Trevor Winchester Swan, Volume II

Frontmatter

Chapter 1. Peter L. Swan The Twin Goals of Internal and External Balance

Abstract

We now come to the first set of papers which made Trevor Swan famous. When Trevor Swan moved to the chair at the ANU he continued to dwell over the problems of internal and external balance which had been concerning him as an advisor to Prime Minister Menzies and even earlier when he was developing his econometric model of the Australian economy.

Peter L. Swan

Chapter 2. Peter L. Swan: The Theory of Economic Growth

Abstract

Having solved the problem of internal and external balance, using a Keynesian kind of model, Swan was able to turn to problems of long-run growth. Amongst Swan’s major theory accomplishments was the independent development of the world's first significant theoretical “growth model” at about the same time as Robert (Bob) Solow (1956) made his contribution which could be, and is, used to analyse the way resources such as labour and capital are combined over time to produce real increases in living standards.

Peter L. Swan

Chapter 3. H. W. Arndt Non-traded Goods and the Balance of Payments: The Australian Contribution

Abstract

“In the interest of historical accuracy and fairness, and without detracting from the merits of Pearce’s synthesis, it should be pointed out that the main ideas which Pearce was synthesizing in his 1961 article had for a decade formed part of an “oral tradition” amongst the group around Trevor Swan at the Australian National University.”

Peter L. Swan

Chapter 4. T. W. Swan Simple Algebra: External Balance, Internal Balance and Price Stability

Abstract

“The following is an English translation of an analysis which, in outline, is due to James Meade”. In it, Trevor Swan considers three objectives for which he assigns three instruments.

Peter L. Swan

Chapter 5. T. W. Swan Economic Control in a Dependent Economy

Abstract

In a system in which private enterprise predominates, economic decisions—what to buy or sell, what to produce or consume, what to lend or borrow, what price to charge or pay—are made by numerous separate persons, firms and institutions. But society has an interest in how all these decisions fit together into a social pattern, and how they add up into certain social aggregates. This reconciliation between the parts and the whole is the responsibility of an economic system and its controlling institutions. In earlier seminars we have considered the theory of Welfare Economics primarily as a critique of the pattern of production and distribution, e.g., contrasting the pattern resulting from a laissez-faire economic system of perfect competition with that of one containing important monopolistic elements, or one in which the State intervenes to regulate the allocation of resources or the distribution of incomes. Now we turn to some social objectives which can be expressed and empirically measured in terms of aggregates (or averages); and the question may be asked, not merely whether a particular economic system serves these objectives well or badly, but whether, with a given structure and institutions, it can achieve them at all.

Peter L. Swan

Chapter 6. T. W. Swan Circular CausationCircular causation

In Myrdal's “simplified mental model”, White prejudice and Negro standards mutually “cause” each other. The greater the prejudice, the lower the standards that Negroes can achieve; the lower their standards, the greater the prejudice against them. At first sight, it seems that any point at which these two forces happen to balance is inherently unstable. “If either of the factors changes, this will cause a change in the other factor, too, and start a process of interaction where the change in one factor will continuously be supported by the reaction of the other factor. The whole system will be moving in the direction of the primary change, but much further”.

Peter L. Swan

Chapter 7. T. W. Swan Longer Run Problems of the Balance of Payments

Abstract

Since Keynes published The General Theory in 1936, it has been widely accepted that the two fundamental propositions of a full employment policy are (a) that incomes and employment depend on the level of spending; and (b) that there is no automatic mechanism to keep spending near its full employment level, without conscious action by economic and financial authorities. But the balance of payments equally depends on the level of spending. Must it be only a happy chance if the “internal balance” and “external balance” levels of spending coincide? Is there an automatic mechanism to ensure this, or what kind of conscious action by the authorities is required?

Trevor Winchester Swan

Chapter 8. W. E. G. Salter Internal and External Balance: The Role of Price and Expenditure Effects

Abstract

This paper illustrates by means of variations on one simple diagram certain features of the relationship between internal and external balance. Its object is merely to indicate the intimate relationships between price and expenditure effects in reconciling full employment policy with balance of payments policy.

Peter L. Swan

Chapter 9. H. W. Arndt Notes on T. W. Swan Population Growth and Economic Development

Abstract

Australia’s immigration programme has recently come under attack on economic grounds. It is argued that there is a natural tendency for population to outgrow Australia’s capacity to earn foreign exchange. Although the attack has in many cases been motivated by dislike of  import licensing, it has a solid core which cannot be brushed aside. Supporters of the immigration programme try to meet it either (a) by pointing to the economic benefits of the programme, such as increase in the size and flexibility of the labour force, or (b) by admitting the criticism but arguing that inflation is one way of paying for development and that, for the sake of rapid development, it is worth putting up with import licensing. The former point is valid but merely mitigates the difficulties; the latter is mistaken.

Peter L. Swan

Chapter 10. T.W. Swan “Orbituary of Wilfred Edward Graham Salter: 1929–1963”

Abstract

Wilfred Salter died in Lahore on 10 November 1963. To all his friends the curriculum vitae and list of publications, which are the substance of this note, seem now beside the point. Yet it is necessary that the Economic Record contain a formal account of Salter's career.

Peter L. Swan

Chapter 11. T. W. Swan Effective Protection with Cobb–Douglas Input Substitution in Domestic Supply

Abstract

Max Corden (1966, p. 235) exposited the calculation of effective rate of protection with fixed input output coefficients. In a previously unpublished note, Trevor Swan exposits the calculation of effective rates of protection when there is substitutability between inputs.

Peter L. Swan

Chapter 12. T. W. Swan Overseas Investment in Australia: Treasury Economic Paper No. 1

Abstract

This paper might be labelled No. 2 for the first on the subject was published by Roland Wilson in 1931. Wilson even then, before he had actually been recruited by the Treasury, was a great Treasury officer and a great economist.

Peter L. Swan

Chapter 13. T. W. Swan Perceptions in Kaleidascope

Abstract

A book review by Trevor Swan of Arndt, H. W. (1985), A Course Through Life: Memoirs of an Australian Economist, National Centre for Development Studies, Australian National University, Canberra, pp. ix +117.$A10.00.

Peter L. Swan

Chapter 14. Peter L. Swan “Why ABS Volume GDP Figures Can Be Misleading”

Abstract

Alan Hall (1926–2019) was one of Trevor Swan’s longest serving and dedicated departmental members as well as a close friend. In fact, the close relationship went back a generation since Alan Hall’s father taught Trevor Swan at Canterbury Boys High School when Trevor was dux of the School. Alan Hall was concerned that Trevor Swan’s work on the balance of payments and the terms of trade remained unfinished business as far as the Bureau of Statistics is concerned. This is still the case.

Peter L. Swan

Chapter 15. John D. Pitchford Trevor Swan’s 1956 Economic Growth “Seminar” and Notes on Growth

Abstract

Trevor Swan’s “Economic Growth” notes were written and distributed before the publication of what has become known as the Swan model of growth. Here I provide some further background on the preparation of this work, give a commentary on the notes and draw attention to the farsightedness of Swan’s early contributions to this literature.

Peter L. Swan

Chapter 16. T. W. Swan Economic Growth

Abstract

In Chart (1), the line \(\frac{Y}{L}\) shows real output per worker, in a given productive environment, as a function of \(\frac{K}{L}\) (the slope of \(\frac{Y}{L}\) rises from left to right, because each unit of labour is more productive the larger the capital stock it has to work with. (Consider only the heavier inked lines for the moment.) The other three curves can all be derived without any additional data once the Curve \(\frac{Y}{L}\) is known. \(\frac{Y}{K}\), real output per unit of capital, is obtained simply by dividing \(\frac{Y}{L}\) at any point by the corresponding value of \(\frac{K}{l}\). The curve \(R\) shows the marginal productivity of capital \(\left(=\frac{dY}{dK}\right)\)—the rate of return in terms of product \(Y\) for a small increase in \(K\), unaccompanied by any increase in \(L\); the level of \(R\) is the slope of \(\frac{Y}{L}\) at the corresponding point.

Peter L. Swan

Chapter 17. T. W. Swan Economic Growth and Capital Accumulation

Abstract

“The aim of this paper is to illustrate with two diagrams a theme common to Adam Smith, Mill and Lewis; the theory of which is perhaps best seen in Ricardo: namely, the connection between capital accumulation and the growth of the productive labour force. The neoclassical economists were in favour of productivity and thrift, but never found a way to make much use of them. Earlier views were much more specific: for example, Adam Smith’s industry “proportioned to capital”, Ricardo’s Doctrine of Unbalanced Growth, Mill's “Irish peasantry, only half fed and half employed”, now so familiar in the work of Harrod, Nurkse or Lewis, and in a hundred United Nations reports. Nevertheless, our illustration takes a neoclassical form, and enjoys the neoclassical as well as the Ricardian vice.”

Peter L. Swan

Chapter 18. Robert Dixon Trevor Swan on Equilibrium Growth with Technical Progress

Abstract

The recent publication of Swan’s “Economic Growth” paper (Swan 2002), which preceded his famous 1956 Economic Record article, and the commentary by Pitchford that accompanies it (Pitchford 2002) provides an opportunity to draw attention to an important difference between Swan’s exposition of neoclassical growth and that of Solow’s published in the same year. Peter Swan’s introduction: In Trevor Swan’s early version of his growth model, first published as Swan (2002) and included above, he warns that Solow’s (1956) article “is in several respects misleading”. While we will never know exactly what he meant by this, the most likely explanation was Solow’s focus on the capital–labour ratio rather than on Swan’s output–capital ratio. This meant that Solow’s treatment of technical progress contained a slip. Robert Dixon (2003) provides an excellent account of why this fundamental difference in focus led Solow into error. Dixon’s important contribution is included here. In assessing Dixon’s contribution, it must be recalled that with the Cobb–Douglas production function assumed by both Swan and Solow that both Harrod-neutral labour-augmenting and Hick’s-neutral technical change amount to the same thing. But for more general production functions only labour-augmenting technical change is compatible with the steady state.

Peter L. Swan

Chapter 19. Robert W. Dimand and Barbara J. Spencer Trevor Swan and the Neoclassical Growth Model

Abstract

Addressing an American Economic Association session celebrating the fiftieth anniversary of his 1956 “Contribution to the Theory of Economic Growth”, Robert Solow (2007, 3) issued a pointed reminder to his audience: “If you have been interested in growth theory for a while, you probably know that Trevor Swan—who was a splendid macroeconomist—also published a paper on growth theory in 1956. In that article, you can find the essentials of the basic neoclassical model of economic growth. Why did the version in my paper become the standard, and attract most of the attention?”

Peter L. Swan

Chapter 20. T. W. Swan Growth Models: Of Golden Ages and Production Functions

Abstract

In this paper I intend to ask more questions than I can answer, and mainly to urge that economists need to consider very closely what it is that theories of economic growth are about, what questions they are trying to answer, if economic theory is not merely jejune mathematics. We also know that if we were asked to think about a five-year plan for India we would not look to economic theory for ready answers: we would need to learn a great deal about India, for more from economic theory than that it might help us with some basic insights as to how to set about the task.

Peter L. Swan

Chapter 21. T. W. Swan Technical Progress in Balanced Growth

Abstract

My original proof was defective in that it did not specify that balanced growth solution must exist for a range of values of s.

Peter L. Swan

Chapter 22. N. G. Butlin and R. G. Gregory Trevor Winchester Swan 1918–1989

Abstract

Let us indeed speak loudly for him. Trevor Swan was wont to preface his papers with a quotation. We follow his example in honouring him. Trevor was born in Sydney on 14 January 1918. He died on 15 January 1989. In the interval, a meteor shot through the Australian sky, more brilliant than any before or since.

Peter L. Swan

Backmatter