An interview with Steve Keen

IIPPE in Brief Issue No. 12

conducted by Ewa Karwowski

Ewa Karwowski: You recently joined Kingston University as the Head of the Economics Department. What are your first impressions of the department?

Steve Keen: The Department has a strong heterodox orientation with people like Engelbert Stockhammer, Paul Auerbach and Julian Wells. There already is a range of staff, which is inclined in that direction. It’s a very friendly Department and it also has a Dean who is aware of the philosophical divides in economics, which is an advantage.

EK: As you mentioned, Kingston is known for being one of the few departments in the UK that teaches mainstream alongside heterodox economics. What is your understanding of economic pluralism and how can it be taught?

SK: I’m a critic of neoclassical economics, which I would say is a failed research programme. I’m equally a critic of conventional Marxian analysis – the labour theory of value. So I’m not just a left-wing critic of sound right-wing neoclassical economics. I am trying to be an analytical and logical critic of bad economics wherever it turns up. So I think the neoclassical school should be consigned to the history of economic thought but at the same time there is nothing completely available to replace it. One of my favourite parables is the ‘Blind Men of Hindustan’. It’s a parable about six blind men who try to work out what an elephant is. So one grabs the trunk, another grabs the body, another grabs the tusk and they all have totally different ideas what an elephant is. In some way that’s the state of different theories of economics. The basic ones are: Austrian, Post-Keynesian, Marxian, evolutionary, ecological and complex systems. They’re all different perspectives on capitalism as a social system. None of them has got a complete answer. The reason for pluralism is that we have no cohesive alternative. It is up to us to provide as much exposure to students as they can get from a range of views and say to them: It’s your task to build the alternative.

EK: You have been a prominent critic of mainstream economics. Some heterodox economists regard the use of mathematics in economics as the root of the problem. What is your view on economic method?

SK: If economists had done mathematics well this would not be a discussion point. Economists have abused mathematics in all sorts of ways. There are mathematical errors in some of their arguments. My main contribution to taking down conventional neoclassical economics is the point that the conventional Marshallian standard theory of the firm is mathematically false. And they will not listen to that complaint. Sraffa showed that the neoclassical definition of capital couldn’t work. That wasn’t listened to. So there is a whole range of critiques that have been done using mathematics that they ignored. If you actually reflected on the mathematics properly economic theory would have evolved dramatically differently; it wouldn’t be what it is right now. So it isn’t that mathematics has led economics astray, it is that economics has led mathematics astray.

EK: How do you assess the prospects of genuinely heterodox/pluralist ideas succeeding in (a) economic teaching and (b) policy debate?

SK: Neoclassicals, Marxists, Post Keynesians and Austrians all believe in their analysis fervently but there is nothing like an accepted set of tools of empirical evaluation that would mean that they reject their views. So the neoclassicals’ response to the crisis (and the students’ call for change) has been to reshuffle what they present as their paradigm to students. It’s not fundamental change. The problem comes from the fact that even though you can go through a process like the financial crisis – as huge as that was and entirely unanticipated by any neoclassical model – you continue to believe (as the neoclassicals do). How do you shake that? We can’t just rely on something like the economic equivalent of the Michelson-Morley experiment that got rid of Maxwellian theory of radiation and brought in the transition to quantum-mechanics because that respect for empirical contradiction doesn’t exist in economics. We only will get fundamental change if we have another financial crisis because this one wasn’t enough to shake the confidence completely. The neoclassical response is: ‘Oh well, this was an unexpected shock. We didn’t anticipate how big the shocks from the financial sector would be’. But if they actually believe that then that big a shock wouldn’t happen twice in a lifetime. What if it happens twice in ten years? I think it will happen again because the causes of the crisis – private sector debt – have not been addressed at all. You need a sense of despair to shift economics and I think that’s what happened back in the 1930s.

EK: Any final words?

SK: To students I would say: Try to have faith in yourself! The biggest pressure that you are going to face when you argue against your university academics is their air of effortless superiority. They have already learnt all this stuff. They know why they’re right. They can understand your disquiet, but they know that if you learn more you’ll understand that they’ve been teaching the right stuff; and that you don’t need all this pluralist nonsense. Have faith in yourself: You’re right and they’re wrong!