Keynes's trade cycle: a system dynamics model

John Harvey

Journal of Post Keynesian Economics, 2013, vol. 36, issue 1, 105-130

Abstract: One of the core premises of post Keynesianism is that a proper understanding of the macroeconomy demands a dynamic analysis set in historical time. The default tool of mainstream economics, the general equilibrium framework, cannot possibly capture such a world. The goal of this paper is to suggest an alternative that allows for path-dependent, holistic analysis: system dynamics. Developed in the 1950s by Massachusetts Institute of Technology engineer Jay Forrester, not only does the worldview it embraces share much with that of post Keynesians, but there are many resources from which to draw including a wide literature, ready-made software, and numerous how-to guides. The paper provides an introduction to system dynamics and builds a model of Keynes's trade cycle theory.

Date: 2013
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DOI: 10.2753/PKE0160-3477360106

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