On the program, Steve Keen said a number of things I contest are false.  He said that mainstream economics ignores banks;  ignores money, or when it doesn’t, simply treats money as a veil.  He said that you can’t publish in top journals without the assumption of rational expectations.  All of these things are false, as a quick Google with some names I suggested in an earlier post will reveal.

The exchange got to the heart of why Steve said these things.

He had two somewhat different answers.

One was that his contribution was ‘edited down’.  Implying that there was a fuller, qualified set of statements not all of which were broadcast, but whose totality could be said to be fair comments.

A second, however, was that his words were ‘shorthand’.  Specifically, when he said ‘you can’t publish papers in top journals without rational expectations’ he didn’t mean that.  He meant ‘you can’t publish papers in top journals without the whole neoclassical edifice.’ This response was to cover my comment that top journals are full of papers that don’t have rational expectations [by Sargent, Marcet, Nicolini, Ellison, Williams, Evans, Honkapohja, McGough, Mitra, Bullard, Brock, Hommes….].

However, these journals are also brimming with empirical finance papers trashing modern finance theory;  of empirical macro papers trashing RBC and New Keynesian theory.  And they are full of behavioural economics and behavioural finance theory papers.  Are those papers that are counted as having ‘the whole neoclassical edifice’?  If we get rid of rational choice, do we still have ‘the whole neoclassical edifice?’  If we dump entirely the project of erecting a theory and have an econometrician demolish one, do we still have ‘the whole neoclassical edifice?’

And when he said ‘mainstream economics ignores money’ [which would be somewhat mysterious for Messrs Kiyotaki, Wallace, Wright, Lagos, Moore, Karecken, Williamson to grasp] he meant ‘mainstream economics has models of money that I think are incorrect’.  [I guess this because he cited my own blog posts questioning whether we yet had a proper model of money].  Presumably the same goes for the claim that ‘mainstream economics ignores banks’ [which Bernanke, Gertler, Gilchrist, Brunnermeir, Carlstrom, Fuerst, Diamond, Dybvig, Keister, Gale, Allen…. would also find peculiar].

Steve calls this ‘shorthand’.  I don’t think this is respectable intellectual discourse on his part.  In my own ‘shorthand’, I’d say that Steve’s characterisation of mainstream economics is ‘made up’ to wage war.  But it’s a desperate tactic.  There are lots of good points to debate about the state of economics and economics teaching, [many made by Karl Whelan, and by Diane Coyle and Andy Haldane, for example, in January’s Prospect] but, by association, Steve weakens the movement he hopes to lead.