Steve Keen

Steve Keen (born 28 March 1953) is an Australian economist and author. He considers himself a post-Keynesian, criticising neoclassical economics as inconsistent, unscientific and empirically unsupported. The major influences on Keen's thinking about economics include John Maynard Keynes, Karl Marx, Hyman Minsky, Piero Sraffa, Augusto Graziani, Joseph Alois Schumpeter, Thorstein Veblen, and François Quesnay. Hyman Minsky's financial instability hypothesis forms the main basis of his major contribution to economics[1] which mainly concentrates on mathematical modelling and simulation of financial instability. He is a notable critic of the Australian property bubble, as he sees it.

Keen was formerly an associate professor of economics at University of Western Sydney, until he applied for voluntary redundancy in 2013, due to the closure of the economics program at the university.[2] In autumn 2014, he became a professor and Head of the School of Economics, History and Politics at Kingston University in London. He is also a fellow at the Centre for Policy Development.

Steve Keen
Steve Keen in 2013
Keen in 2013
Born28 March 1953 (age 66)
School or
Post-Keynesian economics
InfluencesHyman Minsky
Karl Marx
Piero Sraffa
Joseph Schumpeter
François Quesnay
Irving Fisher
Basil Moore
Augusto Graziani
Thorstein Veblen
John Maynard Keynes
ContributionsMathematical models of financial crises and debt-deflation
Information at IDEAS / RePEc

Early life and education

Keen was born in Sydney in 1953. His father was a bank manager. Keen graduated with a Bachelor of Arts in 1974 and a Bachelor of Laws in 1976, both from the University of Sydney. He then completed a Diploma of Education at the Sydney Teachers College in 1977.

In 1990, he completed a Master of Commerce in economics and economic history at the University of New South Wales. He completed his PhD in economics at the University of New South Wales in 1998.


Financial instability and debt deflation

Most of Steve Keen's recent work focuses on modeling Hyman Minsky's financial instability hypothesis and Irving Fisher's debt deflation.[3][4] The hypothesis predicts that an overly large private debt to GDP ratio can cause deflation and depression. Here, the falling of the price level results in a continually rising real quantity of outstanding debt. Moreover, the continued deleveraging of outstanding debts increases the rate of deflation. Thus, debt and deflation act on and react to one another, resulting in a debt-deflation spiral. The outcome is a depression. Steve Keen argues that the current global economic crisis is the result of too much private debt.

Debunking Economics

Keen's full-range critique of neoclassical economics is contained in his book Debunking Economics.[5] Keen presents a wide variety of critiques on neoclassical economic theory, and argues that they show neoclassical assumptions are fundamentally flawed. Keen claims that several neoclassical assumptions are empirically unsupported (that is, they are unsupported by observable and repeatable phenomena) nor are they desirable for society at large (that is, they do not necessarily produce either efficiency or equity for the majority). He argues that economists' overall conclusions are very sensitive to small changes in these assumptions.

Keen has attempted to counter Karl Marx's theory (in his view Marx's pre-1857 view, specifically) from a post-Keynesian perspective, by arguing that machines can add more product-value over their operational lifetime than the total value of depreciation charged "during those asset lives". For example, the total value of sausages produced by a sausage machine over its useful life might be greater than the value of the machine. Depreciation, he implies, was the weak point in Marx's social accounting system all along. Keen argues that all factors of production can add new value to outputs. However he gives credit to Marx for contributing to the "financial instability hypothesis" of Hyman Minsky.[6]

Keen's book closes with a survey of various schools of heterodox economics, concluding "None of these is at present strong enough or complete enough to declare itself a contender for the title of 'the' economic theory of the 21st century." However, he argues that neoclassical economics is a degenerative research program, not generating new knowledge but growing a belt of protective auxiliary hypotheses to shield its core beliefs from critique. There is an accompanying web site which provides more detailed mathematical expositions.

Critique of neoclassical theory of the firm

Keen's work has also focused on refuting the neoclassical theory of the firm, which argues that firms will set marginal revenue equal to marginal cost. Keen notes that empirical research finds real firms set price well above marginal cost: they charge a markup, often cost-plus pricing.

Keen's article on "profit maximisation, industry structure, and competition"[7] has had counter-arguments by Paul Anglin.[8] Chris Auld has additionally shown that Keen & Standish's argument is inconsistent with standard assumptions used in perfect competition, and their analysis uses calculus improperly.[9]


In August 2015, Keen endorsed Jeremy Corbyn's campaign in the Labour Party leadership election.[10]

Views on the UK's EU referendum

Keen was in favour of the UK leaving the European Union, stating that mainstream economists were over-certain and exaggerating as regards the likely effects following the country's withdrawal. Keen regards the open-borders free-movement policy of the EU as precipitate and unsustainable in the absence of a common fiscal policy, all the more so given that migrants impose burdens on public services in destination countries also experiencing austerity. He also states that the Euro is destined to fail, not least because of the way it penalises recession-hit countries unable to pursue expansive fiscal policy, and indeed considers the whole EU project as a failed one destined for[11] collapse.[12]

Minsky software project

Recently, Keen commissioned the development of a software package called Minsky for visually modelling national economies, in a way that is intended to be more accurate than mainstream macroeconomic models – which he contends do not properly include debt and banking. He envisages it being used for both educational and research purposes.

The first phase of the development was funded by an academic research grant, as is typical for academic research projects – but in February 2013 Keen launched a crowdfunding project on Kickstarter to allow members of the public to contribute towards taking MINSKY to the next level of development.[13] In the first 24 hours, this project raised approximately 15% of its funding target, and has since fully achieved its initial funding goal of $50,000.00.


Chris Auld claims that many of the arguments in Keen's "Debunking Economics" against modern economics are invalid. He asserts that Keen's critique of perfect competition is based on mathematical mistakes, and misconceptions of basic microeconomics theory. Regarding Keen's critique that modern economics does not consider dynamics, he claims that this is wrong, even in undergraduate textbooks. He also asserts what he claims are mathematical flaws of the model Keen proposes.[14]

Matthijs Krul[15] maintains that Keen, while broadly accurate in his criticism of the neoclassical synthesis, generally misrepresents Marx's views in Debunking Economics and in earlier work when asserting that, in the production of commodities, machinery produces more value than it costs.[16]

Austrian-school economists Robert P. Murphy and Gene Callahan claim that Keen's 2001 book "suffers from many of the very faults of which he accuses the mainstream". They also claim that much of his work is "ideologically motivated even while criticising neoclassical economics for being ideological". They praise his critique of perfect competition, and his chapter on dynamic vs static models, whilst they criticise his attempts at objective value theory and what they claim is his misrepresentation of the Austrian interpretation of Say's law.[17]

Other publications

  • Keen, Steve (2017). Can We Avoid Another Financial Crisis? Polity. ISBN 9781509513734.
  • Keen, Steve (2015). Developing an economics for the post-crisis world. World Economics Association and College Publications. ISBN 9781848901865.
  • Lee, Frederic S. and Steve Keen (2004): "The Incoherent Emperor: A Heterodox Critique of Neoclassical Microeconomic Theory", Review of Social Economy, V. 62, Iss. 2: 169–199
  • Co-editor of: Commerce, Complexity and Evolution: Topics in Economics, Finance, Marketing, and Management: Proceedings of the Twelfth International Symposium in Economic Theory and Econometrics. New York: Cambridge University Press. ISBN 0-521-62030-9.
  • The Debunking Economics Podcast: with Phil Dobbie and Prof. Steve Keen (

See also


  1. ^ Keen, Steve The Debtwatch Manifesto 2012
  2. ^
  3. ^ The Roving Cavaliers of Credit
  4. ^ Steve Keen (1995): "Finance and economic breakdown: modelling Minsky’s Financial Instability Hypothesis", Journal of Post Keynesian Economics, Vol. 17, No. 4, 607–635
  5. ^ Debunking Economics: The Naked Emperor of the Social Sciences (2001, Pluto Press Australia) ISBN 1-86403-070-4
  6. ^ Keen, Steve The Debtwatch Manifesto 2012
  7. ^ Steve Keen & Russel Standish (2006):"Profit Maximization, Industry Structure, and Competition: A critique of neoclassical theory" Archived 2 November 2006 at the Wayback Machine, Physica A 370: 81–85
  8. ^ Paul Anglin (2008): On the proper behavior of atoms: A comment on a critique Physica A 387: 277–280
  9. ^ Chris Auld (2012): Steve Keen still butchering basic microeconomics
  10. ^ "The Labour party stands at a crossroads". The Guardian. 14 August 2015. Retrieved 15 July 2017.
  11. ^ Unia to tonący statek/Rzeczpospolita/2016/09/29
  12. ^
  13. ^ Steve Keen (2013). "Kickstarter project". Retrieved 10 February 2013.
  14. ^ Chris Auld (2002): Debunking "Debunking Economics"
  15. ^ Steve Keen’s Critique of Marx’s Theory of Value: A Rejoinder
  16. ^ Keen, S., "Use-value, Exchange-value, and the Demise of Marx's Labor Theory of Value", Journal of the History of Economic Theory, 15 (Spring 1993).
  17. ^ Review of Austrian Economics 2003 –

External links

Basil Moore

Basil John Moore was a Canadian Post-Keynesian economist, best known for developing and promoting endogenous money theory, particularly the proposition that the money supply curve is horizontal, rather than upward sloping, a proposition known as horizontalism. He was the most vocal proponent of this theory, and is considered a central figure in post Keynesian economicsMoore studied economics at the University of Toronto and at Johns Hopkins University. In 1958 he started a distinguished academic career at Wesleyan University in Middletown, Connecticut and became professor emeritus at the University. He left in 2003 to move to South Africa where he joined the University of Stellenbosch with which he had long maintained an association and, "where he was Professor Extraordinary of Economics."

Castle of Dr. Brain

Castle of Dr. Brain is an educational video game released in 1991 by Sierra On-Line. It is a puzzle adventure game.

Constant capital

Constant capital (c), is a concept created by Karl Marx and used in Marxian political economy. It refers to one of the forms of capital invested in production, which contrasts with variable capital (v). The distinction between constant and variable refers to an aspect of the economic role of factors of production in creating a new value.

Constant capital includes the outlay of money on (1) fixed assets, i.e. plant, machinery, land and buildings, (2) raw materials and ancillary operating expenses (including external services purchased), and (3) certain faux frais of production (incidental expenses). Variable capital by contrast refers to the capital outlay on labour costs insofar as they represent workers' earnings; the sum total of wages.

The concept of constant vs. variable capital contrasts with that of fixed vs. circulating capital (used not only by Marx but by David Ricardo and other classical economists). The latter distinction corresponds to the very common distinction in economics, between fixed inputs (and costs) and variable inputs (and costs). It distinguishes inputs from the point of view of their user (the capitalist), in terms of the degree of flexibility that the user has in using them.

On the other hand, constant capital refers to the non-human inputs into production, while variable capital refers to the human input (the hiring of labor power to do labor).

Debt deflation

Debt deflation is a theory that recessions and depressions are due to the overall level of debt rising in real value because of deflation, causing people to default on their consumer loans and mortgages. Bank assets fall because of the defaults and because the value of their collateral falls, leading to a surge in bank insolvencies, a reduction in lending and by extension, a reduction in spending: the credit cycle is the cause of the economic cycle.

The theory was developed by Irving Fisher following the Wall Street Crash of 1929 and the ensuing Great Depression. The debt deflation theory was familiar to John Maynard Keynes prior to Fisher's discussion of it, but he found it lacking in comparison to what would become his theory of liquidity preference. The theory, however, has enjoyed a resurgence of interest since the 1980s, both in mainstream economics and in the heterodox school of post-Keynesian economics, and has subsequently been developed by such post-Keynesian economists as Hyman Minsky and by the mainstream economist Ben Bernanke.

Debunking Economics

Debunking Economics: The Naked Emperor of the Social Sciences is a book by the economist Steve Keen about the problems with mainstream economics. The book was initially published by Zed Books in 2001, and a revised and updated version was published in 2011. Translated versions were also published in Spanish, French and Chinese. The book is suitable for a general reader, and uses words and figures rather than equations to make its points, but is aimed at those with at least some basic knowledge of economics.

Demand-side economics

Demand-side economics is a macroeconomic theory which argues that economic growth is most effectively created by high demand for products and services. According to demand-side economics, output is determined by effective demand. High consumer spending leads to business expansion, resulting in greater employment opportunities. Higher levels of employment create a multiplier effect that further stimulates aggregate demand, leading to greater economic growth.Demand-side economists argue tax breaks for the wealthy produce little, if any, economic benefit because most of the additional money is not spent on goods or services. Instead, they argue increased governmental spending will help to grow the economy by spurring additional employment opportunities. They cite the lessons of the Great Depression of the 1930s as evidence that increased governmental spending spurs growth.British economist John Maynard Keynes is the most celebrated of demand-side economic theorists. He was able to show there is no automatic stabilizing mechanism built into an economy and because of that, economic intervention is necessary. Keynes saw his theories successfully demonstrated in the 1930s when they helped to end the Great Depression and into the 1950s and 60s when capitalism experienced its Golden Age. Additional proponents of demand-side economics include Leon Keyserling, John Kenneth Galbraith, Hyman Minsky, Joseph Stiglitz, James K. Galbraith, Steve Keen and Nouriel Roubini.

Demand-side economics is held in opposition to supply-side economics which argues that economic growth can be most effectively created by stimulating business through lowering tax rates on business and decreasing regulation of corporate and financial activities.


Hardtalk (styled as HARDtalk) is a BBC television and radio programme broadcast on the BBC News Channel, on BBC World News, and on BBC World Service.

Broadcast times and days vary, depending on your broadcasting platform and your geographic location. HARDtalk is also available on BBC iPlayer.

New Zealand property bubble

The New Zealand property bubble is an ongoing issue in New Zealand, where house prices have risen considerably faster than incomes. Since the 1980s, various factors including deregulation, immigration and politics have contributed to these rising house prices, with considerable debate over how to address the issue due to its large size relative to the economy.

Paul Ormerod

Paul Andrew Ormerod (born 20 March 1950) is a British economist who is a partner at Volterra Partners consultancy. Additionally, he is a visiting professor at UCL Centre for Decision Making Uncertainty.

Pavlina R. Tcherneva

Pavlina R. Tcherneva is an American economist, of Bulgarian descent, working as associate professor and director of the Economics program at Bard College. She is also a research associate at the Levy Economics Institute and expert at the Institute for New Economic Thinking.

Peak debt

Peak debt is a term meaning borrowing limit, in the same way peak water is a term meaning water limit.

Peak debt is the stage at which an economy or an individual's debt servicing costs become so high relative to income that spending must slow down or stop. The term 'peak debt' was coined by Jaswant Jain PhD in 2006. Jain concluded that debt will eventually reach a limit at which point consumption must be reduced to pay the debt and interest. This reduction in consumption will inevitably have a deflationary or disinflationary effect.

Seemingly, the first person to use peak debt in relation to house prices was Michael McNamara. He contends that, specifically house prices have risen dramatically through the increased borrowing power of purchasers. This was facilitated through rapidly expanding loan to valuation ratios adopted by lenders since the deregulation of financial markets in the early 1980s. Logically, the argument posed states that as growth in credit slows limited by incomes, so too shall the price growth in housing become more subdued.

Since then, growth in asset markets and median property values have been outstripping incomes in many countries, and some people believe the corresponding international, national and household debt levels are unsustainable. To many people, it seems impossible for prices to keep rising faster than incomes, because eventually so much would be spent on debt servicing costs that there would be no money remaining for anything else.

Some observers such as Professor Steve Keen of University of Western Sydney, believe that many countries are hurtling towards peak debt, fueled by excess borrowing and an addiction to credit. To such observers, it appears illogical to take on ever increasing debt just to bid against each other for the same assets. Nations must at some stage reach their maximum debt limit. The timeframe for reaching this limit is always unknown but some believe we are at that limit already, or very close, in many countries.

Ron Laszewski attempts to determine the peak debt limit for America in his 2008 Peak Debt paper. Since the Bureau of Economic Analysis has statistics on how much Americans earn, how much they save, and how much they spend on debt servicing, it was possible for Laszewski to estimate how close America might be to a peak debt limit.

The term 'peak debt' has similar origins to other 'peaks' such as peak oil, peak water, peak food, peak minerals, and peak population.

Post-Keynesian economics

Post-Keynesian economics is a school of economic thought with its origins in The General Theory of John Maynard Keynes, with subsequent development influenced to a large degree by Michał Kalecki, Joan Robinson, Nicholas Kaldor, Sidney Weintraub, Paul Davidson, Piero Sraffa and Jan Kregel. Historian Robert Skidelsky argues that the post-Keynesian school has remained closest to the spirit of Keynes' original work. It is a heterodox approach to economics.

Post-autistic economics

The post-autistic economics movement (French: autisme-économie) or movement of students for the reform of economics teaching (French: mouvement des étudiants pour une réforme de l'enseignement de l'économie) is a political movement which criticises neoclassical economics and advocates for pluralism in economics. The movement gained attention after an open letter signed by almost a thousand economics students at French universities and Grandes Écoles was published in Le Monde in 2000.

Richard Clarida

Richard Harris Clarida (born May 18, 1957) is an American economist and Vice Chairman of the Federal Reserve. He is the C. Lowell Harriss Professor of Economics and International Affairs at Columbia University and, until September 2018, Global Strategic Advisor for PIMCO. He is notable for his contributions to dynamic stochastic general equilibrium theory and international monetary economics. He is a former Assistant Secretary of the Treasury for Economic Policy and is a recipient of the Treasury Medal.

Trygve Haavelmo

Trygve Magnus Haavelmo (13 December 1911 – 28 July 1999), born in Skedsmo, Norway, was an economist whose research interests centered on econometrics. He received the Nobel Memorial Prize in Economic Sciences in 1989.

Value (economics)

Economic value is a measure of the benefit provided by a good or service to an economic agent. It is generally measured relative to units of currency, and the interpretation is therefore "what is the maximum amount of money a specific actor is willing and able to pay for the good or service"?

Among the competing schools of economic theory there are differing theories of value.

Economic value is not the same as market price, nor is economic value the same thing as market value. If a consumer is willing to buy a good, it implies that the customer places a higher value on the good than the market price. The difference between the value to the consumer and the market price is called "consumer surplus". It is easy to see situations where the actual value is considerably larger than the market price: purchase of drinking water is one example.

Victoria Chick

Victoria Chick (born 1936) is a Post Keynesian economist who is best known for her contributions to the understanding of Keynes's General Theory and to the establishment of Post Keynesian economics in the UK and elsewhere.

World Economics Association

The World Economics Association (WEA) is a professional association, launched in 2011, which promotes a pluralistic approach to economics.Its key principles include worldwide membership and governance, and inclusiveness towards the variety of theoretical perspectives and applications of economics. The WEA is registered under United Kingdom law as a non-profit community interest company.

The WEA publishes three open peer reviewed open access academic journals: Economic Thought, World Economic Review, and real-world economics review. It also publishes books, has a bimonthly newsletter, and hosts open access, online conferences.

In an article based on interviews with Fullbrook, Robert Johnson and others, Handelsblatt reported that more than 3,600 economists from 110 countries joined in the first ten days. Early supporters (and members of the Executive Committee) included Steve Keen, Dani Rodrik, James Galbraith, and Richard Koo.

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