in recent years, but the underlying undergraduate stuff has largely remained the same, the rightward shift involves RBC theories and Ricardian Equivalence and what not which simply are not discussed at undergraduate. Also, Krugman may be a political writer now, but he wasn’t always.

          2. Brito

            Actually let me clarify, this decade there has definitely been a shift more to the left as New Keynesian macro, behavioural finance and other work on financial fragility has reasserted its dominance, however between the seventies and late nineties yes there was a shift to the right.

          3. Philip Pilkington

            “Actually let me clarify, this decade there has definitely been a shift more to the left as New Keynesian macro, behavioural finance and other work on financial fragility has reasserted its dominance, however between the seventies and late nineties yes there was a shift to the right.”

            All of it bastardised. Keynes is bastardised. Minsky is bastardised. The neoclassicals poach these ideas and ruin them. It’s not politics so much as it is propaganda.

        2. Lefty

          You hate the word neoliberal because of how much of a failure neoliberal policies have been. Yes, there is some disagreements amongst neoliberal economists, but there are many, many commonalities as well. Same goes with words like socialism. There is, or was, social democracy in Western Europe that was different than the socialism of the Nordic countries, which was different than Yugoslavian socialism which was different than Cuban socialism which was different than Maoist China. They were all different, sometimes radically different, but shared certain characteristics which made them “socialist”. You are running away from performance of neoliberal economics, not the label.

          “further exposing how completely untrue your lies are about economists being rigidly right wing”

          I have a degree in economics, which I mentioned. I am taking classes this fall. Never once had a non-neoclassical teacher. Not once. I wish I had a Yves Smith or a Steve Keen teaching me. I had to work hard to find economists like them. I DID hear lots of hostility to unions, regulation, non-market based solutions to environmental issues. Lots of pretending things about perfectly competitive markets, perfect information, all information being encoded in prices, preferences of all market participants being identical. Was taught how great “free trade” was by teachers who obviously never read Ricardo, never read the assumptions Ricardo articulated in defense of free trade that are radically different than the world we live in today. Again, neoclassical economics HAS dominated the profession and we know the types of ideas and theories neoclassical professors regurgitate.

          One last time, the heads of institutions like the ECB, IMF, the US Treasury, the World Bank, the BIS, they all were taught this type of economics. They all have roughly the same ideas, even after their policies have caused economic collapse. I see no evidence they’ve learned any lessons at all. They’re willing to force countries to socialize the losses of their financial puppet masters in order to save their pet theories. Sorry, but its your type of mentality that makes me embarrassed to tell people close to me that I am an economist in training.

          They, understandably, are skeptical. Many of my friends are politically astute and progressive, or whatever the term is. They ask, “aren’t you economists ruining Europe?” “Didn’t you economists deindustrialize the country, financialize the economy, cause wealth inequality to explode, private and governmental debt to balloon?”. Yep, and I have to explain that there are many schools of thought in economics and…by that point they have heard enough. They respect me, but not what I am studying. Economics wasn’t always such a joke. It used to have meaning, it was a powerful tool to make the world a better place. Neoclassical economists have ruined a wonderful field of study and they’ve caused lots of harm to people the world over. Go to bed!

        3. Philip Pilkington

          “Nevertheless, economists are constantly disagreeing with each other, it is not a rigid cult, get over it.”

          Here’s the deal, buddy. The accusation we make is this: a training in mainstream economics narrows a person’s perspectives so much that they simply cannot see outside the counterfactual and empirically unjustifiable claims the whole discipline (barring a small few) make.

          You’re caught up in this too. That’s why what you think of as dissent is, to the rest of us, just pointless nonsense.

          You say Marxism. There are different strains but most believe in the labour theory of value. If I debunk the LTV the WHOLE OF MARXISM GOES WITH IT. Likewise for neoclassical economics. There may be different currents, but if I debunk, say, equilibrium analysis when applied to complex systems constantly subject to entropy THE WHOLE OF NEOCLASSICAL ANALYSIS GOES WITH IT.

          You’re already trapped, I’m afraid. You’ve swallowed the party line and you’ll never see beyond it. When people raise critiques you’ll react as you did above (“But dur-hur, then my ideas about inflation [which are derived from the same system of knowledge being criticised] don’t work… therefore you must be wrong”). Do you see the trappings here? It’s like a cult.

          If I said to an evangelical that evolution is true, they’d respond by saying something like this (“But then my theory of creation doesn’t work… therefore you must be wrong”). It’s the same thing. Your ‘education’ has trapped you in a closed, self-referential system of knowledge. This is what the Harvard students protested. AND THEY ARE DAMN RIGHT.

    2. Philip Pilkington

      “I also think that’s insane to attribute the problems in various countries to things like New Keynesian modelling, when it can almost always be shown empirically that it’s actually a result from massive levels of corruption and corporate capture, leading to policies certainly counter to what not only modern economics would suggest but even common sense.”

      This is complete and total BS. The New ‘Keynesians’ largely ignored the housing bubble because they were busy worshiping supply and demand equilibrium nonsense on their blackboards. The number of times I was dismissed regarding the housing bubbles with an intersecting graph still makes my blood boil today.

      And they keep doing it. Krugman and his cronies continue to deny oil price speculation and patronise their detractors with basic undergrad supply-demand curves. It’s loathsome.

      I also think there’s a strong case to make about Ireland’s property bubble having to do with the budget surpluses mainstream economists advised the government to run in the early 00s. There’s also a case that the US bubble-machine was only necessary in such an extreme form because of the Clinton surpluses.

      But the mainstream ignore this. Because it doesn’t keep with their quasi-religious view of the world. And then they go around acting all reasonable. Well, they’re not reasonable. Ever. They never listen to the other side. And then, after the fact, they always feign reasonability. As if they had said nothing at the time and their shit doesn’t stink to high heaven. Well, my friend, it stinks. And you’ll never convince me — from your ivory tower — that it doesn’t.

      But history will judge more harshly, I think. You and your ilk will be put in the same category as the Scholastics. A hermetic cult, insulated from criticism who propped up the status quo.

      1. Brito

        This is complete opposite of my experience. My professors are always encouraging me to read different and divergent opinions and normally always provide me with papers from papers counter to the mainstream. In our micro classes we explicitly learn behavioral economics now and its criticisms of neoclassical consumer theory, this is in a very mainstream department in a very mainstream microeconomics class. Your outrageous and unfalsifiable generalizations about HUNDREDS OF THOUSANDS of people are disgusting and so amazingly counter to my explicit experience it’s just hilarious.

        1. Lidia

          “Hundreds of thousands”, huh?

          This is the same lame argument my newly-born-again sister made to me about the Jesus character: “so many people believe it, it must be true”.

          Congrats on proving Pilkington’s point: that beliefs in mumbo-jumbo economics which leave out the objective, empirical natural world are nothing more than a religious cult, a very dangerous one controlling—entirely undeservedly—most of the world’s real assets.

        2. Philip Pilkington

          List them. List some of the papers. Note that they must deal with non-equilibrium analysis.

        3. Philip Pilkington

          Actually, beyond this. You say that you learn about behavioral theories counter to the mainstream.

          SO WHY DON’T YOU INTEGRATE THEM?????

          If you take these seriously then the theory of marginal utility basically falls apart. If this falls apart the theory of downward sloping demand curves goes with it (yes, indifference curves go down the toilet too if you take away the rational consumer).

          So, why not revise the theory?

          Simple. Because this is how economists like you evade real scientific argument. You may read (slightly) alternative literature. But you don’t take its implications seriously. Because they would undermine the foundations of neoclassical theory.

          This is what is disgusting. I’ve talked to so many scientists — real scientists, not pseudo-scientists like you — who have gone over these arguments with me. They see what you’re doing. You’re not changing your models to fit the facts. You’re engaged in pseudo-science. And you don’t even know it.

          Why? Well, I think neoclassicals just aren’t that bright. They’re generally quite good at technical thinking — maths and the like — but they have very weak critical faculties. They generally conform to herd-like behavior and have a remarkable aptitude at blanking over facts and their implications that undermine their theories.

          Scientists laugh at you guys. Sociologists and psychologists laugh. Anthropologists laugh. Other economists laugh. We all see it. Pretty much all of us. And you just keep going. Reading material that undermines your work and then veneering over it. It’s more than simply a blind-spot with you folks. You can’t even see beyond your own noses.

    3. NotABlogger

      Very astute observations. Well said! Economics is not an exact science and having politicians make economic policy decisions (albeit via political appointees) just mucks it up that much more.

  12. Steve Keen

    “Steve Keen is a hack who selectively picks research to suite his agenda”.

    Cute Brito! From my reading of economics, most neoclassicals are themselves hacks who “electively pick research to suite their agendas”–and this includes ignoring critical literature generated even when it comes from leading lights within neoclassical economics.

    Here’s a few “selectively picked research papers” on IS-LM and DSGE modelling that I’d like to see you prove are wrong and should be ignored:

    Hicks, J.R., (1980). ‘IS-LM: an explanation’, Journal of Post Keynesian Economics, 3 (2): 139–54:

    “I accordingly conclude that the only way in which IS-LM analysis usefully survives – as anything more than a classroom gadget, to be superseded, later on, by something better – is in application to a particular kind of causal analysis, where the use of equilibrium methods, even a drastic use of equilibrium methods, is not inappropriate”

    Solow, R. M. (2001). From Neoclassical Growth Theory to New Classical Macroeconomics. Advances in Macroeconomic Theory. J. H. Drèze. New York, Palgrave.

    [N]ow … if you pick up an article today with the words ‘business cycle’ in the title, there is a fairly high probability that its basic theoretical orientation will be what is called ‘real business cycle theory’ and the underlying model will be … a slightly dressed up version of the neoclasssical growth model. The question I want to circle around is: how did that happen? (Solow 2001, p. 19)

    Solow, R. M. (2003). Dumb and Dumber in Macroeconomics. Festschrift for Joe Stiglitz. Columbia University.

    . The preferred model has a single representative consumer optimizing over infinite time with perfect foresight or rational expectations, in an environment that realizes the resulting plans more or less flawlessly through perfectly competitive forward-looking markets for goods and labor, and perfectly flexible prices and wages.
    How could anyone expect a sensible short-to-medium-run macroeconomics to come out of that set-up? My impression is that this approach (which seems now to be the mainstream, and certainly dominates the journals, if not the workaday world of macroeconomics) has had no empirical success; but that is not the point here. I start from the presumption that we want macroeconomics to account for the occasional aggregative pathologies that beset modern capitalist economies, like recessions, intervals of stagnation, inflation, “stagflation,” not to mention negative pathologies like unusually good times. A model that rules out pathologies by definition is unlikely to help. (Solow 2003, p. 1)

    Solow, R. M. (2007). “The last 50 years in growth theory and the next 10.” Oxford Review of Economic Policy 23(1): 3–14.

    the main argument for this modeling strategy has been a more aesthetic one: its virtue is said to be that it is compatible with general equilibrium theory, and thus it is superior to ad hoc descriptive models that are not related to ‘deep’ structural parameters. The preferred nickname for this class of models is ‘DSGE’ (dynamic stochastic general equilibrium). I think that this argument is fundamentally misconceived… The cover story about ‘microfoundations’ can in no way justify recourse to the narrow representative-agent construct…

    The nature of the sleight-of-hand involved here can be made plain by an analogy. I tell you that I eat nothing but cabbage. You ask me why, and I reply portentously: I am a vegetarian! But vegetarianism is reason for a meatless diet; it cannot justify my extreme and unappetizing choice. Even in growth theory (let alone in short-run macroeconomics), reasonable ‘microfoundations’ do not demand implausibility; indeed, they should exclude implausibility. (Solow 2007, p. 8)

    1. bob goodwin

      I have been a hardcore fan of yours since Yves first started to quote you on this site. Thanks for your insight, willingness to cross the entrenched interests, and remaining rooted in the profession.

      And most of all, thanks for the last comment shredding shallow thinking.

  13. Brito

    In a lengthy post earlier that isn’t showing up for some reason I briefly addressed the claim regarding empirical research. I keep trying to post it but it won’t show up so I have given up, Yves regarding that claim I may as well leave you this link: http://econ.lse.ac.uk/staff/spischke/AP%20JEP.pdf

    Also never in my life have I seen more idealogical rhetoric and unsubstantiated claims from lefty’s posts (I’ve provided sources, lefty hasn’t provided a single source to back up a single claim he has made ONCE), I can’t believe you are accusing me of this, outrageous!

    1. Lefty

      “Ideological rhetoric”? It is called a logical argument, which you are losing. You are here defending a very ideologically rigid school of economics, attacking Keen for questioning that ideology and you claim I have nothing but “ideological rhetoric”? Are you nuts? Yeah, gave a few links. So I will do so. These books and articles might get you started on that whole IMF, corruption thingy.

      http://www.internationalviewpoint.org/spip.php?article2267

      http://www.internationalviewpoint.org/spip.php?article1530

      http://monthlyreview.org/press/books/pb3765/

      http://www.plutobooks.com/display.asp?K=9780745319896&

      http://www.google.com/url?sa=t&rct=j&q=eric%20toussaint%20imf%2060%20questions%20monthly%20review&source=web&cd=3&ved=0CCwQFjAC&url=http%3A%2F%2Fwww.cadtm.org%2FIMG%2Fppt%2FTHE_IMF_WORLD_BANK_in_the_aftermath_2_.ppt&ei=JGyzToqRF7H02wXTsInNDQ&usg=AFQjCNG9y4wXQ3JwVkzi-MSn113ZJ7d4mw&cad=rja

      http://www.southendpress.org/2004/items/Panic

  14. Brito

    And please stop basing your impressions of economists on me, I’m an abrasive and hyper-active 21 year old student, economists would be embarrassed to count me as member :D.

    1. reprobrate

      So you’ve admitted you are too young to know the literature, have any sense of history, and are short on life experience. Yet you claim to know better than a professor who is pretty certain to have a better grasp of mathematics than you do?

      You don’t have the foggiest idea of what you don’t know and you have the gall to lecture others.

      1. Dan Duncan

        Reprobrate…you do realize the underlying post involves students younger than Brito, right?

        By your logic, Harvard should tell the students to STFU because…

        You are too young to know the literature. You have no sense of history, and are short on life experience. Yet you claim to know better than a professor who is pretty certain to have a better grasp of mathematics than you do?

        You don’t have the foggiest idea of what you don’t know and you have the gall to lecture others.

  15. Brito

    Keen if I selected comments from eminent economists agreeing with IS/LM or DSGE you wouldn’t accept that as evidence of anything. Why should I in this case? The thing about economics is that it’s not a precise science, so obviously economists are going to disagree all the time, I don’t see what this proves.

    1. Skippy

      “The thing about economics is that it’s not a precise science, so obviously economists are going to disagree all the time, I don’t see what this proves.” — Brito

      Me here Brito… I would evoke the Cave of Economists and from its bowels issues a white furry model: http://www.youtube.com/watch?v=XcxKIJTb3Hg

      What you fail to understand (at your tender age and life experience) is that all models are past orientated, the future is an unknown (Fukushima Daiichi). How many times must we repeat the same mistakes over and over again…eh, to justify short term behavior quantified as profit and a dog pile ensues. And only when the model fails does countervailing opinion have its day.

      Hay don’t feel bad, most of us have made similar mistakes, living with them is the hard part.

      BTW I’ll just pop this down here for conveyance sake see:

      Skippy says:
      November 4, 2011 at 12:10 am

      Your bravado is frighting for such an untested thesis, and I would query how you adjust for natural disasters and their relationship with trustworthiness.

      http://ageconsearch.umn.edu/handle/104522

      Skippy…never enough data old boy, never enough.

      1. F. Beard

        never enough data old boy, never enough. skippy

        Some things should be self-evident – such as a money system based on theft of purchasing power cannot be good. But in addition to that obvious fact, we were also explicitly warned against usury between fellow countrymen.

        But continue with the data collection – it’s not like there is any rush, is there?

        1. Skippy

          @Beard… as much as I respect your humanist overtones, I find nothing useful in the term *self evident*. To me, it smacks of unsubstantiated thought based on antiquity, see might makes right or god given power. Part of our currant problem…methinks.

          Skippy…I can not walk down that path with you, save as a fellow human being in search of our selves.

          1. F. Beard

            @Skippy,

            I thought “Thou shalt not steal” was self-evident even to Progressives. Are any of the 10 Commandments acceptable then?

          2. Skippy

            Stealing is a property problem, see Graebers book.

            Skippy…so many little castles out there, where did it all start, um…kingdoms?

          3. aet

            The elements of any system of knowledge are irreducibly self-evident.

            Truth mountain is the last peak in clarity’s chain.

            The important thing to keep in mind is that the specificity of any assertion, the truth of which is ascertainable, never extends very far, in space or time, from the un-trusting observer.

            Without trust in the testimony of others (not to mention one’s own senses), ascertainable truth simply doesn’t extend very far from the individual human.

            A little trust, though, and the world is “full of truths” – too full, as a matter of fact, for people DO NOT always tell the truth, whether maliciously and wittingly, or through unwitting ignorance.

            So one needs to consider the evidence – and part of that is the trustworthiness of the testimony of others – for any assertion which claims truth as a characteristic.

            There are reasons why science insists on repeatable experiments…very very good reasons.

            In sum: the best truths are the narrowest truths. The broader the statement, the less it is qualified by exception and details, the more likely it is that is in error – that it mis-states the truth.

            There is NO “simple truth”, when it comes to human beings.

        2. Nathanael

          Actually, F. Beard, that’s not self-evident. Perhaps theft is good! Consider Robin Hood.

          This gets us into philosophy. If we go with “Greatest good for the greatest number” and go with “making people happy” (or, perhaps “making sentient creatures happy”) as the definition for good — then we can get somewhere.

          Both of these — which I think should be self-evident –are, horribly enough, disputed, mostly by nasty religions, with horrendous results, as those religions promote torture and suffering (“it’s for your immortal soul!”).

          But anyway, starting from that, we must ask, when does theft make people on the whole happier? The answer is, not very often, so there you go, theft is usually bad. But surely you could imagine a system based on theft which somehow made almost everyone quite happy (the theft would have to be quite equitable and balanced, and everyone would have to be quite unattached to possessions).

          Much less is ‘self-evident’ than most people think. “I think therefore I exist” counts as self-evident, but after that it starts getting hard.

      2. psychohistorian

        I wonder if this made a difference?

        If I/we could just make a model complicated and convoluted enough that it could tell a joke, would anyone laugh?

        Open your mind to history a bit Brito. You might learn something about the potential validity of models or their marginal propaganda value in relation to reality and social structure.

          1. F. Beard

            ….the first models were entrails. Skippy

            I reckon not. The fossil evidence is that species appear, degenerate and disappear. If that is the case with mankind, then the earliest humans were the smartest.

        1. aet

          To hell with the “potential validity” of models.

          Models are either useful or useless (“Valid”? “Invalid”? Who cares?). That’s the way architects , physicians, engineers and mechanics think about them: and they NEVER mistake the model for what they are modelling – ie, the finished project – in seeming contrast to those “modeling” the economy or the mind.

          I prefer my models to be factually physical.

  16. Derek

    Brito, I think you missed the point there slightly. Hicks isn’t just an eminent economist: he’s the inventor of IS/LM. Now this is just a guess, but he probably knows more about it than any other economist. So if he says it’s crap…

    Likewise, Solow isn’t just an eminent economist he’s the inventor of the theory that DSGE is based on. If he says DSGE is an invalid use of his mathematics, you should listen since he is presumably the leading expert on his own theory.

    That is why you should accept their opinions as evidence of something in these cases. They aren’t just eminent economists, they are, directly or indirectly, the creators of the models concerned.

    1. aet

      You must mean their opinions on the evidence: for a stated opinion, itself, is NOT evidence of anything at all, save of its own existence: they are simply opinions on or of the evidence otherwise demonstrated.

      The crucial question is of the worth or weight to be given to that opinion: and one must prior to determining that, demonstrate or prove the expertise of the person giving their opinion – to repeat my point – their opinion ON THE EVIDENCE already presented and accepted.

      Opinions themselves are NOT evidence.

      1. aet

        Opinions on models are at several removes from the evidence upon which those models is based.

        Are we investigating the model, or that which is being modeled?

  17. Steve Keen

    A quick note: my offer of a free book was the the Harvard walkout students only! I have already been contacted by one of them, and arranged to have a copy sent to him.

    Two other people have already written to me asking for freebies. Sorry guys, I’m primarily a critic of neoclassical economics, not of capitalism itself! If anyone else wants a copy, you can get it from here:

    http://www.amazon.com/Debunking-Economics-Revised-Expanded-Dethroned/dp/1848139926/ref=sr_1_1?ie=UTF8&qid=1320383562&sr=8-1

    Cheers, Steve Keen

      1. JCC

        Scary stuff.

        The woman in the article is no longer poor… at the expense of those like me, single, mortgage paid off, middle income, no write-offs. At the end of the month I give up 35% of my income to state and federal taxes, then I pay local property and school taxes. Finally, at the end of the year I have the privilege of writing checks to both the State and the Federal Governments.

        On top of all that my retirement funds, including contributions, are barely higher than they were ten years ago, and I get to pay taxes on some of that too, if and when the time ever comes.

        No one is poor anymore, apparently.

        Do you think that if I had the opportunity of taking Economics 10, my understanding of our present system would be any different? :-)

        1. Lidia

          Yes, you would understand that all of this is happening for your the good of your betters and thus for your own good…

          1. NotABlogger

            Actually, it’s just part of the “spread the wealth around” philosophy that’s infected our governmental system.

  18. Schofield

    Look Steve. What Lloyd Blankstein is trying to tell you in his own inimitable way is that instead of doing “kickback in the outback” you could be here in New York or maybe Harvard stuffing your face with money. It’s the American way!

  19. CaitlinO

    I don’t know anything about econ but I know what’s just. My retirement job is education but I spent my career in telecommunications. I can assure you that if I and my co-workers had managed to crash the global communications network for three years and counting we would have been crucified.

    To see economists get a bye on the equivalent level of screw-up is maddening.

    1. Lloyd Blankstein

      Anyone going to a judge and getting sentenced is obviously a criminal. Honest, hardworking people in USA settle, pay fine (from pockets of shareholders) and get a letter of approval from SEC for their hard work.

      Check this guy for example. He is a criminal guilty of ‘unlawful contact with a minor’. Yes, I agree that there was no contact and there was no minor on the other side of internet, but who cares about those ‘minor’ details? Court says he is a criminal and that is what we care about in this nation of law-abiding people !!

      http://www.mcall.com/news/local/mc-weapons-inspector-arrest-011510,0,2590599.story

  20. Brito

    I like how I’m the only person here who even dares to stick up for these concepts, and that the suggestion elicits such horrendous vitriol, generalizations about my character and disgusting pigeon-holing of me into a specific group so that I can conform to your ideological narrative about anyone who dares to read mainstream economics SHOULD act. I have never seen so much groupthink and circlejerking confirmation bias in my life.

    No there is no way I am going to address every single reply here, that would take months, and the accusations are so bold and general that they could never be resolved on a comment section, it takes a substantial amount of literature review and empirical analysis to address most of these accusations in a resolute way.

    However I want to just address a few lies about my character, you should not be allowed to get away with smeering in this way:

    “1. You don’t realise there is a world of economics outside of the narrow mainstream, you’re narrow minded!”

    Of course I do! That is exactly why I read this blog, and many other blogs from ALL OVER the spectrum EVERY single day, to enhance my understanding of current affairs and different view points.

    2. You’re obsessed with complex maths!”

    1. Praedor

      Brito, you totally blow off the valid and very damning actual critiques and merely address the personal affronts. Who gives a crap about that? How do you respond to Derek’s bullseye above?:

      “Hicks isn’t just an eminent economist: he’s the inventor of IS/LM. Now this is just a guess, but he probably knows more about it than any other economist. So if he says it’s crap…

      Likewise, Solow isn’t just an eminent economist he’s the inventor of the theory that DSGE is based on. If he says DSGE is an invalid use of his mathematics, you should listen since he is presumably the leading expert on his own theory.”

      1. Brito

        I care about the personal affronts, I want to correct mis characterizations about me. I don’t care if people disagree with IS/LM, I ALSO disagree with it, I don’t think it’s robust, I just think it’s a good starting point and can equip undergraduates with a few useful insights about fiscal and monetary policy etc… OF COURSE it’s flawed, every economist would agree with that, Mundell-Flemming is a more interesting and more accurate extension also in undergraduate that can provide useful insights, BUT THAT AGAIN is flawed, which is why most work on modern macro has nothing to do with this. I haven’t even been taught DSGE yet, so I can’t comment, the growth models I’m learning are not actually DSGE right now. Solow on the other hand is not DSGE, there is much comment from people who played IMO a much more important role in developing the framework defending it: http://www.youtube.com/watch?v=TH6QexRT0Fg&feature=player_embedded#! (yes it starts out with criticism, I agree with him that from my understanding right now DSGE is not perfect, but there is a lot happening and as he says it has a lot of potential).

        1. Lloyd Blankstein

          Brito, Economics as a science is supposed to model aggregate human behavior. Steve Keen’s models have been working better than anyone else’s as far as I can tell. They are clearly formulated, and capture the essence of the system he models without unnecessary complexity.

          So, attacking his model or mathematics is not the right way to challenge his work. The better way to do it is to show that he does not work for a reputed institution like Harvard or Columbia, or does not get called to advise the president unlike Summers. You can even point out that he is not rich, because being rich is a good indicator of how smart you are in USA.

          1. Brito

            How childish, and how eloquently you prove my point about unwarranted pigeon-holing and character smearing. I never mentioned Steve Keene’s models, I have never even seen them, I’ve only seen his criticism of other models. I never said his models were wrong. In fact the only people I have seen dismissing ideas and models are the people criticizing me.

          2. Lefty

            Brito, articulate your critique of Keen here. What exactly do you disagree with? Post a counter argument, should be easy for you. Whenever I make such strong comments I have put a lot of thought into it. So if I were asked I’d already have it worked out logically. I wouldn’t just dismiss someone’s argument or speak so authoritatively without knowing what I’m talking about and without having already thought it through.

            So, write a short critique, explain why Keen is nonsense. Leave out the econospeak. People aren’t impressed or intimidated by it, it isn’t necessary to make an argument either.

          3. JTFaraday

            No, that’s actually a pretty good debunking of Steve Keen, and he’s also not one of teh Treasury Boyz from Goldman Sachs.

            Thus, this whole debate has about as much relationship to the effective world of public policy as the neoclassical models Keen himself debunks.

            Also, only 60 out of 700 some-odd of our future masters walked out of class at Harvard. I’m sure they’ll continue to throw their weight around.

            Can we model that?

          4. Travizm

            Brito….I think Lloyd can take you under his wing. You have a very metallic-bright future ahead of you.

            Me…I made my choices and now suffer in the scorching sun with Keen down under……….sitting in a blow up pool drinking tinnies….oh mercy.

            And Lloyd I must confess your persistent trolling has balanced well against the young Brit……its been enjoyable.

            @BRIT: 21…wow thats young and explains allot….but maybe this isnt place for you to be since us crusty cynics might shread you up ahead of your time..go meet some girls mate while you still have some confidence!…p.s whats Santa getting you for xmas?

          5. Philip Pilkington

            Brito complains about character ‘smeering’ [sic] and then goes on to routinely call people ‘childish’ and other names.

            “He who fights with monsters might take care lest he thereby become a monster. And if you gaze for long into an abyss, the abyss gazes also into you.”

            Classic internet argument projection.

            Give it up, dude. Engage with the substantial criticisms (like how I point out above that ISLM is indoctrination and was recognised as such by its inventor). Engage with criticism of equilibrium theory generally.

            Stop ‘character smeering’ like… a child? Whoops. I just ‘character smeered’.

    2. Lefty

      You should take a few days off, come back and look at how you debate people. You don’t have a good enough argument to justify such arrogance. Who the hell are YOU to dismiss people’s opinions with the nonsense you’ve posted? People aren’t just responding to your arguments, they are also responding to your arrogance.

      Some of the people whose opinions you dismiss out of hand (without a coherent logical argument) have been studying the subject much longer than you’ve been alive. They have far more knowledge about the subject than you do. They have written books, articles, given talks on the subject. If you can link something you’ve produced, I think we’d all appreciate it. The total lack of humbleness will eventually bite you in the ass.

      If you do come back and take a look at your ramblings you’ll see that you didn’t even listen, or respond directly, to peoples’ points. You just talk past them. It is obvious that you do this when you don’t have a good response. For example, I asked you about some of the more popular assumptions that form the foundation of many neoclassical ideas. It makes you look silly, immature and arrogant.

  21. Brito

    Whoops didn’t mean to submit that early, let me continue.

    2. “You hav a fetish for complex maths!”

    Bullshit, THE ONLY REASON I mentioned complicated mathematics is because SOMEONE accused me of thinking that economy can only be described with quadratic equations, this is a lie and I only mentioned these models to correct them. I EVEN EXPLICITLY said that I don’t think complex mathematics has anything to do with a good model. In fact among my favorite economists are people like Ronald Coase and various economic historians, they effectively don’t us any mathematics AT ALL in their paper. Please stop claiming the opposite about me, you don’t know anything about me.

  22. Jean

    Thank you, Yves, thank you Steve Keen, but most of all, thank you Harvard undergrads enrolled in Mankiw’s Econ 10. Your letter and protests are truly inspiring. Such insight and courage from you encourages me tremendously.

    I applaud you!

  23. Kevin Egan

    I can’t judge the technical economic issues here, but I teach students how to recognize slippery rhetoric and logical fallacies, and when I heard Mankiw interviewed on Morning Edition yesterday, I recognized a world-class evader of questions and deployer of red herrings.

    Steve Inskeep was actually very good at trying to ignore Mankiw’s constant changes of subject, and kept coming back to direct questions like “Is growing inequality a problem?” or “Would you endorse more progressivity in the tax code?” but Mankiw bobbed and weaved like a champion: to the first question, answering that that was a philosophical debate, e.g. between a Rawls and a Nozick; to the second, saying that the changes in progressively from Clinton to Bush were actually small in proportion to the increasing income gap–which, a few moments before, he had said wasn’t really for economists to address.

    The transcript is very instructive: a man who answers questions this way is supremely well-suited for climbing the academic ladder–and for that very reason, he should not be allowed near young people in any capacity.

    http://www.npr.org/2011/11/03/141969009/economics-class-protests-perceived-bias

  24. John F. Opie

    The funny thing is that the students are purportedly protesting something that Mankiw hasn’t even taught them yet.

    The first semester of EC10 is microeconomics only. They haven’t even had any macro.

    Hence: they are protesting something that hasn’t happened and won’t until next semester. The whole thing stinks of an organized campaign that has everything to do with Mankiw and nothing to do with what he is or is not teaching.

    Meh.

    1. Praedor

      Mankiw and what he teaches are inseperable. His bogus neoclassical/neoliberal beliefs MUST color his every spouting on anything “economics”. Nothing he says will ever diverge from his personal political biases. Nothing he presents will ever diverge from his personal political biases. He IS what he teaches and teaches what he is.

      A fundamentalism christian “science teacher” cannot actually teach science, only his/her religious beliefs. Their every word, the way they present them, are entirely and fully colored by their religious beliefs. Mankiw = fundamentalist christian “science teacher”.

      1. Patrice

        “Nothing is more dangerous than a dogmatic worldview – nothing more constraining, more blinding to innovation, more destructive of openness to novelty.”
        ― Stephen Jay Gould

    2. Nathanael

      Mankiw’s MICRO textbook is biased too.

      I keep all my textbooks from college. But I threw Mankiw’s out, because it’s garbage.

      Unfortunately that means I can’t show you the biases in the MICRO textbook.

      Microeconomics is actually suffering worse rot than macroeconomics at the undergraduate level. The intro micro we see (neoclassical, I guess?) presents a completely ludicrous model of customer and supplier behavior — one which would drive any firm bankrupt if it was run by people who actually believed it. And you know what? Many MBAs have done exactly that, driven firms bankrupt through business-school ideology! Of course, intro micro presents a completely ludicrous model of business behavior, too!

      1. Nathanael

        I remember spending most of my intro microeconomics course saying “But in reality, the firm would attempt to create customer loyalty.” “But in reality, the firm would hire advertisers.” “But in reality, the firm would be connected to suppliers through personal relationships.” “But in reality, the cost of churning staff is bad service.” “But in reality, the supply curve is straight lines with gaps.” “But in reality, they’d form a cartel.”

        Only the last two got covered in class, and shallowly. The rest, the teacher (I had a decent teacher) said, “Yes, you’re right, but we don’t discuss that in this class”.

        Micro is rotten.

  25. Travis Fast

    Brito wrote:
    …(and most of these assumptions are only acquired for these models to be perfectly mathematically precise, not for them to be generally describe the directional influence of certain factors)

    Yes better to be precisely wrong than approximately accurate.

  26. Brito

    I’ll be learning Minsky in my mainstream topics in finance class by those evil rigid mainstream economists by the way (oops), I’m looking forward to it, I find his work very interesting.

    1. Philip Pilkington

      No you won’t. You’ll be learning a version of him that assumes he’s an equilibrium theorist. Look out for Krugman’s crappy paper on Minsky, Fisher and Koo and take comfort in the fact that it isn’t even remotely characteristic of Minsky’s work.

      Of course, you’ll come away from the indoctrination class THINKING you know something about Minsky. But that’s the point, isn’t it? You’ll have a conception of a sterilised Minsky that you can then pass on to others…. ruining Minsky’s fine work and that of his real students.

  27. Susan the other

    Prof. Keen: I apologize to you for not having read your book. Here’s my festering question: Why don’t “economists” separate out “economies” into the dual (or triple, etc) economies that they actually are? There are always two: one is the need economy: food, housing, education, health care, etc. which is the socially ethical part of an eonomy – and two is entrepreneurial, to use a flattering word, it is the capitalistic part of an economy, often backed by the state itself. If there were two aspects to every economy, from nation state models to a big global model, all sorts of insights could be incorporated efficiently. No?

    1. craazyman

      No. You need a house. I need a mansion, polo ponies and a jet. Why? Don’t ask. I don’t even know. Maybe my psychiatrist knows, but I don’t pay attention to what she says. I just go for the mind games. ha ha.

      -John E. Cash, Superman

    2. Lidia

      Susan the other, in a recent book of JMGreer’s, “The Wealth of Nature”, he talks in accessible layman’s terms about the primary, secondary and tertiary economies, the first being that of natural resources, the second being that of transformation of n.r. into goods to supply human needs/desires and the tertiary being financialization: debts, derivatives, and the whole FIRE-type economy, which today has the whip hand* (it thinks) over the other two economies.

      *But that cannot last for long.

  28. Skippy

    @Brito,

    I’m still waiting for your reply, how do you model trustworthiness, see below:

    http://ageconsearch.umn.edu/handle/104522

    Look, if the model can not describe the human condition, then all you are building is a behavioral template, which you then_shove down_upon_humanity. All Mankiw is doing is reinforcing his worldview cough neoliberal see:

    David Harvey notes that the system of embedded liberalism began to break down towards the end of the 1960s. The 1970s were defined by an increased accumulation of capital, unemployment, inflation (or stagflation as it was dubbed), and a variety of fiscal crises. He notes that “the embedded liberalism that had delivered high rates of growth to at least the advanced capitalist countries after 1945 was clearly exhausted and no longer working.”[10] A number of theories concerning new systems began to develop, which led to extensive debate between those who advocated “social democracy and central planning on the one hand” and those “concerned with liberating corporate and business power and re-establishing market freedoms” on the other. Harvey notes that, by 1980, the latter group had emerged as the leader, advocating and creating a global economic system that would become known as neoliberalism.[11]

    ———-

    Skippy…Humanity is the horse pulling the cart. Neoliberalism is nothing more than a glazed apathetic leash to ones own chosen addictions (see economic menu), to justify egregious wealth and power concentration. I find this state deeply wrong. And like Mr. Kline pointed out, one day you_may_wake up and can’t pull your head out of the bucket, drowning in recognition of past deeds or even worse, look in the mirror and see Dick Cheney and be OK with it.

    http://video.google.com/videoplay?docid=-925270800873130790

    1. Nathanael

      You’d be a good economist, Skippy. Trust is clearly key to pretty much every economic activity and transaction, and modelling trustworthiness is *exactly* what you want to do in order to understand economics.

      Such models have even been made occasionally, with some success. It’s basically the only way to understand bank runs.

  29. 60sradical

    Have I missed something? Or is this just “Brito Day.” The post office was open today. Maybe Brito Day is an East Coast thing.
    Meaninwhlie, the Fed tightens its coils around our collective necks.

    1. Skippy

      Brito is a future Bernanke. I say get them sorted young, see how that ties it all up.

      Skippy…other than that, keep banging it radical!

  30. Otter

    F. Beard says: November 4, 2011 at 2:26 am
    I thought “Thou shalt not steal” was self-evident even to Progressives.

    It is self-evident only if you have a truckload of bread and some hungry neighbours with no bread.

    And then it is self-evident only to you. They don’t even know the word “steal”. They are sitting down to the table and asking, “Pass the bread, please.”

    It doesn’t even make sense to you unless you have a bunch of rent-a-thugs dumb enough to think they will get more bread from you than from taking it and sharing with the neighbours.

    1. JTFaraday

      I agree. It’s not self evident.

      This reminds me I need to get back to my St. Hannah Arendt reading, as she is going to be talking about free will and Augustine.

      Loads of fun, that one.

  31. Gallam

    I’ve just finished reading this thread and the attached comments.

    Frankly, it’s shameful. The fact that Yves and Steve Keen have participated in what reads like the bullying of a 21-year-old economics student should be a cause of regret to two people who previously I had some respect for.

    As for the general tenor of the conversation, it is important to remember that economics is, like medicine, a type of toolbox. Medicine’s toolbox, for example, contains things like leeches and thalidomide. The Physics toolbox contains a collection of very old and successful models that assume that molecules behave like billiard balls.

    Now you might think, from the descriptions of economics given in this thread, that the economics toolbox contains ONLY leeches and thalidomide. This would be to seriously under-estimate the work of many clever and dedicated people.

    The fact that Steve Keen promotes the leeches and thalidomide view of economics as a discipline is greatly to his discredit. That he does it whilst promoting his book is more painful still. This is not to say that Steve Keen’s actual work is to be anything other than to be applauded. I find it interesting and progressive. I’m just starting to feel that the rabble-rousing marketing is going too far.

    1. digi_owl

      Physics and medicine work on observations and testing, if the results do not match the theory the theory goes out the window (or at least back to the laboratory for modification).

      Economics, at least the stuff out of the neoclassical camp, comes closer to homeopathy. It got all the verbiage and such of medicine but is about as effective as getting on your knees and thinking happy thoughts.

    2. Foppe

      I am confused. Why is his age a consideration to you? Should 21yos be protected from society when they try to engage with it?
      You would do well to note that Brito’s first post was an ad hominem attack; that he offered no arguments whatsoever for his accusation; and that he has not really provided anything further since then.

      Secondly, you are utterly mistaken in your suggestion that economic analysis is just a “tool”. When you, as most economists today, first reduce ‘reality’ to a set of variables in a bunch of simplistic equations, and you then use that reductionist model as your guide for policy advice, you are using your “analysis” to generate a normative view of reality, and then acting to change reality in the way that the model says is “advisable”. At no point is this about observation, and it is in no way analogous to physics modelling, except insofar as first-year physics often also invokes normative, or ideal-type, environments. The difference in the latter case, however, is that physics students are constantly reminded of the fact that their formulas offer only an approximation, while they know that all systems containing more than two objects are “complex,” and very difficult to predict. Economists in no way share this attitude of (epistemic) humility.

      Lastly, your leeches and thalidomide analogy is vague, and as such, your attack on Keen is similarly pointless if it is meant as a criticism.

      1. Gallam

        OK, given that we are on Naked Capitalism, consider this thought experiment.

        You are lucky enough to win $10m in a lottery and your best friend is making a fortune trading options on his own account. You decide that you would like to do the same, since it is something that interests you.

        What would you do? Would you read the existing (neoclassial) literature, assemble giant data sets, and proceed with a research program, or would you just ignore the literature?

        Let us say that you adopt the former approach. Once satisfied with your maintained hypothesis, you start trading. Do you think that you, and all of the others who have already followed your path, are not aware of your “attitude of (epistemic) humility?” Your fortune is at risk, after all.

        If you decide to ignore the literature you will probably find that your fortune is lost to people who did otherwise.

        Since you think my attack on Steve Keen was vague let me be clearer. The economics toolbox is gigantic and unknowable in its extent by one person (not least because large parts of it are kept secret). You might select one or two tools and criticise them for being old or blunt, but to say that the whole toolbox is useless says more about you than the toolbox. Steve Keen knows this perfectly well.

        1. digi_owl

          And i think Keen have never attacked the economist toolbox in general, only the tools provided by the neoclassical school. The thing is that the neoclassical school have basically a monopoly on economic education these days. Hell, i will go so far as to compare thing to when Luther nailed his theses on the church door.

          Btw, keeping things secret is not the way of science. Nor is sticking to doctrine in the presence of contradictory observations.

          1. Gallam

            If you think about that for one moment, you will realise that keeping things secret is and always has been common in science. The physics, chemistry and engineering of nuclear weapons is not widely taught in western universities. There are countless other examples.

          2. digi_owl

            @Gallam

            The specifics of a bomb are not, but the processes that power such a weapon is. And with that knowledge in hand it is fully possible to build one, if one can lay ones hands on enough fissionable material.

        2. Nathanael

          Gallam, you gave an unintentionally hilarious thought experiment.

          The neoclassical literature claims that it is impossible to make a fortune playing the options market. You will do far better in playing the options market if you simply ignore that load of garbage. In this case, not reading the literature is GOOD.

          1. Gallam

            In the case of pricing options on equities, I think you will find that the starting point in the literature is completely silent on the possibility of “making a fortune playing the options market.” The Black-Scholes model may be derived from an assumption about the time series process for equities, an assumption of no arbitrage and some minor assumptions about the costs of trading.

            The discussion about efficient markets is completely unrelated. All the model is concerned with is answering the question of what the price of an option should be in an efficient market. Now why in the world would you not want to know that if you are trading options? You might find, for example, that options are persistently expensive.

            Anyway, I’m glad that you found my thought experiment unintentionally hilarious. I’m more than happy to play the fool on the hill for you for as long as you are interested.

        3. Nathanael

          BTW, I’ve made an awful lot of money by ignoring the “conventional wisdom” literature on the stock market. Even listening to that stuff can cause you to start losing money.

          So yeah, Gallam, you made up a thought experiment which basically disproves your point.

          Now, a research program? Data? Obviously helpful. And there is indeed *some* literature which is helpful. But in economics and finance, the hard part is sifting out the crap.

          1. Gallam

            When I pay a visit to my garage to look through my toolbox I sometimes come across tools that are old and blunt. I also happen across tools that I do not understand how to use. I’m not sure that I would ever describe any of them as crap, because I am fully aware of the difficulty of making new tools.

        4. Foppe

          Sorry, if I had won $10m, I would be under no time constraints whatsoever, so I see no reason why I wouldn’t take my time and get to know the literature before trying to make use of it. Certainly, if your thought experiment requires me to be an unthinking idiot, I would necessarily behave that way, and put all of my faith in Bernie Madoff thinking that it would be impossible for him to be an impostor; but if those are the parameters you mandate, then I would simply say that your thought experiment is uninteresting in the extreme.

          Having said that, it seems to me that you have ignored most of what I said, and I find it rather telling that you now come up with a “thought experiment” reply that shows that you don’t really appreciate that people can also be motivated by curiosity; and roughly for that reason dislike dogmatic worldviews.

    3. Nathanael

      The problem, Gallam, is that Mankiw and his ilk *are* pushing leeches and trepanning and attempting to drive everything better out of economics departments.

      There’s a reason the Harvard students are protesting.

      1. Gallam

        I’m sure that you are aware that leeches, trepanning and thalidomide are all still in use today in medicine. With the possible exception of trepanning, they are put to use in ways that the original inventors of these treatment tools would never have expected.

        1. Foppe

          You’re letting your analogical thinking get the best of you. The problem isn’t that the tools aren’t being used correctly; the problem is that certain ways of interacting with reality are mandated, and that it is therefore impossible to develop both different ways of looking at reality, and as a consequence, different tools, that are more useful in working with reality.

  32. different clue

    I struggled through all the words of this post and this thread. This seems to be “inside baseball” for economists and therefore shrouded behind a radar-blinding chaff-cloud of jargon from a such a mere layman as myself. Some of the more knowledgeable commenters seem to be trying to cut through the chaff-cloud or even open channels into which the mere layman may hope to peer. I thank them for their efforts.

    Economics seems more like religion than science to me. Does anyone here think that if physics were divided into “schools” like Keynesian Physics, Monetarist Physics, Austrian Physics, Supply-Side Physics, etc.; that normal intelligent people would have anything other than the deepest contempt for it? Would we have ever gotten to the moon and back if the field of Rocket Science were divided among Keynesian Rocket Science, Austrian Rocket Science, Neo-Classical Rocket Science, etc.? Can academic economists see why decent people think they are part of a vast brain-control conspiracy working to keep people helpless against their Class Enemies by keeping them disinformed and confused?

    It seems to me that most “economists” are superstitious theologians working to spread their proud ignorance and militant stupidism throughout society. Normal people predicted the outcome of Free Trade, for example; but Useful Idiot Economists like Paul Krugman propagandized their hearts out for NAFTA, for example.

    Any effort to pretend to understand “economics” apart from the natural world of biophysical energetics within which human beings pursue their “economic” activities is either profoundly stupid or cynically decietful. Maybe that was not true before biophysical energetics was understood or even known to exist. But today? Mainstream economics is a conspiracy of deceit. The only “economics” I would even give a respectful hearing to would be an “economics” based in natural biophysical laws of energetics. Frederick Soddy made an effort, and he had the advantage of being a legitimate chemist, not a charlatan “economist”.

    Those Harvard student dissidents should be directed to come to this website. But even more importantly, they should be directed to study biology, ecology, physics, etc.
    so they can see how legitimate scientists pursue science. Then they will be in a position to see whether “science” and “economists” bear any closer relation to eachother than
    “garlic” and “vampires”.

  33. NotABlogger

    I’ve now listened to many of Steve Keen’s interviews and comments, with interest and dismay. Hoping to hear positive prescriptions for the economic mess we find ourselves in, instead I find that Mr. Keen is just another naysayer from the myopic world that is characteristic of much of academia. A Chicken Little, postulating negative predictors while toting the party line does not raise the intellectual consciousness of those seeking viable and positive solutions. BTW,the students who staged the walkout to join the global OCCUPY movement have demonstrated (pardon the pun) that they really are only interested in a left-leaning educational model. Tipping the scales too much in either direction is not a healthy diet for the head and has proven to be historically disastrous. True openmindedness with an honest desire to learn and find solutions is what the world needs now.

    “Go placidly amid the noise and haste,
    and remember what peace there may be in silence.
    As far as possible, without surrender, be on good terms with all persons.
    Speak your truth quietly and clearly; and listen to others,
    even to the dull and ignorant; they too have their story.

    Avoid loud and aggressive persons, they are vexations to the spirit.
    If you compare yourself with others, you may become vain and bitter,
    for always there will be greater and lesser persons than yourself….” —– Max Ehrman, “Desiderata”

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