,
The ECEES travelled to Eton College for presentation from
Leading economist and author Steve Keen, lecturer at West Sydney University. He
is known as somewhat of a radical for his views on the study of economics
specifically his scathing views of the flaws in mathematical modelling within
Economics and the lack of validity of much of the Study of Economics. Whilst he is considered an insurgent by some many
people’s opinions resonate with the Keens Rhetoric, his practices validated in
many people’s eyes by his shrewd prophecy of the economic crisis of 2008, which
he attributes to methods which allowed him to view the situation more
accurately and more decisively than his counterparts.
I would need 3000
words and just as many hours to coherently explain in layman’s terms the
specifics of Keens argument, such was the complexity of the talk : In
simplified terms he argued that flaws in the mathematical application of theory
and statistics within the financial world lead to monumental
misinterpretations in forecasts and
financial theory. The skeletal frame of
his argument is that whilst many people use ‘simplified’ static models they
ought to refine these by using dynamic
models as the static models do not account for integral pieces of the puzzle.
He claims that models used by many economists are in desperate need of
refinement as they fail to account for the rate of change of many variables
within markets.
To simplify it in an abstract sense we view economics in
straight lines when in his opinion we are required to appreciate the changes
and gradients of these lines to a far greater degree than many do at present . He
has spent many years as an article in Forbes commented arguing that the basics of Economics study at
present is utter nonsense, as such we had to momentarily abandon preconceived
viewpoints and many facts from the A-level course as we listened to his
compelling take on the flaws of economic study.
In his talk he also challenged usage of equilibrium in
economics, often stating that whilst many still use the idea of the Invisible
hand as taught forcing markets to a point of equilibrium by Adam Smith financial
markets such as the housing market, as he demonstrated using graph software,
has an ability to function in an around but never on the equilibrium point if
one accounts for changes in the financial sector which effect the market
forces. Upon reflection of the talk it is clear that whilst the most competent Mathematicians felt challenged by
the rigor of the maths and the eye strain of tiny diagrams used, Keen none the less equivocal and engaging in teaching complex theory to much
lesser economists in an understandable fashion. Even though he was critical of
much of present economic study, including interesting ‘digs’ at leading
economists such as Paul Krugman , author of – The return of Depression
Economist his talk was academic, mathematically evidenced and to the point of the
matter. Which was a welcome contrast to earlier Eton talks from Liu Xiaoming (littered
with political motif).
He did however take the opportunity to implore the audience, as future economists, to pick up his revolutionary torch and ignite the study
of Economics hoping that we would ‘come through and accept something new’.
If you are also interested in the flaws of the present study
of economics, and the Durastic changes which Keen would have enforced by the
time you reach university you might enjoy his books blog and other articles
check some out below
Catch him on twitter invariably engaging in twitter ‘beef’ tweeting
‘ indirects’ at Paul Krugman and other
economists @ProfSteveKeen
Cameron Alexander
