So I think I pretty comprehensively monstered Steve Keen yesterday. That was certainly the feedback from those that attended.
The electronic scoring was a bit convoluted: it measured the shift in the average audience sentiment from bearish (Steve) to bullish (Chris) before and after the debate. On that basis, I won. But I think a simpler Chris vs. Steve voting system would have made the difference much more striking.
While I felt I was able to intellectually tear Steve apart limb-by-limb, I will say this: he is a lovely guy. Very diplomatic and humble in defeat.
As I noted in my presentation, Steve has made some valid criticisms of conventional economics, and its neglect of debt capital market imperfections. And he deserves some kudos for anticipating a credit crisis. But whatever strengths he possesses are overwhelmed by his propensity to make silly statements.
My chief criticism, which I relayed to him privately in addition to vocalising during the debate, is that he massively overstates the explanatory power of his models. Steve arguably got some of the deficiencies in mainstream economics right. But he has yet to show us that he has an alternative model of the world that is demonstrably superior to the existing state of the art.
Put bluntly, Steve has got all his other calls horribly wrong. With the utmost confidence he proclaimed we would have a depression, precipitous house price falls, double-digit unemployment, and so on. Of course, nothing like any of these events came to pass. And Steve complains about the impact of counter-cyclical government policy. Yet this is precisely what he was advocating during the darkest days of the crisis.
In debating Steve yesterday, his tendency to grossly oversimplify and leap to grand and utterly unsubstantiated assertions was repeatedly reinforced. He seamlessly mixes the technical and objective with the purely speculative and spurious.
For example, at one point he showed that he knew little about the tax treatment of Australia’s housing market, or its international peers. And yet he speaks as if he is an expert on the subject.
He rails against the first time buyers' boost, but does not come close to accurately understanding its effects. Earth to Steve: the cheapest suburbs in Australia (read those areas where first time buyers are most active) registered the lowest price growth in 2009. They were not driving the market. On the contrary, the best performers were the most expensive suburbs where first time buyers are few and far between.
There is certainly a place for Steve Keen in our community. Yet he would be well advised to tie his tongue and focus on producing research. Sadly I sense the temptation to excite naïve journalists with meaningless forecasts is all too strong.
