Comments on Paul Davidson's 'Full Employment, Open Economy Macroeconomics, and Keynes’ General Theory: Does the Swan Diagram Suffice?'

9 Pages Posted: 22 Feb 2016

See all articles by Peter Temin

Peter Temin

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

David Vines

University of Oxford - Balliol College - Department of Economics; Australian National University (ANU); Centre for Economic Policy Research (CEPR)

Date Written: December 2015

Abstract

This is a response to a critique by Paul Davidson of our 2013 book Keynes: Useful Economics for the World Economy and related work, where we describe, amongst other things, how the Swan diagram can be used to show how economies can use policy tools to achieve internal and external balance. In his article “Full Employment, Open Economy Macroeconomics, and Keynes’ General Theory: Does the Swan Diagram Suffice?” Davidson rejects our use of the Swan diagram and argues that it distorts Keynes’ own views. We show here why Davidson’s critique is incorrect, inconsistent and ahistorical.

Keywords: Swan Diagram, balance of payments, fiscal policy, neoclassical Synthesis Keynesianism, Post Keynesianism.

JEL Classification: B3, E12, E42, E61, F33, F41

Suggested Citation

Temin, Peter and Vines, David, Comments on Paul Davidson's 'Full Employment, Open Economy Macroeconomics, and Keynes’ General Theory: Does the Swan Diagram Suffice?' (December 2015). Institute for New Economic Thinking Working Paper Series No. 36, Available at SSRN: https://ssrn.com/abstract=2735600 or http://dx.doi.org/10.2139/ssrn.2735600

Peter Temin (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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David Vines

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Centre for Economic Policy Research (CEPR)

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