Debunking economics again

Steve Keen’s Debunking Economics is out in a second edition. Arnold Kling sums up

If I were a zero-tolerance reader, I would have put the book down at page 7

I agree. I had to read the whole thing for a review of the first edition.

To be blunt, Debunking Economics is yet another tome dressed up in academic respectability that preaches left-wing views and opinion. It must be considered as one of many books critical of ‘economic rationalism’. This is most unfortunate and disappointing. Keen is capable of better. The issues he raises are important and should be discussed. Keen, however, has given up the argument, as he indicates in the first chapter, ‘No more Mr Nice guy’. It is not good enough to argue that economics is wrong because hooligans protest outside Nike stores and the World Bank. Something is wrong with how undergraduate economics is taught. The quality of economic analysis in Australia is poor. It is too easy to be seduced into empty slogans and dogma. But that does not mean that the dogma is wrong.

Keen didn’t agree with my analysis.

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76 Responses to Debunking economics again

  1. sabena

    He turned up on the 7.30 report last night in relation to the Occupy protest in Sydney which he addressed.Needless to say he supported the protesters.

  2. JamesK

    Well it doesn’t take much to debunk Steve Keen’s ecomnomics.

    One or two years at most.

  3. Jim Rose

    Are these critics unaware of the famous economists who were democratic socialists? The many famous economists who conceded the practicality of market socialisms?

    The average economist is centre-left in their political views.

  4. Jim Rose

    sinclair, just read your review.

    you make a good point abour Krugman. at least he has a long-standing practice of naming the names of those he supposes to have proposed fallacious theoriesso so you can check the facts.

  5. Jim Rose

    Contrary to Keen’s view, it is not clear that economists have ‘convinced’ politicians that their models are correct.

    It is more likely that politicians have realised that their preferred policy options need economic justification, and have simply sought out economists who would confirm pre-existing views.

    above quote is from sinclair’s great review.

    you could write a good book on the number of occasions that politicians realised their preferred policy options need economic justification, and recruited willing economists for talking points.

    as stigler argued, economists are very unsuccessful preachers. Stigler’s Tanner lectures on economists as preachers are at http://bbs.cenet.org.cn/uploadimages/200442020285010025.pdf

  6. JC

    Did he end up walking from Sydney to Mt Kosciusko?

  7. Jim Rose

    Sinclair,
    Keen’s reply to your review reminds of an influencing skills course I attended.

    Pointed out that if you make three counter-points, they will all be strong.

    If you make ten counter-points, your critic will respond to the 10th and weakest of your points.

    Keen responded to minor points in your review rather than your major points about how economists influence policy-making, and why and how public policy changes direction.

    Keen never explained why successful policies of long-standing lose at the ballot box, and why reforming governments of the 1980s and 1990s were re-elected.

    Keen will never understood that after the 1970s stagflation, the 1980s onwards economic reforms saved the welfare state from bankruptcy, and that social and environmental regulation never missed a beat.

  8. TN

    A nice review, Sinc, and yes, as Jim alluded, his response will appear clearly inadequate to any open-minded reader (which alas probably does not include his intended audience).

  9. ar

    Something is wrong with how undergraduate economics is taught. The quality of economic analysis in Australia is poor. It is too easy to be seduced into empty slogans and dogma. But that does not mean that the dogma is wrong.

    Something happened to the formatting – the bullet points seem to be missing…

  10. Sinclair Davidson

    Not bullet points, italics.

  11. Driftforge

    Did he end up walking from Sydney to Mt Kosciusko?

    Yes.

  12. Jim Rose

    It is too easy to be seduced into empty slogans and dogma

    remember the obsession with the current account in the late 1980s.

    Edward Nelson’s paper ‘Monetary policy neglect and the Great Inflation in Canada, Australia, and New Zealand’ is good on this.

    1988 did also witness a major monetary policy tightening in Australia.

    The tightening itself was motivated by balance-of-payments rather than inflation considerations.

    The fall in inflation that it produced transformed the views of policymakers and observers about the role of monetary policy in inflation control.

    As late as 1990, the Governor of the Reserve Bank rejected central-bank inflation targeting as infeasible in Australia, and cited the need for other tools such as wages policy.

    When inflation fell below 5% in early 1991—clearly a response to the period of monetary restraint. I can assure you that none of the briefings to ministers at that time forecasted inflation fall so rapidly. It just was not an issue.

    Gruen and Stevens (2000) record that in the 1990s, “the main insight of two centuries of monetary economics… that monetary policy ultimately determined inflation” convinced the authorities that nonmonetary approaches to inflation control should be abandoned in favour of central-bank inflation targeting.

    Track records rather than conniving economic advisors were responsible. Milton Friedman was still a swear word back then and the idea that inflation was a monetary phenomenon was still very career limiting.

  13. Gab

    You’re just showing off now, CL.

  14. Driftforge

    Having read through a fair bit of Steve Keen’s stuff (amongst others) over the last couple years as I’ve picked up a bit of economics on the side, I found both the review and the response a little bit off track. Neither piece contributed further to my understanding, or really addresses the issues Steve introduces in his work, but more the fluff around the edges. Maybe that is just the nature of the book (which I haven’t read).

  15. Capitalist Piggy

    I’ve got a question (two actually): What is Arrow’s Theorem, and why does it imply “there is no such thing as society?”

  16. Keen has predicted 6 of the last 2 recessions.

    He bet Chris Joye that house prices would halve. Although he lost (and had to walk to Mt Kosciusko), he’s still doing it.

    Maybe the world is going to hell in a hand basket, as he is always saying, but it will be a lucky guess. He hasn’t got much of a grip on grass roots economics in his country.

  17. Sinclair Davidson

    Not Chris Joye – Rory Robertson.

  18. Infidel Tiger

    He bet Chris Joye that house prices would halve.

    At least he put his balls on the line and sold his own house. He lost a substantial amount of money being wrong.

  19. Tom Valentine

    The best thing we can do with Keen is to ignore him.He is at the same level as the guy who keeps predicting the end of the world-but he has the defense of senility.

  20. Jim Rose

    critics of capitalism tends to over predict the neumber and depth of recessions. austrian economists suffer from that too.

  21. Tom Valentine

    Sinclair,what makes you think that Keen is capable of better?

  22. Sinclair Davidson

    Tom – I had meet Keen before writing the review and he seemed more sensible than his book suggested. Remember the review is from 2001.

    CP – ‘society’ can’t have consistent preferences relative to the individuals within the society.

  23. andreas saccularius

    At least Keen managed to predict the financial crisis (and by that I mean not just guess, but lay out in clear terms why we were heading for a recession). How many others managed to? Only a handful. Bernanke for example was going on about ‘The Great Moderation’ while the world was heading for a cliff. That the vast majority of economists had no clue anything was wrong suggests there is something wrong with the discipline itself, which is his point.

    Also, yes he was foolish to try and put a date on when Australian house-prices would fall, but one of the main reasons they didn’t was because of the government’s intervention via increasing the First Home Owners Scheme which boosted demand.

  24. JC

    Andreas

    It’s called luck. Your point would be right if you could prove Keen wasn’t a one hit wonder. The fact that he’s walking several 100 miles because he lost a bet sort of makes my point.

    There was no way to predict what happened in 08/09 as no one really predicted the actual events as it just wasn’t only one factor that contributed to the clusterfuck.

  25. THR

    There was no way to predict what happened in 08/09 as no one really predicted the actual events as it just wasn’t only one factor that contributed to the clusterfuck.

    That’s a bit harsh on Keen. A handful of economists did predict the crash, and all the ones I can think of were dissidents. the lesson from all this is that there may be, as keen suggests, a kind of structural blindness built into mainstream economics.

  26. Chris M

    Slightly OT sorry but I’d like to hear you economically knowledgeable folk (take that as you will!) comment on this article in the New Yorker.

    Basically the writer is arguing that big business generates wealth in a nation much more so than small business.

  27. andreas saccularius

    It wasn’t luck or a guess JC, he clearly laid out why he considered there would be a downturn. There were several economists (Keen himself, Robert Shiller being another, who also predicted the dot-com bubble) who saw the exponentially rising house prices across the West, together with exponentially rising debt levels, and saw what was happening – that demand was being artificially boosted by increasing numbers of speculators entering the housing market, and who were using debt to facilitate this. It was, in substance, a ponzi scheme that could only sustain itself so long as new investors kept entering the market, taking on ever-increasing debt to sustain the expected price rises. At some point though debt levels would reach a point where this was no longer possible, hence causing the bubble to fall in on itself.

    Now I don’t know that Keen, or Shiller for that matter, saw the sub-prime aspect of the real estate bubble, but that was just the most explosive aspect of the bubble which brought the whole crisis forward – there would still have been a crisis regardless of the sub-prime aspect. And indeed the crisis goes on, governments have only succeeded in stalling it momentarily. It’s not just governments who are in too much debt, it’s investors and consumers too. The effects of their deleveraging have been offset by governments taking on debt in an effort to ‘stimulate’ the global economy, but that is not sustainable either in the long term (at least not without the wholesale extension of government), and so the reversal will continue again, as it’s predicted to do.

  28. Driftforge

    I find it somewhat amusing that people think that the fact that the predictive ability of a developing form of economics is not 100% in terms of timing invalidates it as an approach.

    The modelling is still very much in its infancy. What you can tell at this stage is the shape of things to come; not policy responses to it or even the timing of it.

    The fact that we didn’t have a property value collapse is not necessarily good; the potential still exists for that to occur given either a misstep or a decision to bring that about.

  29. Driftforge

    If you want to know timing, or read on historical response to similar situations, go visit Martin Armstrong.

  30. Irving J

    I have been looking at Keen and Martin Armstrong, hard to say how much of the Armstrong’s stuff is outright bullshit, he know his history but his explanations of his computer program just don’t gel.

    Keen’s idea which follows Minsky is that credit market in inherently unstable, probably not something to dismiss since history shows it to be reccuring event. I haven’t read his book though, although I started to read Minskies.

    Keen’s work I feel is going to be heavily polluted because he is taking funding from Soros and we all know what Soros thinks about capitalism.

    Still I think if something of value may come out of Keen’s work it shouldn’t be dismissed out of hand.

  31. michaelc58

    I thought Keen’s debt arguments were compelling, but his ranting about Australia being a police state for legally restoring order in our cities makes him and all his arguments look unhinged. Perhaps that is a pity.

  32. sdfc

    Keen’s arguments about the danger of private sector leverage were and are spot on. It’s a little disingenuous to say that he “predicted 6 out of last 2 recessions” or that is forecasts were just “luck”.

    No economist (as far as I know) can predict the timing of when those factors that seem sustainable all of a sudden become unsustainable. What he has done is call it as he sees it and that can entail being wrong for an extended period.

    As Keynes said the market can stay irrational longer than you can remain solvent, and that statement remains true. To bet against the market you need deep pockets.

    Keen’s downfall in the housing sector debate was underestimating the potency of Australian monetary policy and the lengths that the RBA and the government will go to in order to keep a floor under housing.

    If we see the house price declines he is predicting you can be sure the RBA will cut the cash rate as far as it needs to go to avoid the surge in household bankruptcies that would accompany such a decline.

  33. PSC

    Keen’s idea which follows Minsky is that credit market in inherently unstable, probably not something to dismiss since history shows it to be reccuring event. I haven’t read his book though, although I started to read Minskies.

    We do often see long periods of comparative stability. I don’t know what you mean by “inherently”, but it’s certainly possible to engineer stable credit markets. The US had then from 1935 through 1980.

    For Keen and the bubble – I have never followed why bubbles are necessarily popped in his analysis.

    Also he’s guilty of my pet hate – switching from total debt outstanding in the economy, private sector debt, public sector debt, and public sector debt excluding municipalities/revenue bonds as he feels it strengthens his argument.

    [ Aside for budding economists including Keen: The US muni market is about 20-25% of US GDP. It’s government debt, just as much as the US federal government debt. When you ignore its existence you probably make your analysis worthless from the get-go. ]

  34. .

    That’s a bit harsh on Keen. A handful of economists did predict the crash, and all the ones I can think of were dissidents. the lesson from all this is that there may be, as keen suggests, a kind of structural blindness built into mainstream economics.

    WRONG

    Goldman Sachs picked it. Them and their mother loving neoclassical modelling!

    Keen’s arguments about the danger of private sector leverage were and are spot on.

    No you’re lying, where’s the evidence, go!!!

  35. Jim Rose

    At least Keen managed to predict the financial crisis (and by that I mean not just guess, but lay out in clear terms why we were heading for a recession). How many others managed to? Only a handful

    see Ross Levine’s “An Autopsy of the U.S. Financial System: Accident, Suicide, or Negligent Homicide?” http://www.econ.brown.edu/fac/Ross_Levine/other%20files/Autopsy-4-13.pdf

    the paper studies five important policies:
    • Securities and Exchange Commission (SEC) policies toward credit rating agencies,
    • Federal Reserve policies concerning bank capital and credit default swaps,
    • SEC and Federal Reserve policies about over-the-counter derivatives,
    • SEC policies toward the consolidated supervision of major investment banks, and government policies toward Fannie Mae and Freddie Mac.

    Levine concludes that

    • The evidence is inconsistent with the view that the collapse of the financial system was caused only by the popping of the housing bubble (“accident”) and the herding behavior of financiers rushing to create and market increasingly complex and questionable financial products (“suicide”).

    • Rather, the evidence indicates that senior policymakers repeatedly designed, implemented, and maintained policies that destabilized the global financial system in the decade before the crisis.

    • although the major regulatory agencies were aware of the growing fragility of the financial system due to their policies, they chose not to modify those policies, suggesting that “negligent homicide” contributed to the financial system’s collapse

    • Although influential policymakers presume that international capital flows, euphoric traders, and insufficient regulatory power caused the crisis, the paper shows that these factors played only a partial role.

    • Current reforms represent only a partial and thus incomplete step in establishing a stable financial system.

    • Since systemic institutional failures helped cause the crisis, systemic institutional reforms must be a part of a comprehensively effective response.

    Interesting morsels are

    • The New York Times warned in 1999 that Fannie Mae was taking on so much risk that an economic downturn could trigger a “rescue similar to that of the savings and loan industry in the 1980s,” and again emphasized this point in 2003; and

    • Alan Greenspan testified before the Senate Banking Committee in 2004 that the increasingly large and risky GSE portfolios could have enormously adverse ramifications!

    Taleb (2007) warned that the GSEs “seem to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup”

  36. Adrien

    There was no way to predict what happened in 08/09 as no one really predicted the actual events as it just wasn’t only one factor that contributed to the clusterfuck.

    I distinctly remember posting a link to an article in, I think, The Australian that suggested a crash was around the corner. You wrote it off as alarmism. This was in 07. A few months later you were the one who was alarmed.

    I looked up Keens’ book and didn’t get very far into it. Apparently the Austrians have a disagreement with the Neoclassicals over equilibrium. The Austrians are right, that’s what’s good about them acording to Keen. Keen’s a Keynsian. I guess that figures. He thinks the world would be great if only we were all Keynsians. And Steven Levitt says people are mostly only good when someone’s watching.

    So why are those economically illiterate hippies out on the lawn again?

  37. .

    Adrien,

    Stop being a clod. GS picked it.

  38. jtfsoon

    I have some time for Keen. He is intellectually serious, he clearly knows and understands his enemy, he understands the Austrian school and he is prepared to put his money where his mouth is.

  39. Peter Patton

    If you had to choose between a Goldman Sachs trader and a tenured Macro professor for insight into what is happening, going to happen, I know which I’d choose; and have.

  40. .

    I do too Jason.

    He puts his money where his mouth is and he has tried to model his theories. He’s not some empty spruiker like what Stiglitz has become.

  41. sdfc

    You just get funnier and funnier Dot. Goldman was an insider shorting securities they themselves had sold. Goldman was a beneficiary of the government bailout of their counterparty AIG.

    If you can point me to a neoclassical paper that explains the dynamics of a financial sector insider engaging in such trades and then receiving funds from a government bailout of one of their counterparties I’d be happy to read it. I won’t hold my breath though.

    Excessive private sector debt was at the heart of the GFC. If you’re going to comment on these things a working knowledge of the dynamics might come in handy.

    I know your keen to score points, but it really does make you say some stupid things.

  42. Alex Pundit

    “There was no way to predict what happened in 08/09 as no one really predicted the actual events as it just wasn’t only one factor that contributed to the clusterfuck”

    JC, I’m a bit surprised as it sounds like you haven’t seen Peter Schiff’s videos. He says in one of them that house prices around the end of 2007 would start to come crashing down to earth. He said that in 2005.

  43. sdfc

    PSC

    US non-financial private sector debt was around 170% of GDP in 2007 and is still around 160%.

    If mainstream economics hasn’t learnt that those sort of figures make your financial system and economy extremely vulnerable to shocks then there isn’t much hope for it as a discipline.

  44. sdfc

    Jim

    I had a quick scan through that Levine paper yet can’t find any reference to monetary policy.

    Is he serious?

  45. Leigh Lowe

    “Did he end up walking from Sydney to Mt Kosciusko?”

    No … but he assumed he did for the sake of the “SKS2K Model”

    SKS2K = Steve Keen Sydney To Kosciusko

  46. Leigh Lowe

    Is his book mandated reading for his disciples at Western Sydney TAFE?
    I mean, if Steve has been following his own advice, he must be badly in need of a supplementary earner.

  47. .

    Goldman was an insider shorting securities they themselves had sold. Goldman was a beneficiary of the government bailout of their counterparty AIG.

    They predicted it, eat shit.

    If you can point me to a neoclassical paper that explains the dynamics of a financial sector insider engaging in such trades and then receiving funds from a government bailout of one of their counterparties I’d be happy to read it. I won’t hold my breath though.

    Point me where GS were wrong. In a rambling discourse a long time ago, you insisted that the (non Keynsian, microfoundations models) neoclassical model did not in fact aggregate from microfoundations and it was empirically invalidated. You don’t even understand what a fucking demand curve is. You can eat my shit if you expect me to cite GS so long as you continue on this fraudulent line of argument about macroeconomics.

    Excessive private sector debt was at the heart of the GFC

    Wrong, stop being a flaming idiot. Government guaranteed private sector debt that was encouraged by loose monetary policy and then undertaken by the Government. How many caveats did you tack onto that “fact” to make it true?

    We don’t have the same system here in Australia and we are completely different in the consequences as well.

    The reason why I respect Keynes and laugh my arse off at you is because has tried to model his theories, you insist Keynes’ useless “animal spirits” is some kind of predictive model. John Maynard Keynes or Alison Dubois? Why don’t you go and get your palm read?

    What have you got on me? I misread a graph once. Big fucking deal. You seem to think Australia is on the verge of a US style collapse because we have too much private debt.

    Pull the other one. You have a litany of stupidity and ignorance to apologise for.

  48. Leigh Lowe

    Oh puh-lease.
    Can we give up on this myth that “Steve Keen predicted the GFC”.
    He has been ‘predicting’ the same thing for at least 15 years (and getting it spectacularly wrong 14/15th of the time).
    Basically he shapes his (alleged) Economics around his Socialist world view.

  49. Peter Patton

    They predicted it, eat shit.

    That’s better. Sounds like an authentic Goldman trader! 🙂

  50. daddy dave

    If we see the house price declines he is predicting you can be sure the RBA will cut the cash rate as far as it needs to go to avoid the surge in household bankruptcies that would accompany such a decline.

    sdfc, the inevitable cannot be delayed indefinitely. Or as the Instapundit likes to say, “if something can’t go on forever, it won’t.”

    Therefore, if Keen’s right, there will be a collapse eventually, regardless of the RBA.

  51. Leigh Lowe

    “Did he end up walking from Sydney to Mt Kosciusko?

    Yes.”

    Well … only because his girlfriend wanted to go tobogganing and he had sold his Volvo to pay for taking his own financial advice.

    My financial planning is “Keen Kontrarian” …. as soon as Steve issues a warning of doom I am on the blower to the broker and in up to my elbows.

  52. andreas saccularius

    For Keen and the bubble – I have never followed why bubbles are necessarily popped in his analysis.

    They pop because, with increasing “irrational exuberance” for a particular asset, either prices will be driven so far from fundamentals that this will become obvious and market participation will decrease, or debt levels will become so high that people will be unwilling or unable to take on the necessary debt levels to enter the market (debt servicing taking up an increasingly burdensome proportion of income), causing prices to fall. Or there simply might be some other economic shock, causing a credit squeeze, preventing the debt-fuelled bubble from continuing.

    Minsky, who Keen borrows from, describes three types of borrowers corresponding to the stages of a bubble: those who can repay their loan interest and principal with the expected revenues from their investment; those who can only cover the interest with revenues, but not the principal; and those who can meet neither the interest nor the payment of the principal with their investment revenues, i.e. being reliant entirely on the capital gain to repay their debt. As a bubble progresses, with investors growing more and more optimistic, the latter type, reliant on capital gains to meet their debt obligations, comes to predominate, and the bubble becomes increasingly fragile – without a steady stream of new participants willing to take on increasing amounts of debt, the capital gains will not be met, and they will not be able to repay their loans. Ergo, the whole thing ultimately falls in a heap – although I don’t think this need necessarily happen explosively, it can unwind over time.

  53. daddy dave

    if you make three counter-points, they will all be strong.

    If you make ten counter-points, your critic will respond to the 10th and weakest of your points

    This is very true.

    That’s why it was wise, as I observed on another thread, for Richardson to give one single example of Gillard’s failings, rather than a laundry list.

    That’s why Pilbersek got nasty as he left her with nothing to work with.

  54. .

    Andreas,

    Read Alexander H Shand’s introduction to neo austrian economics, ch 11, an introduction to the business cycle.

    A distortion in capital markets drives the production of consumer goods over capital goods – this drives a fall in productivity and labour demand. At the same time inflation drives more money into hard assets which accelerates the process.

    Minsky isn’t wrong but he is descriptive rather than analytical.

  55. Peter Patton

    Minsky isn’t wrong but he is descriptive rather than analytical

    Who cares? The question is, ‘is he rich’?

  56. sdfc

    Dot

    That’s one hell of a hissy fit. You should have just admitted you don’t know what you are talking about in the first place and saved yourself a lot of time.

    I really don’t care if you read a graph wrong. Shit happens get over it.

    DD

    You’re right it can’t go on forever. While household debt remains at extreme levels the economy is going to be vulnerable to any shock that produces high unemployment. Luckily for us monetary policy in this country is extremely potent thanks to the domination of variable rate mortgages.

    The best case scenario is an extended period of household sector deleveraging to correct the imbalance.

  57. sdfc

    Minsky provides a deep analysis of financial instability across three books.

    You are once again mouthing off with no substance Dot. No surprise there.

  58. sdfc

    Neoclassical legend Irving Fisher developed the Debt Deflation Theory of Great Depressions after being mugged by reality in the 1930s.

  59. JC

    Alex

    My point really is that you can fluke a big call, but you can’t always be right.

    John Paulson who runs a large hedge fund made 25 billion predicting the crash in sub prime. He lost 50% of his fund this year making the wrong calls.

  60. .

    . You should have just admitted you don’t know what you are talking about in the first place and saved yourself a lot of time.

    I’m not taking crap off some idiot who doesn’t know what a demand curve is and thinks that “animal spirits” is a predictive model.

    Minsky provides a deep analysis of financial instability across three books.

    Funny how none of the fanboys can explain how it works in their own words. If they do it is always descriptive.

    Shit happens get over it.

    As GS picked it, eat shit and bow down to their superior predictive ability based on neoclassical models you criticise but don’t even understand.

    Eat shit pal.

  61. .

    Neoclassical legend Irving Fisher developed the Debt Deflation Theory of Great Depressions after being mugged by reality in the 1930s.

    He came up with a few crank theories, this being one of them. What is your point?

  62. No Worries

    At least he put his balls on the line and sold his own house. He lost a substantial amount of money being wrong.

    He sold his house as part of a divorce settlement, but I remember him scoring a few TV interviews on the basis of his “acting upon his dire predictions”.

  63. Rafe

    If house prices stay fairly flat like the last decade with inflation running 2-4% house prices will halve (from the peak) fairly painlessly in another decade or two (or three, two lazy to do the maths).

  64. Peter Patton

    This is Booker prize level dialogue!

  65. .

    Patsy,

    Bring my raw meat and a wench who looks somewhat like Ana Beatriz Barros or fuck off!

  66. Rafe

    Too lazy to check spelling as well:). That comment sat for a long time due to distractions and became disconnected from the comments about collapsing house prices.

    Re Jim’s comment at 8.31, that was a great piece in the New York Times (1999), pointing out that Fannie and Freddie were under pressure from the government to underwrite increasing amounts of bad loans, that housing prices could not go up so fast for ever, and when the bubble came the bailout would make the Savings and Loans buyout ($88B) look like small change. I don’t recall any advanced theory involved,just a conjunction of loose lending, reckless borrowing, government pressure to lend and the expectation that the taxpayers would foot the bill when the inevitable happened.

  67. sdfc

    Dot

    You’re obviously floundering. Putting Goldman’s decision to start shorting products they were selling to clients down to some neoclassical insight is a sign of desperation.

    I’ll do you a favour though and give you an easy out. Can you point me to one neoclassical economist who identified the imbalances that led to the GFC. I’d be interested to know if there were any. You’d be doing me a favour because unlike you I’m open to competing theories.

    You on the other hand obviously feel a little threatened when presented with concepts that don’t fit with your limited knowledge base.

    Irving Fisher a crank? You’ve outdone yourself.

  68. Peter Patton

    dot

    I can’t help with Ana Beatriz Barros, but IT knows a very obliging lass, with three teeth, and a butterfly tat, called Doreen – Dore to her friends.

  69. Infidel Tiger

    If house prices stay fairly flat like the last decade with inflation running 2-4% house prices will halve (from the peak) fairly painlessly in another decade or two (or three, two lazy to do the maths).

    House prices are already substantially down. Perth prices are down 6%+ across the baord just this year. In some suburbs up to 20%. The Gold Coast has been hammered like a nube on schoolies, off at least 40% in the last few years. Prices are down and staying down. Home owners don’t like it, but the RBA has managed it pretty bloody well.

  70. Tom Valentine

    Andreas,if I predict an earthquake in Sydney for 20 years and a small one finally happens,does that make me an earthquake guru?In fact there was no recession in Australia and many professional economists predicted that outcome.

  71. Leigh Lowe

    “He sold his house as part of a divorce settlement, ”

    What?
    Someone actually married this loser?
    Wow! That is right up there with finding out that TWO women on the planet had slept with Gareth Evans (Mrs Evans and Cheryl).

    Please tell me this was some sort of arranged marriage within Economics World .. surely not entered into freely by the lady concerned.

  72. .

    Dot

    You’re obviously floundering. Putting Goldman’s decision to start shorting products they were selling to clients down to some neoclassical insight is a sign of desperation.

    You’re obviously wrong, Goldman Sachs were obviously right.

    I’ll do you a favour though and give you an easy out. Can you point me to one neoclassical economist who identified the imbalances that led to the GFC. I’d be interested to know if there were any. You’d be doing me a favour because unlike you I’m open to competing theories.

    Goldman Sachs.

    You on the other hand obviously feel a little threatened when presented with concepts that don’t fit with your limited knowledge base.

    It’s bigger than you little boy, you do not learn economics by reading fairy tales like Keynes, you don’t even know what demand curves are.

    Irving Fisher a crank? You’ve outdone yourself.

    Only a crank would count Fisher after 1920 as NOT a crank.

    Idiot.

  73. Jim Rose

    The policy of price stabilization, carried out today by central banks all over the world, is mostly based on work done by Fisher between 1895 and 1922, when his The Making of Index Numbers was first published.

  74. .

    Um yes that worked out well after the US boffins decided to use Moore’s Law as a proxy for productivity, NOT.

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