Steve Keen

Most of Steve Keen's recent work focuses on modeling Hyman Minsky's financial instability hypothesis and Irving Fisher's debt deflation.[5][6] The hypothesis predicts an overly large private debt to GDP ratio, can cause deflation and depression. Here, the falling of the price level results in a continually rising real quantity of outstanding debt. Moreover, the continued deleveraging of outstanding debts increases the rate of deflation. Thus, debt and deflation act on and react to one another, resulting in a debt-deflation spiral. The outcome is a depression. Steve Keen argues the current global economic crisis is the result of too much private debt.

Keen's full-range critique of neoclassical economics is contained in his book Debunking Economics.[7] Keen presents a wide variety of critiques on neoclassical economic theory. He argues they show neoclassical assumptions which are fundamentally flawed. Keen claims several neoclassical assumptions are empirically unsupported (that is, they are unsupported by observable and repeatable phenomena) nor are they desirable for society at large (that is, they do not necessarily produce either efficiency or equity for the majority). He argues economists' overall conclusions are very sensitive to small changes in these assumptions.

Keen has attempted to counter Karl Marx's theory (in his view Marx's pre-1857 view, specifically) from a post-Keynesian perspective, by arguing machines can add more product-value over their operational lifetime than the total value of depreciation charged "during those asset lives".

For example, the total value of sausages produced by a sausage machine over its useful life might be greater than the value of the machine. Depreciation, he implies, was the weak point in Marx's social accounting system all along. Keen argues all factors of production can add new value to outputs. However he gives credit to Marx for contributing to the "financial instability hypothesis" of Hyman Minsky.[8]

Keen's book closes with a survey of various schools of heterodox economics, concluding "None of these is at present strong enough or complete enough to declare itself a contender for the title of 'the' economic theory of the 21st century." However, he argues neoclassical economics is a degenerative research program, not generating new knowledge. It primarily grows a belt of protective auxiliary hypotheses to shield its core beliefs from critique. There is an accompanying website which provides more detailed mathematical expositions.

Keen's work has also focused on refuting the neoclassical theory of the firm, which argues firms will set marginal revenue equal to marginal cost. Keen notes empirical research finds real firms set price well above marginal cost: they charge a markup, often cost-plus pricing.

Keen's article on "profit maximisation, industry structure, and competition"[9] has had counter-arguments by Paul Anglin.[10] Chris Auld has additionally shown that Keen & Standish's argument is inconsistent with standard assumptions used in perfect competition, and their analysis uses calculus improperly.[11]

In August 2015, Keen endorsed Jeremy Corbyn's campaign in the Labour Party leadership election.[12] As of October 2021, Keen plans to run as a senate candidate in the 2022 Australian federal election for The New Liberals in New South Wales.[13][14]

Keen was in favour of the UK leaving the European Union, stating mainstream economists were over-certain and exaggerating the likely effects following the country's withdrawal. Keen regards the open-borders free-movement policy of the EU as precipitate and unsustainable in the absence of a common fiscal policy; all the more so, given how migrants impose burdens on public services in destination countries also experiencing austerity.

He also states the Euro is destined to fail, not least because of the way it penalises recession-hit countries unable to pursue expansive fiscal policy, and indeed considers the whole EU project as a failed one destined for[15] collapse.[16]