Forging a Path to Sustainable Development
Edited by Philip Lawn
Chapter 8: Managing without growth in Canada: exploring the possibilities
About the same time that Western governments adopted full employment and GDP growth as primary policy objectives, economists began building econometric models of economies. These models were intended to help them understand the determinants of employment and growth and to test ideas for stimulating employment and growth. Most of the early models were based on the seminal work by John Maynard Keynes into the causes of unemployment and possible solutions (Keynes, 1935). Despite the anti-Keynesian sentiment that became popular in the 1980s and 1990s when monetarism took centre stage, Keynes’s influence on how economists think about macroeconomics remains strong. Models in the sense being used here are of two kinds. They may be mathematical representations of relationships among key economic variables, such as consumption, investment, savings, employment, government taxation and expenditure, international trade, the money supply, interest rates, and prices. Sometimes resources and the environment are also included. Such models can be built and studied based on nothing more than economic theory and mathematics. A second family of models uses data and statistical methods to estimate the theoretically-derived relationships of the mathematical models.
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