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Debunking Economics - Revised and Expanded Edition: The Naked Emperor Dethroned? Paperback – October 15, 2011
- Print length554 pages
- LanguageEnglish
- PublisherZed Books
- Publication dateOctober 15, 2011
- Dimensions6.14 x 1.05 x 9.35 inches
- ISBN-101848139926
- ISBN-13978-1848139923
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Editorial Reviews
Review
"If you are interested in how the economy really works (and want to challenge an economist) then read this book." -- James Dick, Professional Members Division, The Economic Society of Australia
"Keen's serious but accessible look at the shaky logical and mathematical foundations of neoclassical economics will be of great interest to students and open-minded economists alike. And his insightful survey of alternative schools of thought lends substance to his call for a new economics." -- Don Goldstein, Associate Professor of Economics, Allegheny College
"A wide-ranging yet accessible critique of the staples of neoclassical pedagogy." --Alan G. Isaac, Associate Professor of Economics, American University
"This text carefully follows the form of argument familiar to all economics undergraduates, through to conclusions from which under-graduates are more usually protected. Avoiding polemic or hyperbole, the case that he presents is all the more damning for its clarity and systematic approach." --John M. Legge, Associate Professor, LaTrobe University
"Debunking Economics...will transform the way economics is taught and thought." --Jan Otto Andersson, Professor of Economics, Åbo Akademi University, Finland
"Professional economists include their own best critics. Steve Keen is one of the very best...translating the algebra into plain language, he deploys a devastating theoretical attack on neoclassical theory." --Hugh Stretton, Fellow of the Academies of the Humanities and Social Sciences, and author of Economics: A New Introduction
"Refreshingly provocative." -- Geoffrey Fishburn, Department of Economics, University of New South Wales
About the Author
Product details
- Publisher : Zed Books; 2nd edition (October 15, 2011)
- Language : English
- Paperback : 554 pages
- ISBN-10 : 1848139926
- ISBN-13 : 978-1848139923
- Item Weight : 1.69 pounds
- Dimensions : 6.14 x 1.05 x 9.35 inches
- Best Sellers Rank: #1,045,775 in Books (See Top 100 in Books)
- #984 in Theory of Economics
- #2,109 in Economic History (Books)
- Customer Reviews:
About the authors

I'm Professor of Economics & Finance at the University of Western Sydney, Australia. In 2010 I won the Revere Award from the Real World Economics Review, for being the economist who most cogently warned that the economic crisis that began in 2007 was imminent. I am a staunch critic of mainstream economic thinking, and author of the influential blog www.debtdeflation.com/blogs.
Prior to becoming an academic in 1987, I was school teacher, education officer for an overseas aid organisation, conference organiser, editor, computer programmer, journalist, and finally a government advisor during the days when Australia's government had a serious industries policy.
The latter experience is what convinced me to undertake an academic career: I saw economists, employed by the government, actively undermine this industrial development policy at every step. I was already a trenchant critic of conventional economics at the time, having led the "Political Economy" revolt at the University of Sydney when I was an undergraduate student in the early to mid 1970s.
I realised that, if I was to help defeat the woolly thinking and ideological day-dreaming that passed for analysis amongst economists, I would have to do it on the home territory where these ideas were brewed and sustained: university campuses.
Incidentally, my targets in that weren't just neoclassical economists. My initial academic thesis (in my Masters) was on flaws in the Marxian labor theory of value. That led to my first two published academic papers, which provided the basis for the chapter on Marxian economics in Debunking Economics.
I've been substantially more successful than I had expected in academia. Iconoclastic views aren't well received in economics, but I have been lucky to have an unusual brand of iconoclasm that has led to substantial publications, and lots of support along the way from a number of mentors. I now try to return that favour to my own students, and readers.

Steve Keen was one of the handful of economists to realise that a serious economic crisis was coming our way, and to publicly warn of it from as early as December 2005.
This, and his pioneering work on modelling debt-deflation, resulted in him winning the Revere Award from the Real World Economics Review for being the economist whose work is most likely to prevent a future financial crisis (http://rwer.wordpress.com/2010/05/13/keen-roubini-and-baker-win-revere-award-for-economics-2/). He maintains a highly influential blog on economics (www.debtdeflation.com/blogs)
His book "Debunking Economics: The naked emperor dethroned?", is a classic exposition of why conventional economic theory is not only wrong, but more of a threat to the survival of capitalism than any number of left-wing revolutionaries.
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The Credit Impulse (a.k.a. Credit Accelerator) is not the rate change of the monetary base, but it the RATE OF CHANGE OF IT'S RATE OF CHANGE.
Keen discovers a paradox - because aggregate demand is the sum of GDP plus the change of debt, the rate of change of aggregate demand can be BOOSTED by a slowdown in the rate at which debt is falling. The U.S. FED had stumbled on it by chance - the slight recovery of the U.S. in 2010 and 2011 was driven mainly by a slowdown in the rate of deceleration of credit.
The factor that makes the recent recovery of the U.S. economy different to all previous ones -- except the Great Depression itself--is that this strong boost from the Credit Impulse has occurred while the change in private debt is still massively negative. Keen states that contrary to the neoclassical model of equilibrium, a capitalist economy is characterized by excess supply in all times, even during booms. According to Keen, the main constraint facing capitalist economies is not supply, but demand. The demand must be boosted by a CONSTANT acceleration of debt. The end game here, the way out of the debt, will be many years in the future, if ever. The book contains many things: among them a scathing critic of neo-classical economic theories, but also, interestingly, of Marx. I highly recommend it
Keen also does a good job pointing out the corruption of the economics profession. In addition to the intellectual dishonesty of ignoring serious theoretical and empirical problems, the profession marginalizes those who try and address these problems. Academic employment is based on publication. But the more prestigious the economics journal, the less likely a non-neoclassical paper will be published therein. The result is that the more successful an economist is in terms of academic honors and employment at prestigious schools, the less likely he is to know how economies work. But the terrifying reality is that governments and businesses tend to listen to the leading orthodox economists. One shouldn't be surprised, therefore, when bad things happen.
Moreover, Keen writes in an accessible way, with engaging prose, being simple without being simplistic. Readers will find the book intellectually challenging, but no more so than necessary. Further, Keens does even his mathematical analysis in English, so this book is accessible to all intelligent readers.
CON: My main critique is that Keen makes invalid criticisms of Austrian economics. One should always be careful when assessing another social scientist as a scientist, because ideology is hard to separate from description. If Keen just put forward different policies than I would, I would have given five stars, even though I might disagree with them and be able to put forth strong arguments against them. But there are claims in this book about Austrian economics that are demonstrably false. For that I docked a star.
For example, at Loc 5422 of the kindle version (Chapter 10: Why They Didn't See It Coming), Keen claims both neoclassical and Austrian economists "fail to consider the role of credit in a capitalist economy." And at Loc 5438 he similarly claims both schools argue general gluts and depressions are impossible. Keen claims Austrians and neoclassicals alike ignore the cycle of credit expansion and economic boom followed by credit contraction and bust, i.e., the business cycle.
Obviously, Keen is unfamiliar with Ludwig von Mises' 1912 book, The Theory of Money and CREDIT. In it, Mises laid out the essence of Austrian business cycle theory, which was developed by FA Hayek in Prices and Production (1931) and culminating in The Pure Theory of Capital (1941). The essence of that theory is that credit expansion, by an unsustainable fractional reserve banking system or government money printing, generates unsustainable demand that causes entrepreneurs to overestimate future demand, overextending productive capacity and leading to a general glut that can only be worked off by a period of credit contraction, price adjustment, and bankruptcy of unsustainable businesses.
A leading contemporary source on ABCT is Roger Garrison, whose 2000 book, Time and Money, is accessible, succinct and accurate. Garrison also presents the theory in an hour long lecture available on YouTube and entitled "Austrian Theory of the Trade Cycle." While Keen mentions Peter Schiff, an Austrian, was among those who predicted the housing boom and financial bust (a claim that's itself hard to reconcile with the proposition Austrians don't believe in depression), he doesn't point out the many other Austrians who saw the GFC and the Dotcom bubble on the horizon. Nor does he mention that Mises and Hayek warned of the Great Depression. All these predictions and more are documented, just Google "Austrian predictions."
I suspect that Keen is much more familiar with the first generation of Austrian economics, started by Carl Menger (whom Keen mentions several times) and largely absorbed into the mainstream, than the second started by Mises (whom Keen mentions only twice, and not when laying out his understanding of Austrian theory) and continued by Hayek, Rothbard, Kirzner, Block, Garrison, Salerno, Thornton, Herbner, Murphy, et al. An excellent source to help one distinguish the two is Israel Kirzner's 2 part, 2 hour lecture entitled The History of Austrian Economics, available on YouTube.
We're it not for these errors, I would have given the book 5 stars. If Keen accurately presented Austrian theory and disagreed with it, that would be different. But these aren't valid differences of opinion on policy or theory. They're verifiably false claims about the content of Austrian theory. Keen's critiques of Austrian economics may have been valid 100 years ago. But it's inaccurate as applied to Austrian economics today. Given the fact he compares this old version of Austrian theory with his own up-to-date, Post-Keynesian theory, Keen creates a strawman that misleads the reader, intentionally or unintentionally.
Fortunately, this is a small part of an otherwise worthwhile read, so I only took off one star.
PS: All the texts mentioned herein are available free from the Mises Institute (Mises.org). Just search the title and "PDF" in Google.
Top reviews from other countries
As a doctoral business student and working professional I found this book interesting--for the most part and to the extent that economics is interesting. Dr Keen provides a refreshing look at widely held beliefs in economics which I was questioning myself in my advanced doctoral studies. In the course of my studies I have argued several similar points to some of his--only his are much more profound, well explained, and there are more of them.
His primary premises are that neoclassical economics are highly flawed and are resulting in dangerous government policies. Some of his key points include:
1. The error in efficient market hypothesis
2. The destabilizing effect of neoclassical economic policies
3. Current debt practices are flawed
4. Deregulation of the financial industry is very dangerous
5. Reactions to economic crises based on neoclassical economics (and some Keynesian) will actually result in worse conditions over the long term than other practices
6. The dominance of neoclassical economics is restricting public access to alternate theories
7. Current consumer demand theory is wrong
8. Traditional supply and demand setting price is false
9. Labor theory is flawed
10. Supply curves taught do not match what is happening in practice
11. There are about 15 other items that he also discusses but are too many to mention here.
I would highly encourage you to see his YouTube videos before buying this book as it will give you a great idea as to what to expect in the book (look for the one on risk in particular). I personally found his videos better than the book as the illustrations were good, I am a visual person, and the explanations were short whereas the book has very detailed explanations. If you like the videos and want to know more behind the man or ideas then this book is for you.
Given that he predicted the 2008 crash well in advance (see his other writings) I think it important to read this book for anyone seriously interested in economics.
I recommend this book for any serious student or practitioner of economics and economic policy. If you are a 4th year student (finance, economics) or higher then you should be able to understand most of what he is saying. There are a couple of parts where there is math that gets complex and he suggests skipping it on the first read.
Positives
Dr Keen's perspective is fresh and for the most part appears to be well thought out and logical and has a lot to add to the economics profession.
Areas for Improvement
1. There are not many diagrams. If you are a visual learner like I am it may take you longer to understand the material.
2. You need a strong economics background to fully understand the material.
3. While many of his points are valid, his criticism of how neoclassical economists obtained their theories are sometimes the same means made by him in expressing his points
4. It can be repetitive.
5. It is not an easy read. He quotes several times from others which are hard to understand, but some of what he has written is also difficult. You will, however, likely understand most of it based on my other points. It just takes a while to process. It is too technical for the average person without having taken at least a course or two in economics at a minimum (I took at least 4).
6. His comments on a debt jubilee are questionable
7. His points on government stimulus efficiency are questionable. My own research and that of others indicates the contrary.
The first edition Debunking Economics: The Naked Emperor of the Social Sciences has some other reviews well worth while reading.
After reading several economic books, this is the one where I really understood about the economics' landscape and the many choices of methodology which should be in the curriculum in education.
Edward Griffin in his book The Creature from Jekyll Island states that economics in universities was promoted by the banks in the early 20th centuary to impose a deception on the public absolutely contrary to what the banks wanted the public to discover, that banks don't act as intermediaries but
are the engines of credit and inflation creation and interest collection on what cost them nothing to lend.
The ideology of neo-classical economics from the 1870s was to suppress the working class organisation of socialism and trade unions. Economics should be taught as an objective theory.
He keeps advertising his "next" book Finance & Economic Breakdown which was published in 2001, 2006 and 2010. The 3rd edition is due to be rewritten from 2022 according to author on YT.
His published academic papers are in a book form Developing an Economics for the Post-Crisis World ; but the best of his work is on many YT videos which advertises his free economic software modelling tool QED now called Minsky. His web sites have changed .
A recent book is Can we avoid another financial crisis? (2017) where he gives data on 3 dozen nations and a prognosis for the future.
As the 120 figures are not contained in this edition of the reviewed book they can be down loaded from publisher, Zed books for free or bought at Debunking Economics Supplement to the Revised and Expanded Edition or here due to an Amazon screw up but that is Out-of-Stock as well. Just down load it and the free Kindle version of this book from a search for "Debunking Economics Steve Keens Debt Watch".





