The Conspiracy Against Steve Keen and Others

Paul Krugman recently posted on predictions of the crisis before it happened, in a piece entitled “Non-prophet Economics”. It had a set of propositions about how one should evaluate such claims with which I completely and utterly agree. I’ll quote it in its entirety, because it’s an eminently suitable starting point for evaluating whether a prediction was in fact made:

So as I see it, we should first of all be evaluating models, not individuals; obviously we need people to interpret those entrails models, but we’re looking for the right economic framework, not the dismal Nostradamus.

Second, we should be evaluating models and the individuals who claim to have these models based on broad performance, not single events; if your approach (say) predicted the housing crash but then also predicted runaway inflation from Fed expansion — I assume everyone knows who we’re talking about [for those that don’t, Krugman is referring to Peter Schiff] — it’s not a good approach.

Finally, I think we’re looking for conditional predictions — what happens given events that are themselves not part of the model — not absolute predictions. It was, for example, very hard in the fall of 2011 to know how the ECB would respond to the escalating financial crisis in Europe; failing to predict that Mario Draghi would find a way to funnel vast sums to debtor nations through discounting would have lost you a lot of money, but wasn’t really a failure of the economic model.

This is an excellent set of criteria—all I would add is one more in a similar spirit, that the model has to be evaluated on its own grounds, and not on grounds that suit a different approach to modelling. For example, a model that is purely a simulation can’t be rejected because it doesn’t make an empirical prediction based on current data, nor can models that acknowledge “the butterfly effect” (that a complex system can’t be predicted beyond a very limited horizon) be criticized for not getting the timing of an event right.

With that one addition, Krugman’s guidelines state precisely what I wish Neoclassical economists (and others) would do. Unfortunately it’s not what they d0 – Read more at Business Spectator  it is well worth reading.  Then come back for the bit from Paul Davidson, economist and journal founder, over the fold.

Steve Keen correctly notes there is an implicit-if not explicit- Neoclassical mainstream conspiracy against Post Keynesian economics. Unfortunately, many economists are unknowing co-conspirators — as I will explain below — after a brief mention of history..

The JOURNAL; OF POST KEYNESIAN ECONOMICS [JPKE] was started 35 years ago by Sidney Weintraub and myself with the some financial support of people like Ken Galbraith. Ken and others wanted to create a publication outlet for economists who were trying to develop an alternative analysis to mainstream economic theory — whether it was the orthodox classical monetarist, efficient market theory of Chicago — or even the Neoclassical Keynesian theory of MIT,

In fact, Steve’s 1090′s theory article was published in the Journal of Post Keynesian Economics [ and I am reasonably sure it would not have been published in most orthodox economic journals such as the AER, the EJ, RES, etc.] -So the JPKE played an important role in helping Steve generate interest in his theory and analysis.

Also the John Hicks’ article stating explicitly that he [Hicks] now recognizes that his ISLM model is not a correct interpretation of Keynes’ General Theory analysis was published in the JPKE. [How many think that mainstream journal editors would have published Hicks’s repudiation of his 1937 interpretation of Keynes? As a friend of John Hicks, I can tell you he did not think anyone except the JPKE would publish that article.]}

I could go on with other contributions that have been promoted by the JPKE that might never seen the light of day without the JPKE publication. But now to the coconspirator part of my message.

How, you may ask, are many economists, heterodox or otherwise, co-conspirators with neoclassical theorists to ignore and thereby contribute to the demise of Post Keynesian theory?

As universities have see financing difficulties increased, many university libraries (as well as individual professors) have been reducing their subscriptions to professional journals.
Subscriptions to the JPKE have fallen off significantly in the last four years — since the global financial crisis has created a Great Recession which is still upon us despite some tepid economic growth. I would think that the economics profession needed more, not less, journals promoting economic analysis and policies that did not promise that the market would, by itself, solve our economic problems –in the long run..

With this significant fall in subscriptionsto the JPKE, consequently, the Journal of Post Keynesian Economics is clearly in danger of having to go out of business unless we can pump up subscriptions so that the publisher at least does not find this publication a drain on his cash flow.

Professors and members of research institutions are therefore coconspirators if they have not checked to see if their institutional libraries have not continued to subscribe, or do not subscribe, to the JOURNAL OF POST KEYNESIAN ECONOMICS. Hopefully many economists would also have an individual subscription to the JPKE — but especially if they do not, they must insist and put pressure on their librarians to subscribe to the JPKE.

Help is essential for survival of alternatives to mainstream analysis!

Real World Economic Review comment

 

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