Steve Keen, Ann Pettifor, Peter Bofinger – A clash of paradigms: update on discussion of Steve’s The New Economics Manifesto


Well that was a fun. This was supposed to be a discussion of my new book The New Economics: A Manifesto. It was that, but it also turned into a slanging match between myself and a mainstream economist. If you want to catch the fun, jump to the 59 minute mark.

I say slanging match, because Neoclassical economists will throw nonsense arguments at you, and I wasn’t about to let Peter Bofinger get away with them.

One such piece of nonsense concerned the date of a publication of mine (Centre for Policy Development Report “Deeper in Debt”, attached), which he said occurred after the Global Financial Crisis, and therefore I couldn’t be said to have predicted the crisis. This is nonsense to anyone who knows the publication lags in academic work. I noted that I started that document well before its publication in September 2007. Editing what I wrote here initially–in rather too  much haste–well before I started work on that report, I was warning of a crisis from the end of December 2005, mainly in a report I sent out monthly by email.

The earliest I still have copies of–since the previous ones were sent as emails to a subscriber list from my no-longer-accessible University of Western Sydney email address–was November 2006 (attached).

The earliest published warning was in an Expert Witness Report for a court case on predatory lending (attached), which was completed on December 22nd, 2005, and submitted to the court at that time.

My reports focused on Australia for the simple reason that I am Australian and was trying to warn Australian authorities of the dangers they were facing. My warnings were of course ignored–I was presenting them to politicians who, without necessarily knowing it, were schooled in Neoclassical economics, and advised by Neoclassical economists.

 This sort of behaviour irks me. Before the crisis, when my warnings received lots of media attention, I was described as being “in a minority of one” in warning of an impending financial crisis–for Australia and the USA, which were the only countries I then had decent private debt data for (and I focused on Australia because that was where I lived). After the crisis, they claim that you didn’t warn of it before it happened.

I’m not about to let Neoclassical economists once again rewrite history to suit themselves.

There’s more to this story that I will have to leave until after I’ve recovered from a knee operation that is taking place in about 3 hours. Peter has repeated his “you didn’t warn of the crisis until after it happened” comment by email, and this is written in haste in reply to thar repeated claim.

Ironically, Peter includes this excerpt from the footnotes to that report:

It doesn’t take long to find the first document noted there–published on August 10 2007, when the accepted starting date for the crisis was August 14 2007. I am quoted in that Report as follows:

I should note that I don’t claim to be the first non-Neoclassical economist to warn of an impending crisis. That honour goes to Wynne Godley from the late 1990s on, using the stock-flow consistent monetary modelling framework he developed to say that the Clinton surpluses were being financed by excessive household debt, which when it stopped growing would cause a crisis. That is exactly the causal mechanism I presented as well, though working from Minsky’s Financial Instability Hypothesis.

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