Why CfESI Exists

CfESI is committed to developing a realistic basis for economic analysis.

For far too long, economics has been dominated by an unrealistic theory–known as neoclassical economics–which portrays the market economy as fundamentally stable, and which argues that the level of private debt has no impact on how the economy performs. This is why the economic and financial crisis that began in 2007 took economists and policy makers completely by surprise.

The crisis was not a surprise to all economists–especially those from non-mainstream schools of thought–and some of these went public with their warnings of an imminent crisis. Their prescience was recognized by the Real World Economics Review, which instituted the Revere Award to acknowledge “the three economists who first and most clearly anticipated and gave public warning of the Global Financial Collapse and whose work is most likely to prevent another GFC in the future”.

The winners were CfESI co-founder Steve Keen of the University of Western Sydney, Nouriel Roubini of New York University, and Dean Baker of the Center for Economic and Policy Research.

Academic economics is extremely resistant to change, and despite the failure of neoclassical economics to anticipate the crisis, it still dominates teaching, research, and funding at universities throughout the world. CfESI exists to try to correct this extremely “unlevel playing field” by providing funding from the public to non-orthodox economists.

These economists need more than just financial support if they are going to be able to develop a realistic economics that can replace the failed neoclassical school. They also need a public forum, and the support of committed and capable individuals who can develop alternative economic policies and support them in public debate.

What CfESI Does

The overall aims of CfESI are:

• To develop a realistic theory of economics that acknowledges the inherent instability of capitalism–an instability that can be both creative and destructive; and
• To develop and promote economic policies that lessen the destructive instabilities of capitalism and enhance its creative instabilities

The overwhelmingly destructive instabilities in capitalism emanate from the financial sector’s proclivity to finance “Ponzi Schemes”. These inflate asset prices by causing the level of private debt to not merely rise faster than income, but to accelerate. and they inevitably end in financial “busts” like that of 2007.

The first economist to systematically analyze this process was the late Hyman Minsky, who developed what he called the “Financial Instability Hypothesis” as an explanation for events like the Great Depression.

His work is carried on today by a handful of non-neoclassical economists. CfESI endeavors to help them by providing funding raised by membership and donations. CfESI has a Research Committee that evaluates proposals, and provides financial support for them when they are judged to be of outstanding merit and consistent with CfESI’s objectives. The current projects supported by CfESI are

• The development of “Minsky”, a computer simulation software program that is suitable both for both teaching and research. The initial development of Minsky was financed by a grant from INET to Professor Steve Keen of the University of Western Sydney. This project extends the first version of Minsky to enable it to model input-output dynamics.
• Maintaining and extending a credit and debt oriented global economic database, currently known as EconoData.