great and very useful book. It is seductively well written, and the
subtle points, that are clearly recognised by the author, might easily
be overlooked by the readers. My suggestion for a next edition is to
split the book in the two books that it actually consists of. This
would also give more room to drive the subtleties home.
I may emphasise again that I see a quite parallel line of thinking with
my own analysis. I hope that others will see this too, and that they
will see that there indeed is something to the arguments.
Cox & Alm: “Myths of rich and poor”
Cox and Alm (1999) wrote a book that one shouldn’t buy. Though the book
contains almost 50 pages of footnotes, it is not a scientific but an
ideological and highly contorted book. Many of the arguments are at the
level of ‘An apple a day keeps the docter away’ - superficially
convincing but nonsense at a quick closer look. As such it gives a good
idea of what science is up against - and it is not a pretty sight.
In their preface the authors refer to a list of books that spell
America’s doom, and they rightly comment that “spreading the bad news
has become a cottage industry” (p ix). My problem with their list of
books is that it hardly contains any serious economic study. They don’t
refer to Krugman (1994a, b), while stagflation is a real economic
issue. Of course, if you are a victim of such ‘doom books’ then you
might benefit from Cox & Alm’s exposition, but then you shouldn’t
forget about the serious literature, and the authors should warn about
that.
One of the reasons why the book is unbalanced is that it seems to serve
two goals. On one hand the argument seems to be that America is doing
well ‘on average’ (and even for the majority of the people) and on the
other hand the argument seems to be that the poor are not as poor as
claimed. This creates the contortion that, when it is shown that the
average American home now contains many electronic gadgets, there
apparently is also the suggestion that this would be true for the poor
- while this certainly cannot be the case. Conversely, where it is
argued that many of the legally poor actually are retired people with
$300,000 valued homes, then this indeed is useful to note (and points
to a possible error in America’s laws) but it doesn’t clarify anything
about the working poor.
The authors intend to shake up America from a sense of doom, and the
book contains a lot of hyperbole of the kind that ‘things really are
OK’. The authors of course are right that there has been hyperbole
about American failure. Their suggestion that this sense of doom
originates from the midlife crisis of the baby boom generation, may
well be true too. Cox and Alm likely are right as well that emotions
with such deep psychological roots require tough counter-measures. But
their argument remains unbalanced. If the penis is the problem, please
stay away from economics ! Not surprisingly, they often misrepresent
the real issues in the economics debate.
A positive point about the book is that it provides a number of facts
on the American situation that may not be available in this conjuction
elsewhere. Such facts for example concern some basic results of the
University of Michigan Panel Survey on Income Dynamics, the plots of
the diverging of data series on average hourly wages and total wage
compensation (that includes fringe benefits such as health care), and
an overview of the findings of various authors on the overestimate of
the Consumer Price Index.
It is an entirely different subject how Cox and Alm use these data.
About the image of doom they first suggest that ‘the argument rests’
(p4, they don’t say who gives this argument) on the hourly wage index.
Then Cox and Alm come to the rescue, and show that total compensation
has actually be on the rise. Gentlemen, please, this is no way to
behave in a civilised discussion: (a) say who gave this argument, (b)
serious economists always consider total compensation, so - especially
when you write a book that mentions trivialities such as that computers
get cheaper every year - also explain why your hour wage index would
not include fringe benefits. (In other words, the note on p215 on ‘wage
data’ does not explain much.) (c) a discussion on poverty is not about
averages, (d) and it is entirely misleading to suggest that _per capita
income_ is a good indicator, for either average or the poor, since this
includes the profits and interest of the capital owners.
Similarly, the Income Dynamics data show that people from the lowest
5th quintile can migrate to the higher quintiles . OK, many students
first are poor and later earn a good living. The point of the poverty
debate however is that many of the poor are not students. Mutatis
mutandis for others who manage to escape. And even for students one
might question why they should live in poor conditions. Cox and Alm
again misrepresent the issue.
Cox and Alm spend pages on illustrating the various technological
improvements since the 1950’s or even the 1970’s. The argument e.g.
that the PC has come about since the 1970’s, and has gone down in price
enormously, is of course of little value to the poor person who cannot
afford it anyway. The argument that ‘we benefit from cheaper products’
is rather contorted. Cox and Alm have a point that incorporating
technological improvements is a difficult issue in statistics. Still,
it is not a new point, and giving a list of gadgets is not a sufficient
method to settle the price index problem either.
The authors refer to p182 to Maslow’s theory of psychological stages.
The suggestion is a bit that the poor should be happy that they at
least have their physiological necessities, and that self-actualisation
is a luxury limited for the rich. One would hope that Maslow’s theory
will be applied more critically. Even a poor person or even ‘primitive’
societies can have degrees of self-actualisation. These aspects are so
much part of the definition of being ‘human’ that they do not represent
a sequential order, but are relevant simultaneously, with different
degrees and formats depending upon economic and social means and
conventions.
Another way to look at this book is to see that it highlights many
predicaments in the debate on poverty, so that it shows that the issue
of poverty is not as simple as many may think - including, apparently,
the authors themselves.
Cox and Alm summarised their argument in the article “Why Some
Americans Want More Poverty” in the Wall Street Journal, European
edition, November 10 1999. To show how convoluted some arguments are, I
can usefully quote that article, and then comment on it.
“America could soon get a lot poorer.
The U.S. Census Bureau is experimenting with a new formula that would
raise the poverty threshold for a family of four to $19,500 from
$16,660. Through a simple change of definition, one that has nothing to
do with economic realities, 12 million Americans might become “poor”
overnight.
It’s true that existing measures of poverty are riddled with flaws. But
the problem isn’t that they underestimate poverty; it’s that they
overestimate it. When we’re trying to determine well being, the proper
yardstick is consumption, not income. They aren’t the same thing —
especially among the poor. The poverty rate tells us how many Americans
earn low incomes, not what they’re able to buy.
Households in the bottom fifth of the income distributon consume well
beyond their earnings. In 1997 an average low income household made
$7,086 year before taxes. Consumption — what the poor spent, not what
they earned — totaled $14,670.
How can poor families consume more than they earn? Many supplement
their income through welfare, Food Stamps, unemployment benefits,
Medicare, Medicaid, school lunches, rent subsidies and other programs,
all of which the statistics leave uncounted. And the poverty
statistics ignore wealth, which can be more important than current
income. Workers temporarily laid off don’t get paychecks but they often
have savings to fall back on. Although many retirees earn low incomes,
their houses, cars and furnishings are paid for, and they’ve got nest
eggs. In 1993, 302,000 families with incomes of less than $20,000 lived
in homes worth more than $300,000.
When you’re really poor, everything you see is something you can’t
have. But over the years, the poor have gained access to more goods.
Government statistics show that poor households own many of the
consumer goods usually associated with middle class life in the United
States.
The percentage of poor households with washing machines rose to 72% in
1996 from 58% in 1984. Ownership of dryers went to 50% from 36%.
Two-thirds of poor families had microwave ovens in 1996, up from one in
eight a decade ago. Ninety-seven percent of poor households have color
televisions, and three-fourths have videocassette recorders. Almost
three-quarters of poor families own at least one car.
By the standard of day-to-day living — the standard that really
matters — the poor have gotten much richer. Indeed, poor households in
the 1990s are in many ways better off than average families in the
early 1970s. Two-thirds of poor households had air-conditioners in
1997, compared with less than a third of all households in 1971. And it
wasn’t a welfare program that made it possible; it was the free market
which has introduced innovative new products and brought the prices
down.
Spending patterns help explain how the poor can afford more of the
trappings of middle-class life yet still not escape the poverty
statistics. Among American households below the poverty line, outlays
for food, clothing and shelter were 37% of consumption in 1995,
compared with 52% two decades earlier, 57% in 1950 and 75% in 1920.
Thus poor households have considerably more discretionary income than
they once did.
One reason is that the U.S. government has already been raising the
poverty threshold too quickly. For more than three decades the
government has been adjusting the poverty line every year for
inflation. The Boskin Commission concluded in 1996 that the consumer
price index overstates the actual rise in the cost of living by a
percentage point a year. What’s more, the overall CPI has risen 40%
faster than the cost of groceries since 1965.
The crux of the debate over the proposed new statistics is tbe purpose
of measuring poverty. As originally conceived, the poverty statistics
were meant to be diagnostic. They emerged in the mid-1960s as a
benchmark for President Johnson‘s “war on poverty.” What Americans
wanted to know then—what they should still want to know today—is
whether they’re reducing tbe number of families struggling to obtain
the basic necessities of life.
The answer is yes. A recent Heritage Foundation study examines the
incidence of the bedrock problems of poverty—malnutrition, crowded
housing and lack of access to medical care. It concludes that 8.7
million Americans, or just 3.7% of the population, make up the
nation’s “hardship population”—the truly poor.
In 1993, University of Texas economist Daniel Slesnick recalculated the
poverty rate based on spending rather than income. To remove the
vagaries of inflation, he established the poverty threshold at three
times the cost of a nutritionally adequate diet for all members of a
household. Mr. Slesnick’s results show that the proportion of poor in
the U.S., measured by consumption, has fallen steadily, from 31% in
1949 to 13% in 1965 to 2% at the end of the 1980s.
It’s not hard to discern the political agenda of those who want to
conjure up another 12 million poor people. Having more poor families
enlarges the constituency for programs that dole out money to the
poor. But if it’s simply a matter of deciding which families are
eligible for government programs, then the issue really comes down to
how much American’s are willing to sacrifice to the insatiable god of
equality.”
My (closing) comments:
(1) Poverty is always relative, and its definition is always a
search for what the _better-off_ regard as acceptable rather than a
search for objective truth. Opponents of a reduced welfare state, like
Cox and Alm, should rather accept that relative standard, rather than
confuse the debate with some absolute arguments. For example, a Dutch
poverty debate in the early 1900’s was about whether a table would be
part of household necessities or not. Defining poverty as three times
the grocery bill would surely answer that question. But it is more
likely that society’s standard would start including air-conditioners
too (by some regarded as the most important invention this century).
(2) One of my main arguments is that society even tends to update
poverty with the general level of welfare. That the US has been using
only the CPI would counter that argument. But that the CPI has been
overstated, that all kinds of provisions like Medicare have been added
for purchasing power, and that one is experimenting with a serious
update, is supportive again. Similarly, Cox and Alm p201 even state
“What were once luxuries are now viewed as necessities”. It would be
better to make welfare indexation the official line, and stick to it.
(3) The political argument given by Cox and Alm is doubtful. The few
votes of the new beneficiaries may well lose out against a huge
majority that could be against the proposals, including the current
beneficiaries. Why start the whole discussion about democracy again ?
(4) Poverty definitions, though relative, nevertheless should be as
sound as possible. If wealth is not properly accounted for, as Cox and
Alm point out, then the debate gets noisy, and popular support for the
poor indeed suffers. (Even though the 302,000 families with expensive
homes are only a fraction of the 13 million real poor.) Similary,
implementation of anti-poverty policies will often be very murky. (‘Did
you really try to get a job - and shouldn’t we not take you from the
programme ?’) There is no alternative but to accept this murkiness, and
try to instill operations managers with the spirit that they should try
for a good performance anyhow.
(5) To clarify the argument, to get rid of some of the murkiness, I
myself take a stylized approach. Then we don’t bother with the question
whether air-conditioners are part of household necessities. We assume
some historic subsistence and exemption level, and then work through
the arguments of indexation etc. This thus eliminates much of the need
of statistical measurement.
At one point, Cox and Alm oppose socialism and capitalism: “Socialism,
a failed and receding system, sought to impose artificial equality.
Capitalism, a successful and expanding system, doesn’t fight a
fundamental fact of human nature - we vary greatly in capabilities,
motivation, interests, and preferences.” (p87). The argument is at
kindergarten level again. The American success story derives as much
from FDR’s initiatives as from ‘capitalism’. Western European welfare
states have come about by active participation of Christian and Social
Democrats. The latter often called themselves ‘socialist’, but
certainly didn’t close their eyes to human differences. Indeed, there
is quite a difference with Cox and Alm.
44. Relating to the OECD and some of its authors
The OECD in general
It has been well-recognised that OECD economies have a problem with
jobs with a low level of productivity and thus a low level of
market-earned income. The OECD has done great research here. A standard
reference here is to the OECD (1994) “Jobs Study”, that also was
followed up with studies such as OECD (1995), Marsden (1995), Tyrväinen
(1995), OECD (1998), the OECD Economic Studies 31 (2000/II) issue, with
contributions of Pearson and Scarpetta (2000), Hotz and Scholz (2000),
Dilnot and McCrae (2000), Fitoussi (2000), and Phelps (2000). But,
while all this is recognised, the OECD shows no attention for this
present analysis, even though it has been available on the internet
since 1995.
Two main comments can be made with respect to the OECD (2000) Outlook,
chapter 2, “Making the most of the minimum: statutory minimum wages,
employment and poverty”:
(1) “High marginal effective tax rates associated with the phase-out
range of the benefit give rise to disincentives to increase earned
income beyond a certain limit.” (p55). This is the poverty trap - that
however does not exist. When there are ample employment opportunities,
people on benefit can be fined if they reject reasonable job offers.
(Above minimum income, there also is the dynamic marginal rate.)
(2) “Both theory and empirical evidence are inconclusive about the
precise employment effects of minimum wages over some range relative to
average wages. However, at high levels, there is general agreement that
a statutory minimum wage will reduce employment.” (p57) This tries to
distinguish but does not distinguish sufficiently between (a) a minimum
wage in general, and (b) its position at a high and low value. Much of
economic analysis on the minimum wage concerns aspect (a), but that is
less relevant. What is relevant is that the tax void allows a reduction
of the minimum wage from a high position to a lower position, creating
lots of employment.
Three main comments can be made with respect to the OECD (2001)
Outlook, chapter 2, “When money is tight: poverty dynamics in OECD
countries”:
(1) The issue of ‘poverty dynamics’ can also be seen as much of a
non-issue. First one causes a disease and then one studies how some
patients show different patterns of colours than others. A wrong
economic policy causes unemployment and poverty, and then some people
have more such spells than others. The crucial point is to get rid of
unemployment in the first place, not study its dynamics.
(2) “Despite substantial economic growth in the OECD area during
recent decades, a significant portion of the population consists of
individuals whose household income does not support living conditions
considered adequate in their country of residence. Individuals living
under such conditions are typically labelled as being in poverty, even
if their physical subsistence needs can be met.” (p37) This does not
distinguish properly between earned income and its tax component that
causes unemployment.
(3) The document uses the concept of a “poverty trap” while this
does not exist.
The EITC, direct payroll tax reduction and wage cost subsidies
Pearson and Scarpetta (2000:22) rightly conclude: “Furthermore, there
is growing evidence that there is no single measure which, of itself,
will have a major impact on employment. Hence, [minimum wage policies]
have to be seen as an element of a comprehensive policy strategy, e.g.
the ten broad policy guidelines of the OECD Jobs Strategy. But any
policy that has empirical evidence supporting claims that, in certain
circumstances, it could promote _both_ efficiency _and _equity by
fostering employment and decent levels of family income deserves to be
considered in countries facing such problems.” It should be clear that
the current analysis, e.g. on the tax void, does not constitute a
‘single measure’. The analysis can only be understood within the whole
discussion.
Modern systems of taxation tend to favour the Tax Credit instrument,
notably the “Earned Income Tax Credit” (EITC), as opposed to direct
payroll tax reduction and wage cost subsidies, see e.g. Hotz & Scholz
(2000) and Dilnot & McCrae (2000).
However, tax exemption should be set at subsistence income (the net
minimum wage). Tax credits then could be used for productivity levels
below that subsistence levels. Tax credits that are applied above
subsistence are not required and have the psychological drawback that
the recipient is no longer considered self-reliant but reliant on the
state.
The discussion in the literature suffers from obscurity on this issue,
as can be shown below. In the following discussion, we will limit our
attention to earners, so that we do not have to speak about the ‘earned
exemption’ versus EITC, and just discuss ‘exemption’ and ‘tax credit’.
(1) Hotz & Scholz (2000:37) conclude: “The problems facing workers with
low levels of human capital in the US are severe. Our reading of the
economic and policy literatures is that the EITC is the most sensible,
primary policy to support low-wage labour markets in the US. Our
conclusion is tempered by the institutional facts about US labour
markets noted in the introduction. Economies with different
institutional features may find EITC-like policies to be less effective
or administratively infeasible. Though reliance on the EITC is
sensible, we view targeted employment subsidies as a complementary
policy. We see less wisdom in minimum wage increases, payroll tax
reductions for low-income families, and wage rate subsidies as proposed
by Phelps, at least in the US.”
However, it will be better to choose tax exemption at the subsistence
level. If that implies a ‘payroll tax reduction’ or ‘wage rate subsidy’
then this is not a drawback.
(2) Hotz & Scholz (2000:26) give this useful bit of information on the
US situation: “the EITC, gives nothing to those without earnings. (…)
the EITC provides a subsidy to earnings up to a specific income
threshold. For example, consider taxpayers with two or more children in
1998. The EITC gives a 40 per cent earnings subsidy up to $9 930.
Taxpayers with earnings between $9 390 and $12 260 receive the maximum
credit of $3 756. The credit is reduced by 21.06 per cent of earnings
between $12 260 and $30 095.”
They note: “The US has a fairly low minimum wage of $5.15 per hour.
While in perfectly competitive markets employer-based and supply-side
subsidies (like the EITC) will have equivalent effects, with a binding
minimum wage, employer-based subsidies may be more effective policy. A
binding minimum wage limits the ability of employment and wages to
adjust to an increase in labour supply prompted by the supply-side
subsidy.” (Hotz & Scholz (2000:27)).
However, it is important to reduce the gross minimum wage
simultaneously with introduction of the tax credit (or exemption), to
the point where subsistence equals the net minimum wage. The minimum
wage should only be binding at subsistence, and subsidies (possibly in
the form of EITC) are needed for those working below the minimum wage.
(3) Hotz & Scholz (2000:34): “At its core, targeted hiring subsidies
have a different objective than the EITC. The EITC is designed to
augment the incomes of low-income families. The WOTC and
Welfare-to-Work tax credits are designed to stimulate employment of
targeted groups.”
(a) This obscures the clarity that one should solve unemployment by
getting rid of the tax void, and then look at details. (b) Subsidies to
the employee or the employer are to a large extent interchangeable
though they may be different dynamically. (c) The difference between
persons and families should be dealt with in the tax code.
(4) Hotz & Scholz (2000:34): “The EITC has always been closely linked
to the payroll tax. A commonly given rationale for the credit prior to
recent expansions was that the EITC offsets the regressive (on an
annual basis) burden of payroll taxes.”
However, a similar confusion existed with the Dutch Government “Tax
Plan for the 21st Century”, see chapter 29 above.
(5) Hotz & Scholz (2000:34-35): “Proposals that exempt the first $x of
earned income from payroll taxes would be administratively difficult
for workers who have more than one job or who change jobs during the
year. Underpaid taxes could be reconciled at the end of the year on
individual income tax forms (as is done with overpaid payroll taxes for
affluent taxpayers), but some taxpayers would fail to file, creating a
new compliance headache. Revenue neutral proposals that would exempt a
portion of earnings, and then tax additional earnings at higher rates
would exacerbate the redistribution involved with social security. In
particular, money’s worth calculations show that social security is a
bad deal compared with alternative, safe investments for affluent
singles and couples. (Calculations of this sort tend to ignore the
value one should place on the insurance aspect of social security
against disability, unusually long life, and the randomness of
endowments.) As social security is perceived by affluent families to be
financially unattractive, pressure could mount for drastically altering
social security. Given the importance of the programme in alleviating
poverty among the elderly, we think that would be an unfortunate turn
of events.
However, these are other issues than the proposal to get rid of the tax
void, and should not obscure that matter. Note that taxation always
requires administration and collection, so that it does not help to
call these a ‘headache’.
(6) Hotz & Scholz (2000:35): “In some contexts, one might envision
payroll tax reductions being paired with reductions in mandated
benefits, which could help the flexibility of low-wage labour markets.
In the US, however, it seems unlikely that payroll tax reductions would
be matched with reductions in social security, the programme the taxes
finance. Consequently, there appears to be no compelling reason why
payroll tax reductions would be a preferred policy option to further
expanding the EITC.”
However, this is unwarranted. At issue are net income and benefit that
are at subsistence already. Benefits are net anyway (since the
government assigns a gross value but immediately cashes the assigned
tax). It is strange to suggest that payroll tax reduction can only be
justified by reduction of benefits.
(7) Hotz & Scholz (2000:36): “(Advantage of wage cost subsidy …)
relative to the EITC. First, in the presence of a binding minimum wage,
employer subsidies may be more effective, both in stimulating
employment and increasing employees’ after-subsidy wage rates. This is
because the wage floor imposed by the minimum wage may keep the
employer’s pre-EITC wage payments from falling to their market clearing
level. With the employer subsidy, the post-subsidy wage is the relevant
wage applicable to minimum wage laws. Hence, employer subsidies might
be useful to mute harmful labour market effects of the minimum wage.”
However, that same effect is attained by a simultaneous increase of
exemption and reduction of the gross minimum wage. That move reduces
red tape and the pumping around of subsidies and taxes.
(8)Hotz & Scholz (2000:36): “The second attractive feature (…) is that
with employer subsidies, there is a tighter link between work and the
after-tax, after-transfer return to work than there is with the EITC.
With the EITC, almost all workers who receive the EITC get it as a lump
sum after filing their tax return. As mentioned earlier, there is
anecdotal evidence that workers have a vague understanding that their
“refund” is somehow work related, but it is extremely unlikely that a
significant number of EITC recipients have a clear understanding of the
credit’s structure. There would be a much tighter link between policy
and paycheck with employer subsidies.”
However, that same clarity is attained by a simultaneous increase of
exemption and reduction of the gross minimum wage.
45. After 35 years of mass unemployment:
An advice to boycott Holland
Summary
Jan Tinbergen helped create the Dutch Central Planning Bureau (CPB)
after 1945, and Dutch society has benefitted enormously up to this very
day in 2004. The Dutch situation has also been an example to the world.
But there is a down side when the CPB adopts a wrong theory and when
policy becomes misguided. Economic theory is created by people, the
behaviour of people can also be described by Public Choice theory, and
good theory need not get properly adopted. Dutch society suffers huge
problems, which problems do not exist just by themselves, but they can
also be judged from the angle of the failure of co-ordination. It can
be established as a fact that the directorate of the CPB has been
censoring economic science for almost 15 years now, so that society is
in a suboptimal state. The mechanisms in Dutch society apparently are
too weak to solve this issue. The stress in Dutch society even causes
the breakdown of the mechanisms that might work otherwise. With 9-11
there is the new terrorism that increases the stress. That stress in
Dutch society is highlighted by political landslides and political
murder so unexpected of this country. The censored theory originally
provided a solution to Stagflation, but it can also help to resolve the
social and economic problems following 9-11. The censored theory would
be relevant for other nations as well. For theoretical and practical
reasons the censorship must be resolved at CPB itself. Given the weak
mechanisms in Dutch society to protect the integrity of science in the
preparation of policy, it becomes rational to advise an international
boycott of Holland. Economic sticks and carrots are strong incentives
to motivate people to stop and think. An international boycott of
Holland would likely induce the Dutch to restore the integrity at CPB
as intended by Tinbergen.
Introduction
This May 1 2004, the European Union enlarges with the new member states
of Central Europe. This is a joyous occasion to celebrate and it is
also an occasion to look back at the past and ahead to the future to
see what lessons can be learned.
One of the important issues to consider is unemployment. Unemployment
is a horrible economic disease since it threatens the very existence of
the unemployed person and his or her family, and it increases the
stress in society as a whole. France and Germany still have
unemployment levels of almost 10% of the working force, the new member
states wish they were so lucky. It is not obvious that the Enlargement
will generate the creative energy to resolve the problem, and some
people fear that there will only be additional problems. Hence at the
occasion of the Enlargement it is proper to try to determine what can
be done.
In 1989-1990, I wrote Colignatus (1990a), “After 20 years of mass
unemployment: Why we might wish for a parliamentary inquiry” as an
internal note of the Dutch Central Planning Bureau (CPB). The abstract
and summary are reproduced in the appendix to this chapter below while
the full text can be found at my website. We are now 15 years further
and this explains the first part of the title of this paper: “After 35
years of mass unemployment”.
What remains to discuss is how we move from a wish for a parliamentary
enquiry to an advice to boycott Holland. The point is that the 1990
paper contains the solution for unemployment but met with censorship by
the CPB directorate, and Dutch society has not been able to resolve
that censorship yet. I have grown convinced that an outside influence
will be of use and that in fact only a boycott of Holland can help out.
Hence, my advice to the rest of the world is to boycott Holland till
the Dutch resolve the censorship of science by the directorate of the
Dutch Central Planning Bureau. The remainder of this paper is devoted
to development of that argument.
First considerations
It is useful to explain the following about the Dutch Central Planning
Bureau. The CPB has a similar role in Holland as the Council of
Economic Advisers to the President in the USA in the co-ordination of
economic policy making. The CPB is a world renowned institute. When it
was founded shortly after World War II, the first director was Jan
Tinbergen who later received the Nobel Prize for his pioneering work in
econometrics. Other economists at CPB of historical fame are for
example Theil, Koyck, Verdoorn, De Wolff (who is less known but for
example coined the terms “macro-economics” and “micro-economics”). The
CPB director who originally censored my analysis and who fired me with
an abuse of science is Gerrit Zalm, now better known in European
politics as the Dutch Minister of Finance. The current CPB director is
Henk Don, who has a high personal and professional respect nationally
and internationally, which I agree with except for the censorship. It
must be noted that Henk was vice-director at the time when the original
censorship took place, was not directly involved and does not know some
details, but nevertheless firmly supports the censorship and abuse of
science.
The key points of the censorship are as follows. The paper was blocked
from internal discussion by the CPB directorate and eventually I was
fired in 1991. The court observed an abuse of power but nevertheless
allowed the dismissal. There is weak legal protection for Dutch public
employees, while the court also did not properly distinguish between my
position as an economic scientist and the other position of
non-scientific public employees. Apart from the treatment of my person,
the publication process itself was this: I intended the paper for
publication as a CPB Research Memorandum, the series ‘under the
responsibility of the author’. The possibility of an internal
discussion with interested colleagues seemed to me a necessary step
before I could finalise the paper. The analysis is sound, but the
colleagues can have questions and comments that contibute to enhanced
clarity. This possibility however was blocked by the directorate. A
committee on good scientific conduct, consisting of professor Köbben
(Leiden) and professor Segers (Tilburg), observed that the directorate
would have done better in permitting that internal discussion. My
position is that I wait till that discussion is permitted indeed, so
that I can finalise the analysis and let it be published as intended.
Some more details are in the appendices to this whole book: the
autobiographical note and my presentation for the National Press in
Washington 1993 with attached job resume of that time. Updates can be
found on the web.
Many economists react that I could also publish the (1990a) paper (or a
revision) in an international journal. This however is both beside the
point, while it also meets with practical problems.
· First, the point is that the CPB directorate censors science. When
the problem is at CPB then it must be solved at CPB. Let me note that
when I discussed the censorship with Jan Tinbergen, he said that the
issue needed resolution “but by a younger generation than me”. It
actually is rather curious that one would want the journals to solve
the issue while maintaining the censorship at CPB, and then, when the
issue is resolved, ask CPB to apply it for the Central Economic Plan.
· Secondly, there are various practical problems. The (1990a) paper is
already on the web since 1995, and I do not see it used to solve
unemployment. So availability is not sufficient, there must also be
proper context and channelling. The paper has been written for a CPB
Research Memorandum, it assumes a CPB context and it targets an enquiry
by Dutch parliament. Before the web existed, I submitted the paper to
two journals, one Dutch, one international, but it came back with
useless comments. This is only a small sample, and the paper might be
redrafted, yet it confirmed my idea that journals are not the way to
go. One should also understand that I have little time to write. My job
situation is difficult: short term jobs, always a new subject and not
at the easiest level.
[130] Of course, much of my time is spent on protesting against the
censorship.
I have tried various other ways to resolve the issue of censorship of
science by the CPB directorate. For example, I published reviews and
collections Colignatus (1992b), (1994b) and finally (2000), “Definition
& Reality in the General Theory of Political Economy” (DRGTPE), the
first edition of this book. The latter is listed in the Journal of
Economic Literature JEL 2000-1325, vol. 38, no. 4, December 2000. Also,
Hulst et al. (1998) and Colignatus & Hulst (2003) are Dutch books that
explain the issues in lay terms for a general public. But I see no
effect.
[131]
I have also hoped that other economists would find the same results
that I have, so that the issues could be resolved in that manner. But
no.
A key example is The Economic Journal, Volume 114, no 494, March 2004.
There is the presidential address by professor Stephen Nickell of the
Bank of England and the London School of Economics, and there is a
special session on the UK minimum wage, with five papers by renowned
authors. All these authors have my highest respect and their work is
crucial for understanding the economic situation. But solution to
unemployment isn’t there yet, while it is available for discussion.
I fully agree with professor Nickell and I thank him for his
observation:
“Relative poverty in the UK has risen massively since 1979 mainly
because of increasing worklessnes, rising earnings dispersion and
benefits indexed to prices, not wages. So poverty is now at a very high
level.”
Professor Nickell suggests “reducing the long tail in the skill
distribution”, but in my analysis we should also consider the tax void
and the dynamic marginal tax rates, so that more low-skilled people can
start working (also because of ‘learning by doing’).
Since all these other ways have had little effect, I can usefully
advise to boycott Holland to speed up matters.
The line of reasoning thus is that if you want to resolve mass
unemployment then you need the theory that is blocked from internal
discussion by the directorate of the Dutch CPB. Since other ways fail,
a boycott of Holland can be a good way to resolve the issue.
This is an advice and not an appeal. I am not an activist, but a
scientist. It is only sound advice for the citizen who wants mass
unemployment resolved. This advice derives from the integrity of
economic science. This advice is also stock and barrel of economics
itself and can be included in every economic textbook.
If you don’t know where to start boycottting: it is not just tulips and
Gouda cheese and the Van Gogh museum, but also think of Shell, Ahold,
Baan, Unilever, KLM (Air France), ING, ABN AMRO, Numico, Philips,
AKZO-Nobel, DSM, etcetera. Instead of Amsterdam, visit Antwerp. Many
international companies also have a local branch in Holland or even
have an official seat in the Netherlands for tax reasons, and I would
advise their inclusion. Be creative: locate the Dutch element, and
boycott it. (They are everywhere, so look carefully.) (And I suppose it
already had been wise for David Beckham not to get involved with
Rebecca Loos.)
Of course, the Dutch need to eat, and I as well. I already have cut
back on my Heineken at lunch, but that is tough since the cafetaria
doesn’t sell alternatives yet. Hence the advice of the boycott is for
the rest of the world, and my advice to the Dutch is to start thinking
about that parliamentary enquiry. Also, don’t boycott publishers or the
internet, since these are vital for the flow of information.
The following discusses a number of angles of which the relevance will
become clear in the discussion.
The realism of my advice
Some people wonder whether I have gone nuts in advising to boycott
Holland, the country where I live myself. Well, the logic above is
clear, and it is only an advice, so I presume that the concern about my
nutsiness actually is about the realism of my advice. I don’t know much
about that. Events often start with ideas and it can be useful to air
an idea to see whether it develops.
International contacts are a problem. Paul Krugman (2003), “The great
unraveling”, rightly criticizes ‘anti-globalism’, see Krugman’s chapter
“Global Schmobal” and the injustice done to James Tobin and his Tobin
tax.
But there are now some who speak about ‘other-globalism’. I contacted
some people in Amsterdam in that movement about my suggestion of the
boycott. Last year, I and journalist Hans Hulst published a booklet,
Colignatus & Hulst (2003). (The title translates as “The voter
unchained”.) These other-globalists hadn’t heard of the book yet (so
much for globalisation), but were willing to read it. Their response
was:
“I judge the most interesting aspect of your book the way how you
approach the problem of unemployment and your conflict on that with the
CPB. And indeed, the way how the CPB has dealt with your critique and
your alternative is unacceptable.”
(PM. One should distinguish between ‘the CPB’ and ‘the directorate of
the CPB’. The issues have not been discussed with my colleagues since
the directorate blocked that discussion.)
It is up to discussion now how to proceed and we will see whether the
Amsterdam people are willing to advise the rest of the world to boycott
Amsterdam for a while.
Let me emphasize that I abhor the earlier violence of the
anti-globalists, originally at Seattle. If anything like this violence
or condoning happens, I will have nothing to do with it and I will
report these people to the police. Note that there is a strange mixture
in the anti-globalists that they sometimes say that they reject
violence, but at the same time actually seem to accept it (from others)
since it draws the attention of the media. This is muddled thinking,
immoral, and uncreative since there are also fun ways to draw the
attention of the media.
What I greatly enjoyed was an interview with José Saramago on his new
book “Ensaio sobre a lucidez” (Zoon (2004)). Expressing ideas is the
way to go, and it is the same way as Bob Dylan spoke of “The world gone
sour” and a recent pop song “Where is the love?”.
George W. Bush and Iraq and the American economy
For my American friends, let me discuss George W. Bush and Iraq and the
American economy.
I was a foreign exchange student in Burbank, California, in the Youth
for Understanding exchange programme, 1972-73. This has created strong
ties. Last year when I visited my American Mom, and when we visited
friends in San Clemente, we passed that military training field there
and we felt sympathy for the marines training there. My Mom also had
her anxieties for her neighbour who has been sent out for the US Navy;
fortunately he has returned safely.
It may be clear that the free world needs a strong defence and that the
US has a special responsibility and hence vulnerability here, so that
the US must count on the world’s understanding for its difficult
position. It may also be clear, though for some people less so, that
the war in Iraq is a huge mistake and policy lie. I do not have to
extend on this since the case has been put forward by others more
eloquently. Personally, I still allow for the fact (since who are we to
know ?) that US intelligence has spotted some WMD by now but is slow in
making this public. This does not change the major conclusions on
transparancy and due process.
What is relevant for the current discussion is the common factor of the
policy lie.
Advised reading then is Paul Krugman (2003), “The great unraveling”. It
is a pleasure to read many of my own thoughts in his much more eloquent
words. It is also good to observe Paul’s development. Earlier, he
uttered “sheer intellectual outrage” when he noted that his own theory
was politically abused. Now he exposes the system behind it. Nobel
Prize winning economist Paul Samuelson advises the general public to
read this book:
“Paul Krugman’s is a lone voice, telling things as they are and
debunking Washington policies that are neither compassionate nor
conservative. Plutocratic democracy is in the saddle. Rx. Krugman twice
a week. Buy. Read. Ponder. Benefit.”
I fully support this.
When the censorship at CPB is resolved, it will be clearer how the
policy lies can be averted. Hence, boycott Holland. (And Mom, drop your
Dutch stock holdings.)
This is not the place to extend on my views on the failing peace
process in particular. But it occupies people, so two remarks can help.
(1) I can repeat suggestions already made by others that are neglected
at our peril. Translate “Allah” as “God”, and don’t say “moslim
terrorists” but simply “criminals”. America isn’t in a “war on
terrorism” but is “trying in joint co-operation with the international
community to arrest terrorizing criminals”. Stuff like that. Clean
language helps to focus on what you really want. (2) It is crucial that
the EU is present in the US. Not by propaganda or whatever, but by
simply being there as it is. The EU should establish a broadcasting
channel in the US to show the diversity of the EU, for example by
selections of what is broadcasted in the EU. The current American media
appear too unbalanced and the world cannot afford that.
PM. Relevant texts from my website are:
(1) “Understanding 9-11 and its aftermath”, November 11 2001, at
http://www.dataweb.nl/~cool/Papers/WarAndPeace/Understanding911.html
It may be recalled that at CPB in 1989-1990, I was removed from the
team that eventually published the long term projection 1990-2015,
Central Planning Bureau (1992ab), “Scanning the future”. Relevant here
is the Global Crisis scenario where it is assumed that some particular
events throw the world economy into shambles. My text “Understanding
9-11 and its aftermath” has been written with that in mind.
(2) “Economics and War & Peace” (general entry to other texts), at
http://www.dataweb.nl/~cool/Papers/WarAndPeace/index.html
More on Paul Krugman
Krugman still is ignorant about my analysis (DRGTPE, first edition):
(a) the need for constitutional reform on the Economic Supreme Court,
(b) reform of the tax system and the return to full employment and
growth.
The gap between me and Krugman is getting smaller though:
(a) Krugman abhors the current polical role of the CEA. Perhaps he sees
the need for constitutional change towards an Economic Supreme Court.
(b) Krugman has a life-long aversion of taxation theory. But this is
where the solution for unemployment can be found (otherwise he might
have seen it already). Krugman advances the conclusion that income
inequality furthered extreme right-wing conservatism. This provides
fertile ground for my analysis on the tax void and the dynamic marginal
tax rates.
I think that it is advisable that Krugman reads my work. Of course he
is entirely free not to do so. We can even understand that since he
hates tax theory so much. He is likelier to do so however when Holland
is boycottted and when that circus draws his attention. Hence, boycott
Holland. If Paul starts reading my work, he best starts with DRGTPE.
The Dutch tragedy of the murder of Pim Fortuyn in 2002
In 2002, now two years ago, Holland saw the political rise and murder
of prof. dr. W.S.P. (Pim) Fortuyn. He had been a professor of Erasmus
university and had been a long time critic of developments in Dutch
society. He had been lecturing around the country, his lectures enjoyed
some popularity, and he was well aware of the worries among the general
public that were however neglected in official policy making by prime
ministers Ruud Lubbers and Wim Kok. The events of 9-11 showed Fortuyn
partly right and this caused the mood swing that so surprised both
foreign observers and the Dutch policy making elite itself. Holland,
that always was so calm and tolerant, suddenly became the scene of
turmoil, alleged racism, political murder, and a landslide change of
the political landscape. After the murder of Fortuyn his party got 17%
of the vote, which is not much in international comparison, but it came
from nil and it had a huge impact on the median voter position and
Dutch coalition politics.
[132]
Fortuyn has been systematically misreported, both in Holland and
abroad. The best proper description of him is that he was a libertine –
different from both a liberal and a libertarian. He valued personal
liberty much more than a liberal but still saw the need for a social
framework where a libertarian rejects it. It comes to mind that Fortuyn
followed Voltaire’s views here.
It is useful to clarify the distinctions. The best example still seems
to be Fortuyn’s own homosexuality in relation to the new immigration
into Holland. In Fortuyn’s view people are free to denounce
homosexuality as worse than being a pig. Some people indeed have this
opinion, both some native Dutch and some of the new immigrants. Fortuyn
valued the freedom of expresssion so that there could be scope to start
a dialogue. If thoughts would be repressed then this would cause them
to go underground and they might pop up in unpleasant ways. By
consequence Fortuyn himself should be free to comment on outdated
cultural conventions and the unnecessary unkindness to pigs if not
people themselves.
What happened in this debate is that many commentators, particularly in
Holland that still is sensitive to the discrimination of the Jews and
the Shoa in World War II, feared that Fortuyn discriminated against
moslims. This focus did injustice to Fortuyn’s position for he did not
target moslims and he intended no discrimination but defended their
freedom of speech. By misrepresenting Fortuyn in this way, attention
also shifted away from his other proposals on government, the economy
and for example also the public health system. All this caused a
shallowness of the debate, a shallowness that fed on itself. Fortuyn
protested that he was being demonised and appealed to prime minister
Wim Kok to protect him.
It is crucial to observe that Dutch key politicians joined the
demonisation, including Wim Kok whom Fortuyn had turned to for help.
Fortuyn was no racist and no fascist, the Dutch key politicians knew
this, but they still issued statements that implied that he would be
racist and fascist. It is important to realise that Fortuyn’s true
ideas were known, for example from books that he had written over the
course of years, while Dutch key politicians have the support of staff
to research material. Their idea might have been that it was an
election campaign and that election campaigns are ‘dirty’. My idea
however is that these Dutch key politicians crossed a line and exposed
themselves as liars. Even when Fortuyn protested that he was being
demonised, they did not stop, and in that manner they contributed to
the climate in which the gunman saw himself called into action.
(Noteworthy, that gunman says that he did it to protect society, but he
is an environmental activist who considers pigs to be members of
society.)
Let us consider the evidence. The demonisation of Fortuyn consisted of:
(a) bad listening and wrong citation
(b) the grapevine
(c) suggestion and explicit false accusation
(d) in words and behaviour
(e) with mass demonstrations and pies in his face (mixed with vomit
and excrements).
Let me quote the key politicians. The Dutch sources are AD
Tijdsdocument (2002) and Volkskrant (2002) and I give my own
translation.
Paul Rosenmöller (leader of the green left, GL) calls him “not just
right-wing, but extreme right-wing” (which implies fascism).
[133]
Thom de Graaf (leader of the liberal democrats, D66) refers to Anne
Frank’s “Achterhuis”.
Ad Melkert (leader of the social democrats PvdA): “He crosses a line
that you are not allowed to cross. Holland, wake up !” Later he adds:
“You wake up, and you see Le Pen. You wake up, and you see Fortuyn.”
[134]
Gerrit Zalm (leader for the conservative liberals VVD) : “a dangerous
man”.
[135]
VVD chairman Eenhoorn: “the Mussolini type of leader”. [136]
Marcel van Dam (influential columnist, both on national TV and in a
widely read newspaper, also PvdA): “lower than a low-life”. [137]
Wim Kok (prime minister at that time, PvdA): “sowing of hate and
discord”. [138]
Evaluating the situation and these statements, the Dutch political
scientist Cas Mudde concludes, see AD Tijdsdocument (2002:82):
“(…) can be documented that Fortuyn was demonised by politicians like
Melkert, Rosenmöller and Zalm.” [139]
Nobody denies that Kok et al. were right to be worried about
developments in Dutch society after 9-11 and the Dutch elections of
2002. Nobody denies their special reponsibility in terms of leadership.
In their own view, they might well have been right in opposing Fortuyn.
(I didn’t vote for him or his party either.) But they should not have
corrupted the information. [140]
After the 2002 elections, Kok, Melkert and Rosenmöller have left
politics. Kok is now at the bank ING and Zalm helped appoint Melkert to
the position of Dutch representative at the Worldbank. Have Dutch
society and Dutch politics recovered from the Fortuyn ordeal by now ?
It must be observed that there were no other politicians who stood up
_to defend_ Fortuyn where he was obviously being demonised. It is
basically this group that now has taken over command. Thus, the current
Dutch prime minister Jan Peter Balkenende kept silent. It later turned
out that he had a deal with Fortuyn not to attack each other since they
both wanted to replace the sitting coalition. But neither did he defend
Fortuyn against the slander. The current leader of the social
democrats, Wouter Bos, also gave his silent support to the lies by
Melkert. He now admits that some mistakes have been made, though he
apparently still supports Kok and Melkert and apparently does not mind
that they have tried to fool the public, while it has already been
discussed in Dutch newspapers that Melkert might be a candidate to
become a European Commissionar. The sad observation remains that while
key politicians have stepped down, they have been succeeded by the same
breed, the ones who kept silent while Fortuyn was demonised. The Dutch
situation still is a mess and science still gets censored.
It is not just the politicians. The 17% who voted for Fortuyn’s party
did not become a member of that party. They complain that the
government did not provide bodyguards but if they had paid
contributions, Fortuyn could have hired those himself. The Dutch have a
strange relation to their wallet.
The rest of the world is amazed over the events in Holland, that had
such a fine reputation of liberty and tolerance and openness of mind
and that uncritically followed Bush and Blair on Iraq, talks about
dress codes, the banning of books (even of medieval writers), the
return of the death penalty, the closing of “coffee shops”. Some
political commentators conclude that the current Dutch government is
slowly executing Fortuyn’s agenda. It is hard to judge this, since that
agenda was also fuzzy and inconsistent at points. While Holland now
seems to get the toughest immigration laws in Europe, it is difficult
to call this Fortuyn’s agenda, since that was not Fortuyn’s main point.
Also, if you would take immigration and integration serious, I would
suggest that my analysis on unemployment is very important for that. It
may also be noted that some people continue demonising Fortuyn. Anyway,
the real thing that the world should be amazed over is not so much the
closing of the Dutch mind but how it came about that this mind is
closing.
The point is that Holland still needs to focus on the real questions.
If you agree, boycott Holland.
(PM. There is one thing about Fortuyn that needs retelling. After his
murder, his party commissioned a statue. This statue was transported to
its destination in an open truck in upright position, in proud
demonstration. The driver however misjudged a tunnel and in full speed
the statue was beheaded. There he was, his person and ambition murdered
and his memory turned hilarious… But, that this story is hilarious
means that we basically respect Fortuyn as a good man. Otherwise it
would be ridiculous. That the story is worth retelling, will contribute
to his memory.)
On the European Enlargement
It is good to see the attention that the European Enlargement gets in
the media these days.
Of special note is Timothy Garton Ash (2004), that May 1 2004 is the
beginning of a new century. This article strikes the proper balance
between realism and the idea that we should have a big party. A nice
touch are his jokes. Question: “Rebbe, is it possible to create
socialism in one country ?” [141] Answer: “Yes it is, but then you must
go live in another country.” Question: “Are the Soviets our friends or
our brothers ?” Answer: “Our brothers – you can choose your friends.”
The Books Supplement of NRC Handelsblad of May 1 2004 appropriately
also discusses John Gillingham “European integration, 1950-2003”,
Christopher Booker and Richard North “The Great Deception”, and Jacques
Delors “Mémoires” (apparently French).
Interesting, and only available for Dutch people now, is Renée Postma
(2004), from the reporter of NRC Handelsblad for Central Europe. What
strikes me from her account is the robber baron period after the fall
of the Berlin Wall and the hurt that still exists. The reader is
quickly confronted with suicides from persons who were brought in
hopeless conditions. I am very moved by this, for my paper (1990a) that
was blocked from discussion by the directorate of CPB was intended
precisely to prevent all this.
Dutch readers can benefit from Postma’s account. On page 113 she shows
that the Dutch prime minister Wim Kok did not know what he was talking
about when he promised Poland that Holland would employ 40,000 Polish
nurses.
Job flows in the enlarged EU are a hot topic, but there are a lot of
confused arguments like this. The best approach is that each economy
targets full employment, so that only those people migrate who freely
opt for it. Problems in the labour market can be solved in Holland too,
so migration is second best and hides the real problems. Poland also
needs lots of nurses. Foreign training of course is useful, and so on,
but if economic conditions force people to move permanently, then
something seems to be wrong with the economy. John Kenneth Galbraith
(1979), in his booklet on poverty, has forcefully shown that migration
has historically been one of the best ways to fight poverty, but those
historical circumstances were different. In the present situation,
investments in Central Europe are the key approach and that means that
people are needed in Central Europe.
A key passage in Postma’s book is:
“In Central Europe there is a romantic vision about the Dutch citizen.
He would be the example of a successful relationship between government
and individual, a rational being who decides on the base of both
self-interest and the common interest and thus finds the social
optimum. According to the Hungarian writer Pétér Nádas the Dutch have
understood the importance of compromise. Only by co-operation at all
levels it is possible to keep a dry polder.” (p105).
Postma confronts this view with the events around prof. dr. W.S.P.
Fortuyn. I can usefully confront it with the ideas in DRGTPE as well.
For foreigners it may be difficult to get a grip on Holland. A key
point is this. Holland has 16 million inhabitants and may be regarded
as a relatively small country. In a specialised professional field,
such as macro-economics, everyone tends to know everyone else. Social
control, biases, prejudices, stigma, and so on, can occur. As a
Dutchman, I presume that Dutch society is admirable in many respects,
but perhaps we are also a bit spoiled (and not only because of our
resource of natural gas).
The EU has quite some challenges ahead. It is also obvious that my
analysis is not mentioned in the debate on them while it is the best
way to meet them. Hence boycott Holland.
Advice to vote NO on the current proposals for a European Constitution
My advice is to vote NO on the current proposals for a European
Constitution.
The reason is that these proposals are scientifically unsound. For
example, they lack an Economic Supreme Court, and they do not satisfy
the conditions explained in Colignatus (2001) “Voting Theory for
Democracy”.
Obviously, a vote is a political statement, and not something what
science can determine. If people want a sloppy constitution then they
are entirely free to do so. Science can only contribute to consistency
between what is claimed for that constitution and what will be its true
effect. Given the claims, vote NO.
My analysis on social welfare and voting is part of the censorship by
the directorate of the CPB. Hence boycott Holland.
A note on my own position
I already expressed the hope that you would not boycott me, my
publisher and my internet provider (or those in general).
I have wondered whether I should also beg for such leniency for my
family and friends. This would turn into quite a logistical operation.
I have turned 50 this year, there is quite a trail. Also, I already
told that I contacted some ‘other-globalists’ in Amsterdam with the
question whether they would be willing to ask their foreign friends to
boycott Holland: perhaps they should be absolved from harming
themselves as well. Perhaps we can make a sticker or label “Don’t
boycott me because I boycott Holland” and sell this, with the proceeds
to the tropical rain forests (that also suffer from the censorship by
the directorate of the CPB).
All this is rather complex and one can imagine that people ask why I
don’t simply emigrate. But I hope that you agree that the censorship by
the CPB directorate shouldn’t force me to depart from my loved ones.
It is decidedly simplest to boycott all Dutch. My loved ones might
suffer, but the rational gamble is that the boards of Shell, Ahold,
Baan, Unilever, KLM (Air France), ING, ABN AMRO, Numico, Philips,
AKZO-Nobel, DSM, etcetera, and also the mayors of Amsterdam, Rotterdam,
The Hague, Utrecht, Leiden, Delft, Maastricht, and even the rather
sleepy mayor of Groningen wake up before that, and send out their
envoys to Parliament to do something about this rather weird situation.
Yes, I have really tried everything else possible. My efforts have been
listed in Colignatus & Hulst (2003), but a selection for an
international audience is:
· Dutch government has an Office of Integrity, but this has been
installed only recently (suggesting that there were no solutions
before?), and they don’t take ‘old cases’ (even though the directorate
of the CPB still censors the analysis: I recently asked for some proper
decisions, the court established that they should reply, and they
replied as a censor does).
· The Academy of Science (KNAW) sees no task to cover the official
governmental research institutes that claim a scientific status, such
as CPB, SCP, RIVM.
· I’ve also asked my last employer, the Department of Public Health at
Erasmus MC, whether they would support a suggestion to KNAW to
investigate the CPB case because of its importance for the integrity of
science. Professor Richard Gill of Utrecht University already supported
that suggestion. If Erasmus MC thinks that I have some professional
standing, as they renewed my contract in October 2003, perhaps they
also value my judgement on this issue on the integrity of science. The
censorship by the directorate of the CPB also has consequences for
Public Health, not only in Holland, but via economic theory in all
countries. To my regret, this discussion appeared difficult to resolve.
For a longer discussion, see my website on the topic of public health.
· I’ve written a string of newspaper articles in the beginning of the
1990s, but to no avail. This is about the same period when Fortuyn was
put down by Kok and Melkert as well. Nowadays newspapers fundamentally
neglect me, seem to regard me as some idiot who should stay in his
cage. My recent book with Hans Hulst has had a decent and highly
positive review in the magazine for Dutch teachers in economics, and
similarly in a newsletter for socially involved workers in the
Churches, but got a short negative put down in a social science
journal, and has otherwise been neglected.
The censorship of science now takes almost 15 years. This year I turn
50, and that is a good moment to take stock. Institutions are stronger
than people, what resources remain? I see no other prospects. So, alas,
I must advise you to boycott Holland.
(May 1, 2004)
Appendix: After 20 years of mass unemployment:
Why we might wish for a parliamentary inquiry
(Abstract and summary only)
http://www.dataweb.nl/~cool/Thomas/Nederlands/TPnCPB/Record/1990/12/18/
index.html
Thomas Colignatus * December 18 1990
CPB internal note 90-III-38
Abstract
A synthesis of economic theory is presented, the solution to
unemployment is restated, the intellectual need for a parliamentary
inquiry is established, and as an example to such inquiry the
performance of the _Centraal Planbureau _is evaluated.
Summary
In Holland, mass unemployment persists already for about twenty years,
and will continue to do so for many years to come. Economists agree on
the obvious solution, the reduction of labour costs. But for some
reasons our decision making process doesn’t generate that decision.
Policy measures that are taken, actually are troublesome, like the
creation of a _Centraal Bureau voor de Arbeidsvoorziening _(CBA), or
the recent ‘temporary and red tape’ ten percent subsidy on minimum
wages (WLOM). The policymaking situation is analyzed in a more formal
manner, to allow for more abstract reasoning. This requires a social
welfare function, an income redistribution function, and a production
function (for the unemployed cq. subsidized workers). In fact, we might
attain the goals of high growth, price stability, full employment and a
just income distribution, by means of monetary, fiscal and subsidy
instruments. The conclusion however is that the present policy
sclerosis derives from insufficient interest in and information about
the form and location of those mentioned functions, and lack of
interest In optimization itself; and_ _this again may be caused by
institutional weak spots. A review of the issue and of the policymaking
process could be beneficial and actually logically needed. Among
others, this would include a review of the _Centraal Planbureau _(CPB),
that has not properly endogenised government behaviour in its models,
projections and analyses. It is suggested that such review would be a
task for parliament; and the logic for a so-called _parlementaire
enquete _is compelling. Clarity on the issues is essential too for the
European debate and our advice to the Eastern European countries.
*) The author is an econometrician at a government agency that has some
involvement with the economic policy making process; the article
expresses his own views only. This paper is adapted from a presentation
at a parallel session at the conference in honour of prof. W. Albeda
“The future of industrial relations in Europe” June 7-8 1990,
Maastricht, The Netherlands
46. Final conclusion
Considering all these arguments, I think that it is best that
economists advise their parliaments to investigate these matters. The
television cameras should not focus on the debate between the parties,
for a while, but on the didactic discourse between politicians and
scientists.
Epilogue
I like to thank Guido den Broeder for publishing my earlier work
(1992b). I want to thank my friends of the Samuel van Houten
Genootschap, Eric van Stappershoef and Fred Kromhout, for my earlier
publication “Trias Politica & Centraal Planbureau” (1994b). I thank
Hans and Auke Hulst for their 1998 “Werkloosheid en armoede, de
oplossing die werkt” (“Unemployment and poverty, the solution that
works”), written with my assistance. Hans and I wrote “De ontketende
kiezer” (“The voter unchained”) in 2003. All these books were good
products and provided the encouragement of a work well in progress.
I thank Stephen Wolfram and the people at Wolfram Research Inc. (WRI)
for creating _Mathematica_, a system for doing mathematics on the
computer. Without this, this book would have looked quite different, or
not have been there at all. I thank Leendert van Gastel and André Heck
of the - now no longer existing foundation - Computer Algebra Nederland
(CAN), and Dick Verkerk of the - very existent - CANdiensten for the
opportunity to visit CAN at that time. I thank Asahi Noguchi (1993) and
Silvio Levy for originally creating the_ Mathematica_ package on
Applied General Equilibirum analysis, and for giving their permission
to rework it and to include it in my own _Economics Pack_ (1999), that
this book uses.
Specific thanks are also due to Bob Parks of the Economics Working
Papers Archive (EconWPA) of the Washington university at St. Louis.
Over the course of the years much of this work has been put there, and
this has been very useful.
On content, I thank prof. dr. Jules Theeuwes (Leiden University), prof.
dr. Hans Weddepohl (Amsterdam University) and prof. dr. Jan Siebrand
(Erasmus University Rotterdam) for their comments on some of my earlier
papers. A discussion with prof. dr. Henk Folmer (Wageningen University)
contributed to more clarity in the argument as well. All responsibility
is mine of course.
I like to thank my former colleagues at the Dutch Central Planning
Bureau (CPB). Without them I would not be the economist that I am now,
and I can do them no greater compliment than by advising that the
bureau should be promoted, with some modification, to an Economic
Supreme Court. My special thanks go to Martin Vromans and Carel
Eijgenraam.
I am also indebted to my close friends and family, both Dutch and
American, without whose support this work could not have been created.
I think that I usefully state again that I protest against the abuse
that has been inflicted onto me by the directorate of the CPB and that
has hindered the due course of science.
Not that I entertain any illusion. Most people and organisations that I
contacted have been particularly uninterested. Policy makers do not
like the idea that the government itself contributes to stagnation.
Voters seem to accept unemployment as a natural phenomenon. Academic
economists are mainly interested in their own line of research and the
possibility of publishing in some journal. Scientific truth, and the
interest in scientific integrity in the policy making process,
somewhere gets lost. So, having this experience since 1989, an educated
guess would be that it might take many more years before my analysis is
accepted and before there is any chance that the abuse can be
corrected. The main worry of course is that unemployment and poverty
hang in here too.
Appendices
On the definition of economics
The body of the text explains the difference of and relationship
between ‘economics’ and ‘political economy’. I propose that we all
stick to those definitions. But it remains useful to relate to
definitions provided by other authors.
Marshall (1890, 1947, p1 and 43) first equates Political Economy and
Economics, and then splits them up again:
“Political Economy or Economics is a study of mankind in the ordinary
business of life; it examines that part of individual and social action
which is most closely connected with the attainment and with the use of
the material requisites of wellbeing.”
“Economics is thus taken to mean a study of the economic aspects and
conditions of man’s political, social and private life; but more
especially of his social life. The aims of the study are to gain
knowledge for its own sake, and to obtain guidance in the practical
conduct of life, and especially of social life. The need for such
guidance was never so urgent as now; a later generation may have more
abundant leisure than we for researches that throw light on obscure
points in abstract speculation, or in the history of past times, but do
not afford immediate aid in present difficulties.
But though thus largely directed by practical needs, economics avoids
as far as possible the discussion of those exigencies of party
organization, and those diplomacies of home and foreign politics of
which the statesman is bound to take account in deciding what measures
that he can propose will bring him nearest to the end that he desires
to secure for his country. It aims indeed at helping him to determine
not only what that end should be, but also what are the best methods of
a broad policy devoted to that end. But it shuns many political issues,
which the practical man cannot ignore: and it is therefore a science,
pure and applied, rather than a science and an art. And it is better
described by the broad term “Economics” than by the narrower term
“Political Economy”.”
Here, ‘economic aspects and conditions’ refer to the provision for food
and shelter, the working life etcetera. Nowadays we would tend to
include more subjects, and still say that ‘economics’ is involved in
it. To us, ‘economics’ sets in (as a sufficient but not necessary
condition) as soon when some preference decision is to be made.
Marshall’s tools, as for example the scissors of supply and demand,
have been applied to this wider area of application too. This indeed
may well be the luxury situation that he expected.
By consequence, it is useful to still use the name ‘economics’ for the
wider subject areas, even though allowing for more subjects causes less
‘economic content’ than Marshall perceived. Economics thus is
characterised by the approach, method and tools used. On the other
hand, ‘political economy’ then concentrates on one particular subject:
the management of the state. Much of Marshall’s “Principles” will,
paradoxically, then be relevant for political economy.
Gambs and Komisar’s 1968 textbook “Economics and man”, chapter 1,
gives a nice overview of the various definitions that early economists
have provided. A longer quote (of those quotes) usefully enriches our
understanding of the definition of ‘political economy’.
“What is economics all about? It is often defined as the science of
wealth or as the study of how mankind gets its living. Statements like
this are certainly useful, but they are also too general. When we try
to take the next step, we get into trouble. We meet difficulties in
pinning economics down because its practitioners are in disagreement
about the scope and nature of their science, and attempts to
particularize lead to protests from opposing schools of thought. The
only definitions on which agreement is possible are broad ones like
those given above, or humorous ones like “Economics is whatever an
economist wants to talk about.”
The reader may have misgivings about studying a science in which
disagreements arise at the very start. His doubts are indeed well
founded but should not too quickly turn him away. After all, there are
still differences of opinion even in astronomy and phyics, chemistry
and biology. Psychology remains a free-for-all. No considerable field
of knowledge is so completely understood that all of its scholars speak
with the same voice. The process of reaching a balanced conclusion
often requires a sifting of the testimony of contradictory witnesses.
In any event, stress on differences should not obscure the fact that
all sciences, including even economies, agree on many things. There is,
besides, an enormous store of historical and descriptive
matter—economic facts—that is well worth knowing and concerning which
there is little dispute. We shall hope that the burden placed on the
reader of suspending judgment and viewing the same things in different
lights will not be too heavy.
One of the dominant schools of the day looks upon economics as study of
what happens when we try to reconcile the scarcity of things with the
insatiable wants of human beings. Most things worth having, except the
air we breathe are scarce — scarce enough, at least, to command a price
and not to be available to all in generous quantity. Among the less
dominant and dissenting schools is one that considers the study of the
disposal of scarce goods too restrictive. Some members of this class
focus their interest on the moral codes, business practices, social
instimtions, legal framework, and the like under which we get our food,
clothing, and shelter. They study an economic system — capitalism, for
example — in much the same way that an anthropologist studies the
Klamath Indians or some primitive tribe of a South Sea island. They
ask, and try to answer, questions that have little to do with the
disposal of scarce goods.
The student may find it helpful to examine the definitions given below.
They represent the thought of several periods and schools. In these
definitions the older phrase “political economy” is more or less equal
to the modern word “economics.”
Oeconomy, in general, is the art of providing for all the wants of a
family, with prudence and frugality …. What oeconomy is in a family,
political oeconomy is in a state (Sir James Steuart, 1712-1780).
Writers on Political Economy profess to teach, or to investigate, the
nature of Wealth, and the laws of production and distribution:
including directly or remotely, the operation of all causes by which
the condition of mankind, or of any society of human beings, in respect
to this universal object of human desire, is made prosperous or the
reverse (John Stuart Mill, 1896-73).
Political Economy treats chiefly of the material interests of nations.
It inquires how the various wants of the people of a country,
especially those of food, clothing, fuel, shelter, of the sexual
instinct etc., may be satisfied; how the satisfaction of these wants
influences the aggregate national life, and how in turn, they are
influenced by the national life (Wilhelm Roscher, 1817-94).
Political Economy or Economics is a study of mankind in the ordinary
business of life; it examines that part of individual and social action
which is most closely connected with the attainment and with the use of
the material requisites of well being. Thus it is on the one side a
study of wealth; and on the other, and more important side, a part of
the study of man (Alfred Marshall, 1842—1924).
Economics is a study of the “community’s methods of turning material
things to account” (Thorstein Veblen, 1857—1929)
Economics ... is concerned with that aspect of behavior which arises
from the scarcity of means to achieve given ends (Lionel Robbins, 1898—
).
. . . Economics is ... a social science; that is, it deals with the
behavior of men in organized communities. Its special province is the
behavior of social groups in providing the means for attaining their
various ends (Wesley Mitchell, 1874—1948).
The theory of economics … is a method rather than a doctrine, an
apparatus of the mind, a technique of thinking, which helps its
possessor to draw correct conclusions (John Maynard Keynes, 1883—1946).
A few comments on the above may help. The first definition, by Steuart
was conceived before much formal and sustained thought by a succession
of scholars had been given to what we now name “economics”. Steuart was
a mercantilist, primarily interesed in the wealth of the British crown
and its capacity to support a navy, pay soldiers, and build and
maintain the King’s highways. His concern was not with the nation as a
whole — the artisans, farmers, and other men of low degree. In
contrast, the next definition, by Mill — a very acceptable definition
even today — does consider the society as a whole. It also calls
attention to the “laws of ... production and distribution.” which are
still at the forefront of economic interest. With the exception of the
definition given by Lionel Robbins, all of the others reach down — like
Mill — into the entire community. Veblen and Mitchell are dissenting
economists (…) Yet both echo the phrase of Marshall, a major orthodox
economist, about “the attainment . . . of the material requisites of
well being.” Marshall, Robbins, and Mitchell place emphasis on human
behavior. This is a desirable emphasis, lest we forget because of our
shorthand way of speaking that human beings are the cause of economic
phenomena. For example, economists are much concerned about the rise
and fall of prices; but prices do not rise and fall. Human beings mark
them up or down. The majority of American standard or orthodox
economists would endorse the definition given by Marshall, not only
because it is a good one, but also because of his great authority. Yet
Robbins’ — so completely different—would also meet with great favor.
What economists like about this pithy definition is that it goes to the
heart of an issue which engrosses many of them: how to reconcile
scarcity or the niggardliness of nature with the unlimited desires of
man. Economists like to say they will not be needed in heaven. The
reason is that in paradise, wants are few and resources boundless. Its
inhabitants will never have to decide how much to spend and how much to
save, how heavily to tax, how much butter to give up in order to have
guns.
The definition given by Keynes, the most widely acclaimed economist of
the 20th century, is a rather puzzling one. Economics is here defined
partly as a “technique of thinking.” What does this mean? Obviously,
any organized body of knowledge directs the mind in ways that are
foreign to other organized bodies of knowledge. The chemist thinks
about how atoms combine, whether they combine explosively or quietly,
what happens when you restructure the atoms of a molecule. In this
sense, we get a unique “technique of thinking” in almost any
specialized activity, including economics; indeed, even baseball,
football, and other sports impose a special technique of thinking, But
is his all that Keynes has in mind? Certain well-known techniques of
thinking include induction and deduction. Behaviorist psychologists —
at least in the early days—reduced thinking to inaudible speech; the
philosopher John Dewey described thinking as problem solving. Without
clarifying, Keynes seems to claim for economics a unique method of
ascertaining truth—one which is either a substitute for or an addition
to the more widely known methods suggested above; something you would
not find in a book of logic, only in a book of economics. If this is
his meaning, we must reject the definition, for the method of
scientific investigation and techniques of thought are the same for all
kinds of data; and in any case, there is a difference between the
concerns and data of economics and the method of studying it — a
difference which is not recognized in the Keynesian definition.
The question whether economics is really a science cannot be answered
easily. Astronomy, chemistry and physics have spoiled us with their
split-second accuracy and such infallibility of prediction that we are
inclined to look with disdain at the social sciences. Biology has not
scored the successes credited to the physical sciences, but it still
outpaces economics by a good deal. If, however, science is thought of
as an attitude, a willingness to put aside prejudice, self-interest,
and the unverified wisdom of the authority, then economics will fare
moderately well.”
This ends the longer quote.
Gambs and Komisar themselves state: “The economist’s job in our society
- as it would be in simpler societies - is to study all of our
decision-making forces, practices, and traditions, and to decide
whether they are promoting the general welfare.” (p14)
My own notes on all of this: (1) Keynes’s quote likely refers to the
‘science’ claim for economics, and has less to do with its subject
matter. See the discussion on Hicks in chapter 19. (2) Robbins’s
definition, though popular as it is - since it focusses on a clear
phenomenon that can be frequently seen - thus is inadequate on the
whole. It is an engineering’s definition, a rephrasing of ‘efficiency’.
It is useful to highlight some aspects, but no more. It neglects policy
stagnation that causes a state of inefficiency to endure. It neglects
evolution and power that for example affect the income distribution.
Robbins’s definition is like defining a map as ‘a piece of paper that
contains street names’, forgetting all the other useful things that map
makers provide.
Mankiw (1998:4) defines: “Economics is the study of how society manages
its scarce resources.”
This again mixes ‘economics’ (the approach) and ‘political economy’ (a
subject). I am not in favor of this, see the introductory discussion.
The ‘10 principles’ that Mankiw himself provides in his first chapter
give a nice view on the economic approach to problems - quite like
Keynes’s definition - but do not tell us much yet about the management
of the state.
Piet de Wolff (1911-2000) introduced the distinction ‘macro-economics’
and ‘micro-economics’, in his 1941 article on elasticities, in The
Economic Journal. His distinction is plain technical, and his
‘macro-economics’ appears to be just another word for ‘aggregate’. I
surmise that the economics profession quickly adopted the word
‘macro-economics’ since it sounds more professional and less political
than ‘Political Economy’. It sounds as a distinction that can be made
within economics, without having to visit the other sciences. The
problem with equating macro-economics with Political Economy however is
that Political Economy also is interested in distributional aspects -
while macro-economics by definition looks at the aggregate only. A
problem with publishing a book on micro-economics (and using that word
as the title) is that good micro-economics of course also includes the
macro-economic feedbacks and constraints. So my suggestion is to use
the ‘macro’ and ‘micro’ words as technical terms only (better sounding
than ‘aggregate’ and ‘disaggregate’), and not write books with those
titles or create professorial chairs on those ‘subjects’.
Biographical note on Montesquieu
Quoting from
http://www.geocities.com/Athens/Acropolis/6681/montesqb.htm:
“Montesquieu, Charles Louis de Secondat, Baron de la Brede et de
(1689-1755), French writer and jurist, born in the Chteau of la Brède,
and educated at the Oratorian school at Juilly and later at Bordeaux.
He became counselor of the Bordeaux parliament in 1714 and was its
president from 1716 to 1728. Montesquieu first became prominent as a
writer with his Persian Letters (1721; trans. 1961); in this work,
through the device of letters written to and by two aristocratic
Persian travelers in Europe, Montesquieu satirized contemporary French
politics, social conditions, ecclesiastical matters, and literature.
the book won immediate and wide popularity; it was one of the earliest
works of the movement known as the Enlightenment, which, by its
criticism of French institutions under the Bourbon monarchy, helped
bring about the French Revolution. The reputation acquired by
Montesquieu through this work and several others of lesser importance
led to his election to the French Academy in 1728. His second
significant work was Considérations sur les causes de la grandeur et de
la décadence des Romains (Thoughts on the Causes of the Greatness and
the Downfall of the Romans, 1734), one of the first important works in
the philosophy of history. His masterpiece was The Spirit of Laws
(1748; trans. 1750), in which he examined the three main types of
government (republic, monarchy, and despotism) and states that a
relationship does exist between an area’s climate, geography, and
general circumstances and the form of government that evolves.
Montesquieu also held that governmental powers should be separated and
balanced to guarantee individual rights and freedom.”
Note that his original name was Secondat, and that he inherited the
title of Baron from his uncle in 1716. He also was elected to the Royal
Society in 1730. See http://tqd.advanced.org/3376/Monty2.htm
Sir Isaiah Berlin: “Montesquieu advocated constitutionalism, the
preservation of civil liberties, the abolition of slavery, gradualism,
moderation, peace, internationalism, social and economic justice with
due respect to national and local tradition. He believed in justice and
the rule of law; detested all forms of extremism and fanaticism; put
his faith in the balance of power and the division of authority as a
weapon against despotic rule by individuals or groups or majorities;
and approved of social equality, but not the point which it threatened
individual liberty; and out of liberty, but not to the point where it
threatened to disrupt orderly government.” (“Against the Current”)
(Also taken from the internet.)
The Spirit of Laws can actually be read on the internet at
http://www.constitution.org/
I’ve read the introductory parts, and find them still quite readable.
One notes that Montesquieu refers to the ‘laws of the material world’,
and one cannot but think that Newton (1642-1727) has some influence
here.
It is interesting too what Montesquieu has to say on economics (Book
XX.7):
“Other nations have made the interests of commerce yield to those of
politics; the English, on the contrary, have ever made their political
interests give way to those of commerce. They know better than any
other people upon earth how to value, at the same time, these three
great advantages -- religion, commerce, and liberty.”
Also interesting is what he writes on taxes:
“12. Relation between the Weight of Taxes and Liberty. It is a general
rule that taxes may be heavier in proportion to the liberty of the
subject, and that there is a necessity for reducing them in proportion
to the increase of slavery. This has always been and always will be the
case. It is a rule derived from nature that never varies. We find it in
all parts -- in England, in Holland, and in every state where liberty
gradually declines, till we come to Turkey.” (Book XIII.12)
Also:
“Thus, in the Roman world, as at Sparta, the freemen enjoyed the
highest degree of liberty, while those who were slaves laboured under
the extremity of servitude.
While the citizens paid taxes, they were raised with great justice and
equality. The regulation of Servius Tullius was observed, who had
distributed the people into six classes, according to their difference
of property, and fixed the several shares of the public imposts in
proportion to that which each person had in the government. Hence they
bore with the greatness of the tax because of their proportionable
greatness of credit, and consoled themselves for the smallness of their
credit because of the smallness of the tax.
There was also another thing worthy of admiration, which is, that as
Servius Tullius’s division into classes was in some measure the
fundamental principle of the constitution, it thence followed that an
equal levying of the taxes was so connected with this fundamental
principle that the one could not be abolished without the other.”
(Book XI.19)
He discusses exemption of taxes for whole provinces.
18. Of an Exemption from Taxes. The maxim of the great eastern empires,
of exempting such provinces as have very much suffered from taxes,
ought to be extended to monarchical states. There are some, indeed,
where this practice is established; yet the country is more oppressed
than if no such rule took place; because as the prince levies still
neither more nor less, the state becomes bound for the whole. In order
to ease a village that pays badly, they load another that pays better;
the former is not relieved, and the latter is ruined. The people grow
desperate, between the necessity of paying for fear of exactions, and
the danger of paying for fear of new burdens. (XIII.18)
On exemption we also find something like a ‘basic income’ for nobles:
“We find in Xenophon’s Banquet a very lively description of a republic
in which the people abused their equality. Each guest gives in his turn
the reason why he is satisfied. “Content I am,” says Chamides, “because
of my poverty. When I was rich, I was obliged to pay my court to
informers, knowing I was more liable to be hurt by them than capable of
doing them harm. The republic constantly demanded some new tax of me;
and I could not decline paying. Since I have grown poor, I have
acquired authority; nobody threatens me; I rather threaten others. I
can go or stay where I please. The rich already rise from their seats
and give me the way. I am a king, I was before a slave: I paid taxes to
the republic, now it maintains me: I am no longer afraid of losing: but
I hope to acquire.”” (Book VIII.2)
Price inflation and wage growth in Holland 1950-2002
Table 20: Price inflation and wage growth in Holland 1950-2002
Source: Central Planning Bureau (January 2003)
_Year_
_% change_
_% change_
_1951=100_
_1951=100_
_dlog P_
_dlog wi_
_P_
_wi_
1950
8.7
-
90
91
1951
11.1
10.4
100
100
1952
0.3
5.4
100
105
1953
-0.7
4.2
100
110
1954
4.0
9.2
104
120
1955
1.7
8.9
105
131
1956
2.1
8.6
108
142
1957
5.5
10.8
113
157
1958
1.6
4.4
115
164
1959
1.2
2.4
117
168
_dlog P_
_dlog wi_
_P_
_wi_
1960
2.3
8.2
119
182
1961
2.1
7.2
122
195
1962
2.6
5.9
125
206
1963
3.8
9.0
130
225
1964
6.5
14.9
138
258
1965
3.6
11.1
143
287
1966
5.3
11.
151
319
1967
2.9
8.8
155
347
1968
2.5
8.9
159
377
1969
6.2
13.4
169
428
1970
4.4
12.8
176
483
1971
7.9
13.6
190
548
1972
8.3
12.6
206
617
1973
8.5
15.8
223
715
1974
9.5
15.6
245
826
1975
10.1
12.8
269
932
1976
9.0
10.9
293
1034
1977
6.1
8.7
312
1124
1978
4.5
7.2
326
1205
1979
4.3
6.1
340
1279
1980
6.9
6.1
363
1357
1981
6.3
4.2
386
1413
1982
5.3
6.3
407
1502
1983
2.8
3.8
418
1559
1984
2.1
0.5
427
1568
1985
2.2
1.8
436
1597
1986
0.2
2.1
437
1630
1987
-0.2
1.4
436
1653
1988
0.6
1.1
439
1672
1989
1.6
0.8
446
1685
1990
2.5
3.0
457
1735
1991
3.1
4.4
471
1811
1992
3.2
4.1
486
1886
1993
2.6
2.9
499
1940
1994
2.7
2.4
512
1987
1995
2.0
1.3
522
2013
1996
2.1
1.1
533
2035
1997
2.2
2.3
545
2082
1998
2.0
4.0
556
2165
1999
2.2
3.1
568
2232
2000
2.6
5.0
583
2344
2001
4.5
4.8
609
2455
2002
2.5
4.2
625
2559
Income distribution in Holland 1950 and 1988
Rijken van Olst (1969:97) provides the Dutch income distribution for
1950. Here income is measured in Dfl thousands (thousand guilders) of
1950, and the observed frequency concerns males with tax obligations. A
Dfl is about 0.5 €.
The Centraal Bureau voor de Statistiek (1991:47) provides an income
distribution for 1988, in Dfl thousands of 1988, and the observed
frequency concerns the ‘active’ population with an income, i.e.
exclusive of fulltime benefit recipients, but, in this case, also
exclusive of independents.
Table 21 contains both distributions. Income class _c_[_i_] means that
incomes from _c_[_i-1_]_ < c_[_i_] are considered, so that _c_[_i_]
itself is excluded. With _f_[_c_] the frequency observed for class _c,
_we can compute the frequency density as _f_[_c_[_i_]]
/ (_c_[_i_] - _c_[_i-1_]) or the frequency adjusted for
the range concerned.
Table 21: Dutch income distribution for 1950 and 1988
1950
1988
Class
(Dfl 1000)
Frequency
(1000)
Frequency
density
Class
(Dfl 1000)
Frequency
(1000)
Frequency
density
< 1
343
343
< 2
334
167
2
544
544
4
185
92
3
909
909
6
192
96
4
618
618
8
197
98
5
261
261
10
193
96
6
136
136
12
181
90
7
79
79
14
163
82
8
49
49
16
151
76
9
33
33
18
138
69
10
23
23
20
149
74
15
53
11
22
173
86
20
20
4
24
221
110
50
23
1
26
267
134
100
4
0
28
288
144
100
1
0
30
294
147
32
291
146
34
302
151
36
289
144
38
237
118
40
224
112
45
384
77
50
257
51
60
257
26
70
118
12
80
65
6