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.

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.

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.

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).

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.”

Gerrit Zalm (leader for the conservative liberals VVD) : “a dangerous man”.

VVD chairman Eenhoorn: “the Mussolini type of leader”.

Marcel van Dam (influential columnist, both on national TV and in a widely read newspaper, also PvdA): “lower than a low-life”.

Wim Kok (prime minister at that time, PvdA): “sowing of hate and discord”.

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.”

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.

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 ?” 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

1950

8.7

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

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

544

544

185

909

909

192

618

618

197

261

261

193

136

136

181

163

151

138

149

173

221

110

267

134

100

288

144

100

294

147

291

146

302

151

289

144

237

118

224

112

384

257

257

118

100

150

200

200

These data are not comparable, and some aspects are a bit less relevant for our objectives. Apart from the difference in independents, the 1950 distribution excludes females, and the 1988 distribution contains parttimers while the number of parttimers has strongly increased compared to 1950. In both cases it are incomes, and not just labour earnings. However, we can see how far we get.

Table 22 contains a summary review, with both the numbers of persons involved, the total and average income (in currency of the relevant year). It appears that by dropping the lowest 8 classes of the 1988 distribution we are better approximating the situation without the parttimers. This then is used for estimation of the lognormal productivity distributions that are used in the illustrations in the body of the text.

Table 22: Summary of the Dutch income distributions for 1950 and 1988

Number of persons

(thousands)

Total income

(Dfl million)

Average income

(Dfl thousand)

1950

3096

10993

3.5

1988 with the first 8 classes excluded

4081

154120

37.7

1988

5677

165460

29.1

Program used in the analysis on exposed and sheltered sectors

This program uses the Applied General Equilibrium routine of the Economics Pack (Colignatus (1999)), which routine is based on work of Asahi Noguchi and Silvio Levy, see the chapter in Varian (1993). It is nice to show how simple modeling actually can be made.

Needs[“Economics`Pack`”]

ResetAll

Economics[“AGE`”]

SetFunction[withl, shel] =

{Function ( 0.4 (1-q) hs^0.334 + 0.6 (1-q) ms^0.334 + q ls^0.334)^3,

CoefficientList { q 0.1}, Factors {hs, ms, ls} }

SetFunction[withl, expo] =

{Function

(( (c he^(1-1/s2) + (1-c) me^(1-1/s2))^(1/(1-1/s2)) )^(1-1/s) * (1-d) +

d * le^(1-1/s) )^(1/(1 - 1/s)),

CoefficientList {c 0.2, d 0.01, s 1.2, s2 0.4},

Factors {he, me, le} }

SetModel[NumberOfSectors 2, NumberOfFactors 3, Utility CES,

Production {Sector SetFunction[withl, shel],

Sector SetFunction[withl, expo] } ]

ownpars = {Utility {Scale[Utility] 1, RTS[Utility] 1, S[Utility] 0.6,

FactorE 0.7, FactorE 0.3},

Production {}, Resources {15, 75, 10}}

eq = Equilibrium[ownpars]

AllocationTable[Allocation[ownpars]]

shares = (FactorPrices /. eq) * (Resources /. ownpars) / (YEq /. eq) / / cpc23 = CPCDiagram[ownpars, AxesLabel {“Sheltered”, “Exposed”},

AspectRatio Automatic]

ploteq1 = EdgeworthBowley[ownpars, Factor {1, 2}, PlotPoints 50]

(*l = 0*)

SetFunction[withoutl, shel] =

{Function ( 0.4 (1-q) hs^0.334 + 0.6 (1-q) ms^0.334 + q ls^0.334)^3,

CoefficientList {}, Factors {hs, ms} } /. {ls 0, q 0.1}

SetFunction[withoutl, expo] =

{Function (( (c he^(1-1/s2) + (1-c) me^(1-1/s2))^(1/(1-1/s2)) )^(1-1/s) * (1-d) +

d * le^(1-1/s) )^(1/(1 - 1/s)) /. {le 0, s 1.2, s2 0.4} // PowerExpand,

CoefficientList {c .2, d 0.01}, Factors {he, me}}

SetModel[NumberOfSectors 2, NumberOfFactors 2, Utility CES,

Production {Sector SetFunction[withoutl, shel],

Sector SetFunction[withoutl, expo] } ]

pars22 = {Utility {Scale[Utility] 1, RTS[Utility] 1, S[Utility] 0.6,

FactorE 0.7, FactorE 0.3},

Production {}, Resources {15, 75}}

eq22 = Equilibrium[pars22]

AllocationTable[Allocation[pars22]]

shares22 = (FactorPrices /. eq22) * (Resources /. pars22) / (YEq /. eq22)

cpc22 = CPCDiagram[pars22, AxesLabel {“Sheltered”, “Exposed”},

AspectRatio Automatic]

ploteq4 = EdgeworthBowley[pars22, Factor {1, 2}, PlotPoints 50]

cpcfin = Show[cpc23, cpc22]

ebfin = Show[ploteq1, ploteq4,

FrameLabel {“Total high pr. labour”, “Total middle pr. labour”}]

A note on Hayek

Writing this book got me to read some of Hayek (1984) - finally, and after great misgivings. As a rule, a student of economics should always read up on the Nobel laureates, but Hayek never inspired me. What I read about his work made it uninviting. In Skidelsky’s biography of Keynes he is reduced from a critic of Keynes to someone whom Keynes, exasparated from lack of progress in communication, took along to go and buy old books. Later Hayek got a following of ‘libertarians’ and that was equally unattractive (not to be confused with ‘librarians’ (;-)).

I likely agree with Mark Blaug (1985:90): “In short, everyone agrees with what Hayek means in general but there is a large spectrum of answers to what he means in particular. It will take another generation to fully digest Hayek’s many and multifaceted contributions to economics and indeed social science as a whole.”

What I finally got to read of Hayek actually made me better appreciate part of his work, though the feelings remain mixed.

For starters, it appears that Hayek considers himself to be a ‘whig’ like Gladstone and de Tocqueville, and that he was not too happy with the ‘libertarians’. This is quite a relief to read, and I am sorry that I have entertained such a prejudice for so long. (And: Why can’t reporters be more accurate ?)

Secondly, Hayek is known in current economics for his early comments on the relevance of ‘knowledge’. My hesitation on this remains, though. This hesitation derives from the consideration that he apparently didn’t advance beyond Walras’s solution of assuming tatonnement, and similarly I find it hard to believe that other early economists disregarded knowledge. (Keynes for example emphasised ‘expectations’.) But ‘knowlegde’ is an issue.

Subsequently, though, I was jolted by Hayek’s discussion of the philosophical consequences of his theory of knowledge. Some of his thoughts are precisely the same as mine ! Notably (I could not have said it better!):

“The sense data, or the sensory qualities of the objects about which we make statements, thus are pushed steadily further back; and when we complete the process of defining all objects by explicit relations instead of by the implicit relations inherent in our sensory distinctions, those sense data disappear completely from the system. In the end the system of explicit definitions becomes both all-comprehensive and self-contained or circular; all the elements in the universe are defined by their relations to each other, and all we know about the universe becomes contained in those definitions. We should obtain a self-contained model capable of reproducing all the combinations of events which we can observe in the external world, but should have no way of ascertaining whether any particular event in the external world corresponded to a particular part of our model. Science thus tends necessarily towards an ultimate state in which all knowledge is embodied in the definitions of the object with which it is concerned; and in which all true statements about these objects therefore are analytical or tautological and could not be disproved by any experience. The observation that any object did not behave as it should could then only mean that it was not an object of the kind it was thought to be. With the disappearence of all sensory data from the system, laws (or theories) would no longer exist in it apart from the definitions of the objects to which they applied, and for that reason could never be disproved.” Hayek (1984:230-231)

Clearly, a fully ‘self-contained model’ might take a million years to make - and I doubt whether sense input can be really fully eliminated - but the Definition & Reality approach of using a ‘reduced form of stylized facts’ is quite along the same tracks, and differs only in digits of accuracy.

Thirdly, Hayek (1984) discusses constitutional reform. I’d rather not use this space to comment on those particular thoughts, especially on those of constitutionally allocating younger women to older men, since I would digress on my subject. But it remains useful to note, then, that more economists have taken up the issue of the constitution. (And to be clear about it: I write these lines with lots of laughter.)

It appears (more soberly) that Hayek is mentioned a number of times by Sen (1999a) “Development as freedom”. Sen even states: “(…) my admiration for Friedrich Hayek and his ideas (he has contributed more than perhaps anyone else to our understanding of constitutionality, the relevance of rights, the importance of social processes, and many other central social and economic concepts) (...)” (Sen:257) !

Sen’s “freedom” is Hayek’s “liberty”, see in particular p289-292 where Sen clarifies that ‘income’ has been and is a useful indicator but tends to be overvalued and mistaken for the true objectives relating to freedom. See the discussion of Sen’s book above.

Sen however rightly criticises Hayek’s misuse of the argument of ‘unintended consequences’ against social change, and in fact makes fun of it:

“The idea that unintended consequences of human action are responsible for many of the big changes in the world is not hard to appreciate. Things often do not go as we plan. Sometimes we have excellent reason to be grateful for this, whether we consider the discovery of penicillin from a leftover dish not intended for that purpose, or the destruction of the Nazi party caused by - but not intended in - Hitler’s military overconfidence. One would have to take a very limited view of history to expect that consequences match expectations as a general rule.” (Sen:254)

“If it is, as Hayek puts it, a “profound insight,” then there is something wrong with profundity.” (Sen:257)

Sen concentrates on the difference between ‘unintended’ and ‘unpredictability’. I think that the argument can even be stronger than that, but, don’t pursue that reasoning here, since it is not the topic of discussion.

Fourthly, it appears that Hayek in “Road to serfdom” argues in favour of a ‘guaranteed minimum income for everyone’ - which would be called a ‘basic income’ nowadays. This is actually a fairly decent approach to the poverty problem - though I would suggest that workfare at a living wage would be more appropriate. It is interesting to see that Keynes recommended that book and supported it for its ‘ethics and philosophy’ (though not explicitly for its economics).

Fifthly, Hayek (1984)’s chapter on Bernard Mandeville is advised reading.

A note on Barrow’s “Impossibility”

John D. Barrow (1998) “Impossibility” gives a nice introduction into some of the topics that we encounter when developing the Definition & Reality methodology. I have taken a useful quote from one of his pages to emphasise a main point. A point of consideration however is that Barrow only provides an introduction and a starting point, and there is need for more discussion and refinement of the argument. Some points of warning are:

1. Barrow uncritically adopts Arrow’s explanation for his impossibility theorem - and we have shown that this explanation is erroneous.

2. On the logical paradoxes (e.g. Epimenides’ Liar paradox ) I have presented a ‘logic of exceptions’ that changes the argument. (Not in this book.)

3. See our discussion on non-Euclidean geometry in the main body of the text.

4. On p23 Barrow suggests that at small dimensions ‘concepts’ like velocity and position can only exist with ‘limited sharpness’ - which is a very strange thing to say.

5. Barrow p22 states: “There have occasionally been attempts to find mental consequences of Heisenberg uncertainty, but the general opinion is that the effects are too small on the scale of neurons to have any significant effect upon the human thinking process.” Well, Schrödinger gave his cat-example that quantum mechanics can extend into the macro world. (We don’t seem to have that mechanism in our head though, but there can be equivalent ones.)

6. We should be more critical about how physicists deal with their ‘measurement problems’ in general.

A constitutional amendment for an Economic Supreme Court

As an economic expert I advise to a parliamentary enquiry and a public debate on this issue. It are the present powers in government that must grow convinced of the need for a better balance of powers. The evidence will likely convince them, if only they study it.

The following is a text that may serve as a concept for a constitutional amendment. The text assumes the common Trias Politica. It uses the term “Parliament” for the legislative branch (e.g. US Congress), and “President” for the executive branch (e.g. the UK Cabinet). It then adds the Economic Supreme Court. The given size, terms and other properties of the Economic Supreme Court seem best to create a balance for group decision making, openness, stability and change.

This text has essentially been posted on the internet in 1996. The major current change with respect to that text is a result of Frank Sulloway’s “Born to rebel” (1996) and the subsequent reports - Van den Berg (2004) refers to Nature - that these findings are not accurate. Sulloway argues that first-borns tend to be less open to new ideas but more likely to have responsible positions. This causes the idea that, since the court should be sensitive to new discoveries and be critical to abuse of authority, it would seem wise to have some test on open-mindedness. This needs to be investigated upon. Since this is a constitution, we should formulate a general rule, and we should leave it to the practical times and state of scientific inquiry how this is implemented, by first-bornnesss or by some other verifiable criterion.

The nation has an independent and scientific Economic Supreme Court of equal status next to Parliament, the President and the Supreme Court.

1. The task of the Court is to scientifically check the economic data, assumptions, analyses and projections underlying the government’s budget and its draft statement, and then possibly veto the official adoption and publication of the budget, if the Court finds that the information used and presented, and in particular the estimates for the deficit and national debt, are not scientifically correct. The Court will publish its findings both for Parliament and for the scientific community.

2. Members of the Court are appointed by the Court itself, subject to a veto by a normal majority in Parliament. The Court will inform Parliament about the name and credentials of the candidate for appointment. Parliament will have 50 days to discuss and possibly veto an appointment. The appointment of the candidate becomes effective when Parliament does not veto the appointment.

3. The Court consists of 7 members. At least 5 members have a high likelihood of open-mindedness, by criteria generally accepted in the scientific community.

4. Term rules are:

a) Each member serves a term of 7 years. Each year the member with the longest term resigns, and a new member is appointed.

b) Terms run from May 1st till April 30st, 7 years later. If a member resigns before the end of the term, then the replacement will concern only the remainder of the term.

c) Members may only serve for two terms, which terms need not be consecutive. A part term will not count if its duration is less than 4 years.

d) All 7 members participate in the selection of a candidate for appointment.

e) The Court chooses its chairperson from among its members. Non-eligible are the newly appointed and the resigning member, so that only 5 members are eligible.

f) The Court determines its modus operandi further by itself.

5. Parliament may, if the occasion arises, decide to dismiss an existing Court and reappoint a new one, which decision requires a majority of two-thirds. Parliament may not override a veto by the Court, by any majority. It is up to the newly installed Court to decide if a wronged veto is repealed.

6. The means of the Court are as follows:

a) The Court can appoint a staff of maximally 150 persons. Minimally 50% of the staff shall have an appointment as scientist, and they shall operate under both common scientific standards and a special statute that has precedence. This special statute shall be established and published by the Court.

b) The Court can instruct the President to provide information. The President may refuse information only if national security is at stake. Information that the President regards as confidential will be treated as confidential by the Court and its staff too, unless the same information can be received via independent other channels too.

c) When State governments within the Federation install their own Economic Courts, then possible disputes shall be settled by the Economic Supreme Court.

d) The Court can install a council of economists and other specialists from the academia. The Court can install chambers of special competence.

e) The Court shall have a budget that compares favourably to the average budget of scientific research institutes of the same size.

A parallel argument on the Central Bank

The analysis about the Economic Supreme Court and the ‘natural monopoly’ argument about economic policy advice, actually finds a parallel with respect to the Central Bank. Reading Galbraith (1998) made me aware of this situation.

Let us regard the situation that market forces determine the rate of interest to a large extent, but that the Bank is not without some power and will use its influence on rates to control inflation.

· Theory dependence: The Bank decides on its policy while using an economic model that contains a mechanism for the determination of the rate of interest - for example the rate of interest will contain anticipated inflation. Hence policy is directly dependent upon the state of economic theory.

· Self-reference (reflexiveness): Since interest rates are sensitive to Bank policy, Bank policy would be part of the model. Popular thought has it that a good Bank would target at zero inflation, but Bank policy generally would be different. For example, a true zero target would require that a period with inflation is followed by deflation, and Banks generally don’t do that. Also, the true price level should include inventories and capital stocks, but inflation generally is measured as the CPI, which is something totally different. These details, and Bank policies on them, should be put into the model (with error terms to allow for possible discretion).

· Conflictive self-reference: Clearly, one can conceive the situation that the Bank announces a policy while the true scientific forecast shows that the policy is untenable and will be repealed later. Hence there is an internal source of conflict - the worst kind, not a dysfunctional person, but a logical knot.

· General conflict of interests: The Central Bank may not only have the objective to control inflation but also other objectives, like for example supporting and supervising the financial system. For example, the US Fed is not purely a governmental body, but it is rooted in the financial system and it is influenced by private interests therein. See Galbraith (1998:221-231) for a discussion on the conflict of interests - for example on the ‘credit crunch’ - and read also Krugman on the Savings & Loans debacle.

Hence, along the ‘TP & ESC’ line of argumentation, we can clearly see a need for reform in existing Central Banking, and the direction that it would need to take. Interestingly, where economic policy of the state would have to be co-ordinated with the policy of the Central Bank (that should best remain independent), there arise questions of structure and priority. My suggestion is to first create the Economic Supreme Court, and have it advise on how to position the Bank or its separate functions.

About the US Council of Economic Advisers

This appendix consists of two large quotes from the White House internet site in January 2000, with my comments added.

From the “Employment Act of 1946”

“There is hereby created in the Executive Office of the President a Council of Economic Advisers (hereinafter called the “Council”). The Council shall be composed of three members who shall be appointed by the President, by and with the advice and consent of the Senate, and each of whom shall be a person who, as a result of his training, experience, and attainments, is exceptionally qualified to analyze and interpret economic developments, to appraise programs and activities of the Government in the light of the policy declared in section 2, and to formulate and recommend national economic policy to promote employment, production, and purchasing power under free competitive enterprise.

It shall be the duty and function of the Council--

1. to assist and advise the President in the preparation of the Economic Report;

2. to gather timely and authoritative information concerning economic developments and economic trends, both current and prospective, to analyze and interpret such information in the light of the policy declared in section 2 for the purpose of determining whether such developments and trends are interfering, or are likely to interfere, with the achievement of such policy, and to compile and submit to the President studies relating to such developments and trends;

3. to appraise the various programs and activities of the Federal Government in the light of the policy declared in section 2 for the purpose of determining the extent to which such programs and activities are contributing, and the extent to which they are not contributing, to the achievement of such policy, and to make recommendations to the President with respect thereto;

4. to develop and recommend to the President national economic policies to foster and promote free competitive enterprise, to avoid economic fluctuations or to diminish the effects thereof, and to maintain employment, production, and purchasing power;

5. to make and furnish such studies, reports thereon, and recommendations with respect to matters of Federal economic policy and legislation as the President may request. ”

Martin Feldstein on the US Council of Economic Advisers

Quoted from The Economic Journal, 102 (September 1992), “The Council of Economic Advisers and Economic Advising in the United States”, by Martin Feldstein.

The Structure of the Council of Economic Advisers

Although the term ‘Council’ conjures up the image of a large committee, the CEA actually consists only of a chairman and two members. The chairman is legally responsible for establishing the positions taken by the Council. The other two members direct research activities of the Council in particular fields, represent the Council at meetings with other agencies, and generally work with the chairman to formulate economic advice.

In addition to the chairman and two other members, the CEA has a professional staff that is both small and unusual. A group of about ten economists, generally professors on one- or two-year leaves from their universities, act as the senior staff economists. They in turn are assisted by an additional ten junior staff economists, typically advanced graduate students who also spend only a year or two at the CEA. Four permanent economic statisticians assist the economists in the interpretation and identification of economic data.

The academic nature of the staff and of most CEA members distinguishes the CEA from other government agencies. It generally assures a higher level of technical economic sophistication and of familiarity with current developments in economic thinking. Members and staff also use their strong links in the academic community to obtain advice on technical issues throughout their time in Washington.

There is of course a price to be paid for this reliance on academic economists, especially at the staff level. They often come to the CEA without the institutional knowledge of some of the issues with which they will deal and without any experience in the bureaucratic process of decision-making. My experience however was that most of the senior staff economists learned quite quickly to be effective participants, and made an important contribution to the policy debates because of their ability to apply economic analysis to the issues being discussed, and to develop new economic proposals that had not occurred to non-economist participants from the agencies.

How Advice Is Given

The CEA chairman gives advice directly to the President and to the senior members of the administration. There is also a broader role of trying to shape public understanding of the economic issues. The CEA members and staff participate directly in the inter-agency process, in which policy options are evaluated and recommendations developed for presidential decisions.

The specific organization of advice-giving undoubtedly differs from administration to administration, reflecting the overall form of economic policy making and the particular style and interest of the president. I can only describe my own experience.

In the Reagan administration, the cabinet as a whole rarely met. Instead, economic policy issues were discussed through a series of cabinet councils with more specialized responsibilities. These included a cabinet council on commerce and trade that was chaired by the Secretary of Commerce, a cabinet council that dealt with labour and social insurance issues, a cabinet council that dealt with regulatory and legal issues, and a general cabinet council on economic affairs that was chaired by the Secretary of the Treasury. Each of the interested departments was represented at the council by the secretary of that department. Occasionally the deputy secretary or under-secretary substituted for the secretary at those meetings. I generally represented the CEA, although occasionally one of the members took my place at the table. Vice President Bush usually attended these meetings.

The councils generally met without the president. Roughly twice a month the president participated in council meetings when there was a specific issue that required a presidential decision or, occasionally, a broad area that seemed appropriate for general cabinet-level discussion with the president.

Any major proposal for legislative action, whether originated by a department or from Congress, would be assigned to an appropriate cabinet council for consideration to develop an official administration position. Initial meetings would be held at a staff level, with the CEA represented by the senior staff economist with the relevant expertise. Often discussion at this level would be sufficient to dispose of the idea, usually with the conclusion that the proposal was well-meaning but misguided and would not accomplish its stated purpose or would do so only at an unacceptable economic cost. This would quietly bury an internal departmental proposal or lead to a formal administration position to oppose a Congressional initiative.

When there was disagreement about the proposal that could not be resolved unanimously at the level of this working group, a higher-level meeting would be held. Each interested department would be represented at a sub-cabinet level, generally by an assistant secretary. The CEA would be represented by a member or senior staff economist, since with only two members it was often true that the CEA only had the expertise at the senior staff level and preferred to send a real expert rather than, as in the other departments, to send a more senior official who was ‘briefed’ but who did not really understand the issues himself.

Once again, if this group could not reach a consensus the issue would be passed up to the full cabinet council, where the departments were represented at the top level and the CEA by the chairman. If this group reached an agreed recommendation, its conclusion would be sent to the President. When there was disagreement, a summary of the different positions would be prepared by the staff of the council for submission to the president for his decision. These decision memos were carefully prepared so that each side could object to any spurious arguments put forward by others. On some occasions, when it was felt that such written summaries were inadequate, the group would meet with the president to present opposing views.

This process gave the CEA an opportunity to influence both the specific decisions and the way that members of the administration thought about particular issues. This was true at every level from the departmental senior staff that interacted with the CEA economists to the cabinet level.

In addition to these relatively large group meetings with the President, there were also smaller meetings dealing with specific subjects. A central organizing set of meetings each year dealt with the budget. Here the only regular participants, in addition to the president and the vice-president, were the Secretary of the Treasury, the Director of the Office of Management and Budget (OMB), the Chairman of the CEA, and a small number of senior White House staff. The series of budget meetings began with a five-year economic forecast prepared by the CEA. Technical staff discussions and meetings between a CEA member, a Treasury assistant secretary and an associate director of the OMB would review the evidence on which a forecast would be based. In insisted, however, that the CEA alone was responsible for the final forecast in order to avoid a repetition of earlier experience in which the forecast was widely (and correctly) criticized as over-optimistic, and therefore as leading to a substantial underestimate to future budget deficits. Needless to say, this was a source of friction and contention.

Other such small meetings with the president included preparation for the G-7 economic summits, for his televised national press conferences, and for discussions of special subjects like social security reform.

The Secretary of the Treasury and I also met roughly every two weeks with the president and a few senior White House staff to discuss subjects of our choice. The Treasury Secretary frequently used these sessions to discuss monetary policy or issues currently under development at the Treasury. I frequently discussed the budget deficit but also talked about things like the character of unemployment, the nature of the trade imbalance, and other types of general ‘background’ information. These were not intended as decision-making sessions.

In addition to these meetings, I also sent the president brief memos on particular issues. Occasionally these would be my thoughts on some issue being discussed in the administration. There were also almost daily brief memos telling the President how to interpret important economic statistics that would be released the next morning so that he would not be caught unaware of the information (by the press or other visitors) or uninformed about the significance (or lack of significance) of the particular statistic.

The CEA also serves as a source of professional economic advice to other departments and agencies. In some cases, this serves to reinforce the advice being given by that department’s own economist. In other cases, it fills a gap where the department does not have an economist or where the CEA can bring better analysis to a particular problem. As chairman I also met on an individual basis with the department heads to discuss policy issues relevant to their department or more general issues like the budget situation.

A weekly breakfast meeting with the Treasury Secretary and the OMB Director -- the so-called Troika or T-t group -- provided an important opportunity to discuss economic issues with complete candour and without fear of leaks to the press. This small group was occasionally joined by Secretary of State George Shultz and on some rare occasions by Federal Reserve Chairman Paul Volcker.

These breakfast meetings were just about the only time during my time at the CEA when the Fed Chairman participated in a discussion inside the administration. He met privately of course with the Secretary of the Treasury and with various financial regulators. I had breakfast with him every other week and on those occasions we discussed the state of the economy, the direction of monetary policy, banking regulation, and such issues as the developing country debt problem, in which the Fed worked closely with the administration.

As the senior economist in the administration, the CEA chairman is frequently called upon to discuss economic policy issues in public. These include testimony to congressional committees, speeches to a wide array of audiences, occasional television interviews and frequent discussions with the press. I always regarded these as opportunities to teach economics. An important challenge was to explain why the dollar had soared and how that, rather than protectionist policies abroad, was responsible for our trade deficit. Until the recovery was firmly established, I would explain why an expansionary fiscal policy was unnecessary and later I spent endless hours explaining how to assess the structural budget deficit and why reducing it was important.

The Council of Economic Advisers produces an annual report which discusses broad issues of economic policy for a general audience. This report is widely read by the economic press, by Congressional staff and by academic economists and students.

How the CEA Advises Presidents

“I think our unique system of placing a professional economist in the White House to report directly to the president works well. I hope that future presidents continue to use this policy.”

The principle of comparative advantage suggests that I, as a former chairman of the Council of Economic Advisers, convey my knowledge of this unique and little understood agency. I emphasize the word “unique” because I believe the CEA is really quite different from advisory institutions in other countries.

During my time as chairman (1982 through 1984), I had the opportunity to talk with the senior economic officials in many countries. I never found one that institutionalized our combination of characteristics: a professional economist who has direct access to the head of the government and who participates as an equal in all cabinet-level discussions.

In other countries, the top economic official is either an economics minister (i.e., a politician selected from the Parliament who may or may not be a professional economist) or a professional economist who reports to the minister of finance or some other cabinet minister. There are also some special situations in which individual economists are influential advisers to the heads of government, but these are personal arrangements that have not been institutionalized in the way that the CEA has been.

One reason why the American system for giving economic advice differs from those abroad is that, in our presidential system, it is the president rather than the minister of finance or budget minister who has ultimate responsibility for all economic matters. In other countries, the prime minister or president is less involved with economic issues and the responsible cabinet member has a political standing and legitimacy in his own right. In the United States, the cabinet is in the last analysis an advisory and management body while all true decision-making authority of the executive branch is vested in the president.

The role of the CEA and its chairman undoubtedly differs over time depending on both the chairman and the president. The differences can be quite profound even within the same set of legal rules. For example, during the Nixon administration there was a period when George Shultz served simultaneously as budget director and as counselor to the president with responsibility for overall coordination of economic advice. But I have not researched the history of the CEA and will therefore focus my comments on the period of 1982-1984 that I know from firsthand experience.

I began by saying that the council is “little understood” because I have frequently discovered that people are quite surprised when they learn how small the council is and how it actually operates. The term “council” seems to conjure up the image of a dozen or more people sitting around a conference table voting on recommendations of economic policy. In fact, the CEA has only a chairman and two additional members.

Since the days of the Arthur Burns’ chairmanship in the Eisenhower administration, there has been an official executive order vesting all of the executive authority for the council in the chairman. In practice, that means that the three members have informal discussions but do not take votes. It also means that when a formal recommendation from several agencies is sent to the president, the position taken by the CEA reflects the judgment of the chairman just as the position of the Treasury reflects the view of the Treasury secretary. In giving direct advice to the president, I always spoke for myself rather than on behalf of the Council.

The CEA has a small but high quality professional staff of about twenty economists and four economist statisticians. The statisticians are permanent civil servants who understand the construction of official economic statistics and do their best to save the economists from erroneous use of these data. Because the senior staff economists come fro universities for a one- or two-year period, they keep the CEA up to date on the best academic thinking on a wide range of subjects.

Although the CEA is physically as well as operationally part of the White House complex (CEA offices are in the Old Executive Office Building adjacent to the White House and within the same security cordon), the economic staff functions in a completely professional and nonpartisan way. My very able and distinguished staff included Larry Summers, who was prominent as chief economic adviser to presidential candidate Michael Dukakis.

The tradition of professionalist is so strong that even in a presidential election year the CEA chairman appoints members of the staff for the coming academic year with the clear understanding that they will continue to serve even if the party in power loses the presidential election. I might just add in this context that, unlike the practice in some countries, the members of the CEA and their staff work full-time at their CEA responsibilities. Indeed, in December and January of each year, the pressure of working simultaneously on the Economic Report of the President, the budget, and the issues to be presented in the president’s state of the union message seemed like much more than a full-time job.

The CEA was created by the Employment Act of 1946 with a Keynesian heritage and an expectation that it would give advice about the use of fiscal policy to achieve and maintain full employment. Needless to say, there has been a profound change in the economics profession’s thinking about macroeconomic policy in the past forty years.

Commenting on this

Above description of the US CEA shows that it is very close to the Executive. There is ‘professionalism’ - and we may willingly interprete that to mean that one keeps a distance to political scheming and the illusions of the day - but still, this is not auditing, this is not verification for verification’s sake, this is not vetoing David Stockman, this is not sticking to one’s own perception of what the right model is regardless of what the President likes to think. If there would be an Economic Supreme Court, then, indeed, the President would still have need for advice as currently provided by the CEA. One would imagine that CEA staff members would frequent the Court’s offices, and such. But the constitutional powers would be institutionally separated.

We can see that the CEA is so understaffed and so preoccupied with its duties of ‘running about for the President’, that it failed to pick up an important analysis. In April 1993, I sent a major piece of my work to the CEA. And got no reply.

In August 1993, I actually visited the US Treasury, but with little success. See the appendix on presenting the analysis to the US National Press below, and the autobiographical appendix as well.

At the end of August, 1993, President Clinton announced a major increase in the Earned Income Tax Credit (EITC) - see next appendix. I don’t think that my paper and visit contributed to that. If it has, they should have replied - and could have gone much further. (But I do think that the Clinton EITC measure helped, as one factor, to create the subsequent the long boom in the US economy. There was more competition on the labour market, and this helped to reduce wage growth.)

To prof. Blinder

& prof. Stiglitz

Council of Economic Advisers

White House

Old Executive Office Building

Washington DC 20500

Verenigde Staten van Amerika

April 16 1993

Concerning: unemployment and inflation

Dear professors,

It takes time to get things published, so I overcome my hesitations and send you enclosed paper. It is one of the fruits of 15 years of econometric research, including long term projections with 2000 equations models.

The paper gives a structural analysis of unemployment, regardless the state of inflation. The analysis can be extended on the time path of inflation.

You should read it with a good intuition of the importance of heterogeneous labour and a reduced form analysis.

I am glad to answer any questions.

Kind regards,

Drs. Thomas Cool

Rotterdamsestraat 69

2586 GH Scheveningen

Holland

Enclosed: paper “On the political economy of employment in the welfare state” [Chapters 39 and 40 of this book]

Presentation for the National Press in Washington 1993

The following is a bit of an ambarrasment, but modern courage is not fighting wild animals but facing such possible views in public opinion. Anyway, in 1993 my Class of ’73 (of Burbank Highschool, California) had, guess what, a 20 year reunion. I took the opportunity to visit Washington, visit the US Treasury, and also present my analysis at the National Press Building. When I arrived there on August 17, it appeared that almost everyone had taken their holiday, following President Clinton to Martha’s Vineyard. My appointment with the Treasury lasted only some 20 minutes, and my host was too much involved in the Health Plan and showed no interest in my analysis. The journalists subsequently must have been at the beach - or in Europe - since nobody showed up. Perhaps my press release was uninviting too - judge for yourself, below. I took care that it was distributed to all agencies - which was another bill to pay. The idea remains: people have had the opportunity. Note 1: Had I still been at the CPB, then my possibility frontier with US officials of course had been larger. Note 2: My foreign exchange year at Burbank High and participation in the US National Forensics League apparently rubbed off, and I got some editing help from an American friend: so that my presentation was All American.

Clinton administration EITC plans for 2000

(The following is quoted from the White House internet site.)

THE WHITE HOUSE Office of the Press Secretary

For Immediate Release

January 12, 2000

PRESIDENT CLINTON PROPOSES TO EXPAND THE EARNED INCOME TAX CREDIT IN ORDER TO INCREASE THE REWARD FOR WORK AND FAMILY

Today President Clinton Will Announce, in his Address to the Democratic Leadership Council, A New $21 Billion Plan to Expand the Earned Income Tax Credit -- A Key Part of His “New Opportunity Agenda.” The President’s proposal would expand the Earned Income Tax Credit (EITC) to provide tax relief for 6.4 million hard-pressed working families. The expansion will cost about $21 billion over 10 years.

Building on the Successes of the 1993 EITC Expansion. In 1993, the President signed into law the largest EITC expansion ever to provide a tax cut for 15 million working families while rewarding work and family. Today, the success of the EITC in reducing poverty and encouraging work is clear:

· 4.3 Million People Directly Lifted Out of Poverty by the EITC in 1998 -- more than double the number lifted out of poverty in 1993.

· 2.3 Million Children Directly Lifted Out of Poverty by the EITC in 1998. This includes 600,000 African-American children and 600,000 Hispanic children..

· Largest Drop in Poverty and Child Poverty in Over Three Decades. The poverty rate has fallen from 15.1 percent in 1993 to 12.7 percent in 1998 -- the lowest since 1979. At the same time, the child poverty rate fell from 22.7 percent to 18.9 percent -- the lowest child poverty rate since 1980.

· More Single Mom’s Are Working Than Ever Before. The percentage of single mothers who work and receive no welfare has risen from 60.9 percent in 1992 to 75.0 percent in 1998.

The President’s Proposal Increases the Reward to Work and Family in Four Ways:

· Expand the Maximum Credit for Working Families with Three or More Children By $500. This would provide a tax break for 2.1 million low- and moderate-income working families. This expansion is targeted at the highest concentration of child poverty: in 1998 the poverty rate for children in families with three or more related children was 28.5 percent -- more than twice the 11.9 percent poverty rate for children in families with one or two related children.

· Expand the Credit for Married, Two-Earner Couples. This would benefit over 1.3 million married filers. For married, two-earner couples, this provision by itself would provide an average tax break of $250.

· Increase the Reward to Work While Expanding the Credit for Families with Two or More Children. This would provide an additional tax break, and an additional incentive to work, for families with two or more children by lowering the phase-out rate to give more rewards to families struggling to work their way into the middle class.

· Encouraging Savings Through Simplification. Currently, when a working family contributes to a 401(k) they may see their EITC reduced. This proposal encourages savings and simplifies the calculation of earned income for the purposes of the EITC.

Here is How These Changes Would Increase the Reward to Work for American Families:

THE PRESIDENT’S PROPOSED INCREASE IN THE EARNED INCOME TAX CREDIT

Pre-1993 Law

Current Law

Proposal

Increase

Married*; 2 children; $20,000 earnings

$1,438

$2,524

$2,940

+$416

Individual; 3 children; $15,000 earnings

$2,331

$3,577

$4,116

+$538

Married*; 3 children; $23,000 earnings

$902

$1,892

$2,867

+$975

*Both spouses must earn at least $725 to qualify for the additional credit for a married couple.

DETAILS OF THE PRESIDENT’S PROPOSAL

The President’s Proposal Would Expand the Earned Income Tax Credit to Provide Tax Relief for 6.4 Million Hard-pressed Working Families. The average increase for families with three or more children is $544 and some married couples with three or more children could see as much as an additional $1,155 tax credit. The expansion will cost about $21 billion over 10 years. The four major provisions of President’s EITC expansion are:

Expand the Maximum Credit for Working Families with Three or More Children By $500. The President’s proposal would add a “third tier” to the EITC to expand benefits for families with three or more children. Very low-income families will get 45 cents for every additional dollar they earn -- compared to 40 cents under current law. This higher credit rate will increase the maximum credit for a family with three children in 2001 from $3,992 to $4,491 -- a roughly $500 increase. This proposed new “tier” of the EITC is important because 60 percent of all poor children -- 7.7 million children -- are in families with three or more children. Adding a third tier to the EITC would provide a tax break for 2.1 million low- and moderate-income working families.

Expand the Credit for Married, Two-Earner Couples. The President’s proposal would allow married couples to earn an additional $1,450 more before beginning to have their EITC phased out. For example, in 2001 a married, two-earner couple with children would be able to earn up to $14,480 and still receive the maximum EITC, as compared to the $13,030 threshold under current law. The result of this provision would be to provide an additional $250, on average, for married, two-earner couples. This provision would benefit over 1.3 million married filers.

Increase the Reward to Work While Expanding the Credit for Families with Two or More Children. The third provision of the President’s proposal would provide an additional tax break, and an additional incentive to work, for families with two or more children. Under current law the EITC for these families is reduced by 21.06 percent for each dollar they earn above the maximum threshold. The President’s proposal would lower this phase-out rate to 19.06 percent -- a tax break for 5.4 million of America’s hard-pressed working families.

Encouraging Savings Through Simplification. Under current law, 401(k) contributions and other forms of nontaxable earned income are counted as income in computing the EITC. For many families this means that if they increase their contributions to a 401(k) then they will see their EITC reduced. The President proposes to encourage savings for poor people by eliminating nontaxable earned income from the calculation of the EITC. In addition to encouraging savings, this step will simplify the EITC, and continue to increase compliance.

THE PRESIDENT’S 1993 EITC EXPANSION HAS CONTRIBUTED TO THE LARGEST REDUCTION IN POVERTY IN OVER THREE DECADES

In 1993, the President Signed Into Law the Largest EITC Expansion Ever. The President’s policy provided a tax cut for 15 million working families. For every dollar a very low-income working parent with one child earns, the EITC was increased from 23 cents to 34 cents (25 cents to 40 cents for two plus children). The maximum credit was increased by over $1,500. The income limit on eligibility was increased by about $3,700.

Nearly 19 Million Families Claim the EITC. In FY 1999, the total cost of the program was $30.5 billion. In 2001, the average credit for all claimants will be $1,680 and for claimants with children it will be $1,990. [Source: U.S. Department of the Treasury]

In 1998, the EITC Was Directly Responsible for Lifting 4.3 Million People Out of Poverty -- Twice the Number Lifted Out in 1993. Census Department statistics show that the EITC was directly responsible for lifting 4.3 million people out of poverty in 1998 – more than twice the number lifted out of poverty in 1993. The indirect contribution of the EITC to poverty reduction may be even greater given the evidence that the EITC provides a powerful incentive to work. [Source: Calculations using data from the U.S. Census Bureau.]

In 1998, the EITC Was Directly Responsible for Lifting 2.3 Million Children Out of Poverty. The 2.3 million children lifted out of poverty by the EITC include 600,000 African-American children and 600,000 Hispanic children. [Source: Calculations using data from the U.S. Census Bureau.]

Expanded EITC and Higher Minimum Wage Has Led to Large Real Income Growth For Hard-pressed Families. A working parent with two children earning the minimum wage in 1993 made $10,559 with the EITC (in 1998 inflation-adjusted dollars) -- well below the poverty line. With the 1993 increase in the EITC and the 90 cent increase in the minimum wage in 1996 and 1997, a similarly situated family in 1998 was above the poverty line -- making $13,268 -- a 26 percent inflation-adjusted increase in their standard of living.

Poverty Rate Fell To 12.7 Percent in 1998 -- Its Lowest Level Since 1979. The poverty rate has declined from 15.1 percent in 1993 to 12.7 percent in 1998 -- that’s the largest five-year drop in poverty in nearly 30 years (1965-1970). There are now 4.8 million fewer people in poverty than in 1993. (In 1998, the poverty threshold was $16,660 for a family of four.) [Source: U.S. Census Bureau]

The Largest Five-year Drop in Child Poverty in More than Three Decades. While the child poverty rate remains too high, between 1993 and 1998, the child poverty rate has declined from 22.7 percent to 18.9 percent -- that is the lowest child poverty rate since 1980 and the largest five-year drop in nearly 30 years (1965-1970). [Source: U.S. Census Bureau]

The Poverty Rate for Children in Families with Three or More Children is More than Double the Poverty Rate for Children in One or Two-Children Families. Although the poverty rate for children in families with three or more related children has fallen from 32.3 percent in 1993 to 28.5 percent in 1998, this is still more than twice the 11.9 percent poverty rate for children in families with one or two related children. 7.7 million children in families with three or more children were growing up in poverty in 1998. [Source: Calculations by the Department of the Treasury using data from the U.S. Census Bureau.]

THE EVIDENCE IS OVERWHELMING THAT THE EITC ENCOURAGES WORK

More Single Mothers With Children Are Working Than Ever Before. After staying essentially constant in the 1980s and early 1990s, the percentage of singe mothers aged 16 to 45 who work and receive no welfare has risen from 60.9 percent in 1992 to 75.0 percent in 1998. The percentage of single mothers who worked rose from 73.7 percent in 1992 to 86.6 percent in 1998. [Source: Calculations by Professor Jeffrey Liebman using data from the Bureau of Labor Statistics’ March Current Population Surveys.]

According to One Study, More Than 60 Percent of the Increase In the Employment of Single Mothers Has Been Due to Expansions of the EITC. Bruce Meyer and Dan Rosenbaum find that 63 percent of the change in the employment of single mothers between 1984 and 1996 can be explained by the expansions of the EITC. [Source: “Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers.” National Bureau of Economic Research Working Paper No. 7363. September 1999.]

Another Study Predicted That the 1993 EITC Expansion Would Induce 516,000 Families To Move From Welfare to Work. Stacy Dickert, Scott Houser, and John Karl Scholz found that the 1993 EITC expansion would induce 516,000 families to move from welfare to work. [Source: “The Earned Income Tax Credit and Transfer Programs: A Study of Labor Market and Program Participation.” Tax Policy and the Economy No. 9, MIT Press: Cambridge, 1995.]

Another Study Shows that Increasing the Reward to Work, Increases Labor Force Participation. Nada Eissa and Jeffrey Liebman found that the EITC significantly increases labor force participation among single mothers, especially less educated women. [Source: “Labor Supply Response and the Earned Income Tax Credit.” Quarterly Journal of Economics 111(2), 1996.]

Comment January 2000, that still stands in 2004: These are still relatively small effects. In that sense we should not overestimate the impact of the 1993 EITC change on the increase in competition on the labour market and the US booming economy. And having a higher gross minimum wage does not help - the Card & Krueger argument does not convince for the general situation. /TC

Summaries of additional papers

There are two papers that have not been included for brevity’s sake. It is useful to include their summaries however. Both papers are available on the internet.

(1) Colignatus (1996d) “An institutional explanation of structural unemployment of low income labour”, presentation for the Dutch “7th Research Day of the Social Sciences”, Amsterdam, ewp-oth/9605001. The idea of this paper is to use results of social psychology to identify the real forces implied by the reduced form theorems. The paper’s summary is:

“Structural unemployment of low income labour has causes in institutional settings. Directly, there is a systematic error in the co-ordination of employment policy and tax policy. Indirectly, the system of co-ordination shows a deficiency in its capacity to repair systematic errors.

Many people see the cause of mass unemployment in technology and ‘globalisation’, which are factors on the demand side. Others see the cause in high benefit levels or in low levels of education or educationability, which are factors on the supply side. These explanations allow little room for policy making, especially when the benefit level is regarded as social subsistence. There however is a third explanation, one that has been put forward by employees of the Dutch Central Planning Bureau (CPB), first Van Schaaijk in 1983, then Bakhoven in 1988 and Colignatus in 1989-1996. In this approach the cause of unemployment must be found in policies on taxes and social security, an area where policy can do a lot. In this third approach, technology and trade have reduced the problem of unemployment, since they have boosted productivity. Since the problem lies with labour costs and the demand for labour, supply factors like the benefit level are less relevant. This third approach does not attract much attention. The three authors are little known, even though they at the time worked at a renowned institute.

This paper intends to raise the attention level towards asking the proper questions about current stagnation. The best way to tackle stagnation likely is the institutional approach. The economy and its management can be regarded as a system, which system comprises the community of economists, officials, politicians, journalists and ‘the general public’. This paper then proceeds by using Aronson’s book on social psychology to discuss various properties of the system and relations within it, and the behaviour of the participants in the collective decision making on this complex issue. The discussion results into a number of questions for further research.”

(2) Colignatus (1998c), “On the paradox of efficiency improvement at the micro level and Productivity Slowdown at the macro level: The case of Efficient Inventory Control”, ewp-get/9805003. The summary is:

“Last decades show a Productivity Slowdown at the macro level, while at the micro level we have seen a huge attention for business economics and operations management - and we now have a decade of booming stock markets. This paper tries to tackle that paradox by singling out the issue of Efficient Inventory Control. This seems to be the part of the business process that comes closest to the problem of the Productivity Slowdown. Namely, when inventories are reduced, then this normally means that part of demand is serviced from inventories, and this means lower production. Estimating stylized relationships for the US, we find that inventories in 1997 are 25% lower than they would have been otherwise, and the level of production is 0.56% lower at an annual basis. However, real GDP growth is not really affected, since the annual change in inventory is a very small percentage of GDP. Thus, business success stories that are based upon inventory reduction - which is regarded as efficiency improvement at the micro level - can be reconciled with stagnation at the macro economic level.”

A note on the New Economy (2000)

(The following note was written in 2000 and it still stands in 2004.)

The US economy has shown steady growth from 1992 till 2000, and people have been talking about a New Economy. The stock exchange has exploded, the Productivity Slowdown seems to be over, unemployment has been dropping below the CWIRU (NAIRU) while prices have remained stable, an Asian Crisis that might have turned into a big depression did not do that: and economists have been looking all over to find causes. The New Economy answer would be that the Volcker - Reagan years have created a stable environment, and that technology now is causing all kinds of revolutions. Computers, the internet, biology, a better understanding of economics and capital markets, you name what, the interaction of all these: they all cause a wholly different world. And billionaires to prove it.

My view on this issue is sensibly guarded.

Yes, the internet indeed has interesting properties, vide Shapiro & Varian (1999). I have been using computers intensively since 1972, have my own software on the internet - see Colignatus (1999). Yes, on biology and other technologies the possibilities are huge, and man can be a creative animal.

No, it all is plain old economics. Shapiro & Varian (1999) make that clear too. Also: (a) It should be obvious by now that my own analysis on unemployment and inflation already provides much of the answers. Many causes why the CWIRU dropped can be identified - e.g. the EITC increase (labour cost reduction) in 1993, and the abolishing of ‘welfare as we know it’. Society has started to accept a lower subsistence level - which is a dubious origin of growth for the rich. (b) Lower taxes for the rich gives them more money e.g. to invest in the stock market. (c) Americans have been borrowing. (d) The fact that 1970-1992 was a low period in post-War US history does not mean that the current ‘high’ is so high. I think that the basic foundation was given by FDR, and hence the creative human energy was provided with a stable environment to prosper. The 1970-1992 period fouled up the FDR heritage. Getting back to that heritage is important - but not something ‘new’. (e) Of course there still are many people in poverty, and many are seduced to crime which ends them up in prison. (f) The New Economy is much coloured by Wall Street, the Jones’s driving up the property price of the Jones’s. The financial system still needs reworking.

I think I could go on, but I’d rather stop. The basic idea is that if there is a new kid on the block then this does not mean that the block has changed. In particular when the kid is someone old who everybody has forgotten about. In economics, though, perceptions are important - and the New Economy idea might be relevant for that.

On the 2005 edition of this book

This 2005 edition of this book is virtually the same as the 2000 edition. This note discusses the points of consideration.

(1) The major change seems to be that I now use the name Colignatus for my scientific work for better distinction from political or commercial work. I remain of course a single individual but the papers and books can be usefully labelled differently. In some archives you will have to keep searching on the name “Cool”.

(2) Unfortunately, I have not been able yet to extend the discussion as indicated in chapter 32 on dynamic optimality. The prime cause is a new job in a new field that required much new study.

(3) The book now uses euro’s. I didn’t use the latest data but use those of Colignatus & Hulst (2003) for consistency. The Enlargement of the EU from 15 to 25 member states on May 1 2004 caused some changes in the data and text however. A discussion with Henk Folmer (Wageningen University) caused an update on OECD data and papers, clarification of some points in the argument, and the longer Abstract below.

(4) Colignatus (2001) “Voting theory for democracy” is my implementation of the theory on social choice within Mathematica. An earlier suggestion of (1990c) for an algorithm was developed in more detail, which caused me to find a name for it: this became the “Borda fixed point” approach. Further reflection caused the paper Colignatus (2002) “Without time no morality” that now has been adapted to a new chapter in this edition. The total enriches the analysis on Arrow’s Theorem with a practical social choice algorithm.

(5) The chapter with notes on ethics has been added.

(6) The chapters on the reduced form have been re-united into Book IX again. In the earlier paper Colignatus (1992b, 1995a) they already formed a unity, but in the first edition of this book they got separated for a reason that appeared unconvincing.

(7) Since Coligatus (1990) had in its title “After 20 years of mass unemployment”, I could write (2004) “After 35 years of mass unemployment”, and this has been included as a chapter. Since the (1990) paper was hit by censorship and the intermediate years have seen no resolution of that matter, I now advise to a boycott of Holland till that censorship is resolved. Please study the chapter closely.

(8) The following comments can be included at this very spot:

(a) Much of current policy focus is on the EU Lissabon Strategy and issues like pensions. This book does not explicitly discuss these but it would be a mistake to conclude that this book would not be relevant for those topics. The point is that this book already had that long term approach to start with. Lissabon and pensions are new kids on the block and one should rather study this book before proceeding with new policy making.

(b) Advised reading is Skidelsky (2000), the third part of his biography of Keynes.

(c) Lomborg (2001), “The skeptical environmentalist. Measuring the real state of the world”, gives an impressive review of the problems in this subject. As an economist and non-ecologist it is difficult for me to say anything about his comments on the state of the ecology. Three statements in the realm of political economy are: (b1) Lomborg does not yet take account of the argument by Hueting (1980) and Van Ierland et al. (2001). Statistical measurement of national income derives from the economic theory of social welfare. To approximate the social welfare function we use the income hyperplane that is tangent to it. Market prices for the environment will not suffice since there are market failures. (b2) In his discussion on the ‘double dividend’ Lomborg relies on economic papers that do not take into account both the analysis by Hueting and the analysis provided in this book on the Trias Politica, unemployment, the tax void and dynamic marginal rates. (b3) The case for an Economic Supreme Court appears enhanced. Human flourishing requires proper environmental protection, and monitoring of the information about the environment then requires proper safeguards.

(d) Shiller (2003), “The new financial order. Risk in the 21st century”, discusses how the market with proper government regulation can give rise to new risk instruments. Part of what I try to do with the constitutional amendment for an Economic Supreme Court, he tries to do with ‘macro-markets’, i.e. financial instruments based upon macro variables: namely, getting better information. My impression is that both approaches have merits of their own, and that it helps to disentangle what the instruments are intended for precisely. Similarly, the analysis in this book on unemployment cannot be replaced by an insurance on the distribution of income. Yet, when these more basic reforms on the Economic Supreme Court and unemployment have been implemented, Shiller is right that welfare can be improved by novel risk instruments.

(e) Gould (2000:294-297) discusses Sulloway (1996) with sympathy. This seemed relevant given the importance of the latter for the draft constitutional amendment for an Economic Supreme Court. However, Van den Berg (2004) in Dutch NRC-Handelsblad reports that the validity of Sulloway’s finding is seriously questioned in Nature.

(f) I reread Ayer (1936, 1978), “Language, truth and logic”, and was struck by his discussion of Poincaré. Ayer, page 115: “For a well-chosen definition will call our attention to analytic truths, which would otherwise have escaped us. And the framing of definitions which are useful and fruitful may well be regarded as a creative act.” In the “definition & reality methodology” the idea is that definitions concerning stylized facts are “useful and fruitful”. Williams (2002), “Truth and truthfulness”, is advised reading. What I take from it is that people have a ‘sense’ what is true or not, whether they are right or not, and that society can benefit from giving proper way to this ‘sense’. Now, what would be a proper way ? My approach is to give more attention to science and the scientific attitude.

(g) Colignatus & Hulst (2003) is a Dutch booklet that summarizes the scientific argument in this book for the Dutch lay public. This booklet also relates to the murder of the Dutch politician Pim Fortuyn in 2002. There is a peculiar streak in Dutch society that is wildly at odds with its reputation for tolerance. Namely, the Dutch can react strongly to someone who threathens their view of the world. A similar phenomenon can be observed in other cultures too, but it is strong in Holland. My inclination is to link this phenomenon to the observation in Cavalli-Sforza (2000:184) of different mentalities in France: “Hervé Le Bras and Emmanual Todd have recently refined ideas by the French sociologist Fredericq Le Play. They believe three major types of families exist in France. (…) have proposed a controversial but stimulating hypothesis that says family structure influences political structure”. These types are related to the history of Celts, proto-Basque and Franks. My impression is that Dutch society is similarly subject to some cultural mentality.

(h) When I discussed the consequences of the CPB censorship for public health, this caused developments that led to my dismissal in August 2004 from the Erasmus MC Dept. of Public Health. This is another breach of the integrity of science. Dutch readers are referred to my website. All this is too fresh to include it in this book.

(i) November 2, 2004, Holland saw Theo van Gogh murdered. He is a grandson of Vincent van Gogh’s brother Theo (the elder). The younger Theo is said to have been a talented though controversial film director. The Van Gogh family had donated its collection of paintings to the state and Theo van Gogh had trouble finding funds to develop his talent. When he was murdered he was completing his film 0605 of the murder of Pim Fortuyn. Van Gogh’s murderer of Moroccan decent expressed his delusion of the 9-11 ideology. This is a new element in Dutch society that can only be understood with the input of the Bush policy on Iraq. It must be noted though that Theo van Gogh protested regularly to that other original streak in Dutch society referred to above, namely that Holland is not as tolerant and open as it may seem. One can summarize the situation as that a truly tolerant Holland would have had no fertile ground for that 9-11 ideology, while the resulting criminal extremist killed the critic of that intolerant streak.

(j) There are some Dutch books that deserve an English translation. Here I only translate the titles. Klever (1990), “Pure economic science”, takes his position in Spinoza and argues that economic science should be developed from first principles in a deductive fashion. This strikes me as quite similar to the “definition & reality methodology”. Mathematical economics already had the deductive approach, and econometrics assumed that only statistical approximation was feasible, but we can do better if we can find definitions that fit stylized facts. Klever also recovered Franciscus van den Enden (1665, 1992), “Free political theses”. That author was a teacher of Spinoza and his book argues that democracy is the only form of government that can safeguard stability and general welfare. Klever (1981), “Dialectic thinking”, must be mentioned for a better understanding of the deductive method. His discussion of Poincaré and his pupils, for example, clarifies the creative element in mathematics. Guépin (1985) “Civilization” and Guépin (1994) “The difference in opinion” defend classical rhetorics as the essence of civilized mentality. These books provide a wealth of information and are a useful antidote to expecting too much from deduction only. He highlights the tension between rhetorics and deduction by criticizing Socrates that it is rather easy to impress people by goading them into inconsistencies when they have not first defined their terms properly. (Rhetorics cannot make fun of rule based inference if the only goal of rhetorics is to get better inference.) Guépin also highlights that deduction thrives with dichotomy but hesitates with the sorites, i.e. the problem of accumulating grains of sand until the mountain moves.

Autobiographical note

This book completes a project that started in 1989 and that is closely related to the Fall of the Berlin Wall in that year.

At that time in 1989, and in fact from 1982-1991, I was employed as a ‘economic scientific researcher’ at the Dutch Central Planning Bureau (CPB), which institute can be compared to the US Council of Economic Advisers. The CPB provides the executive branch with economic projections and with evaluations of policy proposals. In 1989 I was involved in test runs for a study of the economy for the long run till 2015, later published as the CPB (1992a&b) “Netherlands in Triplo” and “Scanning the future”. The test runs showed continued economic problems, and this caused me to consider some points. If the Bureau would publish bad weather projections, then these might cause the government to enact economic reforms that would self-unfulfill the projections. Secondly, my CPB colleagues Van Schaaijk (1983) and Bakhoven (1988) had presented a solution approach to unemployment that did not get the attention that it deserved. Thirdly, when the Wall fell, it was obvious that continued unemployment in Western Europe would be detrimental to economic recovery in the East, and this suddenly made unemployment much more important than it had been before. So in November I wrote an internal memo Colignatus (1989) proposing various economic reforms that might be considered as research projects not only for the final version of the long run study but also for the medium run.

Then, in December, in deciding on the annual pay rises, the CPB directorate withheld part of the normal raise for me, and my section chief informed me that it would have been better if I had not written that memo. Apart from the bizar sensation that a hundred billion dollar invention was being punished instead of rewarded, I also experienced the sensation that comes when the dime drops or when the pieces of a puzzle fall together. I could not escape the conclusion that I was confronted with a particular piece of evidence of stagnation in policy making, and that improper means were being used to influence scientific discourse. Taking stock: my career position was blemished, my creative contribution was branded as weird instead of simply creative, and I was apparently supposed to no longer judge ideas on their own value but on some line that was decided by the directorate. If these methods were used, I could understand why colleagues Van Schaaijk and Bakhoven had become silent on their important contributions to the solution approach, or had left the Bureau altogether.

So in December 1989 I easily envisaged a book that would explain both the solution to the current mass unemployment in OECD countries and the stagnation in policy making that causes it. It was my perception at that time that under normal conditions it might take ten years before this analysis would be accepted by ‘the relevant circles’, i.e. some years to write the book, some years to allow my fellow economists to digest it, and some years for the percolation into public and political discourse.

But life is not such that if a scientist decides that a book should be written, that his environment will let him do it. Instead, there was the pressing need to find a proper answer to the abuse inflicted on me, and to collect and safeguard the evidence of that abuse. Given the triad of Voice, Exit or Compliance (‘compliance’ since ‘loyalty’ is the precondition - and the Exit and Compliance options already used by my two colleages) I decided to Voice. I filed an appeal, and started writing a paper where I clearly stated my conclusion as a scientist that the return to full employment could be much speedier if Parliament would have an enquiry in the policy making process. Not quite to my surprise, I saw myself moved to a separate room in April 1990, and my paper was blocked from circulation. Only after some trouble it was allowed to appear as an internal note Colignatus (1990ac), but was further blocked from internal discussion and eventual publication. And I was finally fired in October 1991. And neither quite to my surprise, the courts allowed the directorate to do all this. The court deemed it an abuse of power that the directorate had moved me to a separate room, but the dismissal was deemed acceptable. The legal position of a scientist within the government is not that strong, the popular stories to the contrary.

These lines clarify that this book has not been written under the conditions that benefit science. I have been mauled by the bureaucracy, I have been on the run from one short temporary job to another, always job hunting, a longer while unemployed and in dire financial straights. But I was happy that I had kept my integrity, and it was a joy to occasionally read some economics again and to write a piece of the analysis. I published a collection in 1992 and another collection in 1994. I discovered Mathematica, January 1993, and there was hope again. The internet became accessible to me, and I was able to enter my papers in the Economics Working Papers Archive (EconWPA) at the Washington University in St. Louis.

One factor that caused a shift in the plan of the book was that I no longer had the resources of the CPB at my disposal. No database, no model, no easy access to the literature, no participation in professional discussion, and no professional position that would give easier access to the other research institutes and organisations like the OECD, World Bank or IMF. It was curious, to say the least, not to have access to the model that I had helped designing and that I in fact normally maintained and had sitting at my computer. My situation caused me to rethink methodology. What could I prove, if I did not have the means that I had grown accustomed to ? But by 1991 I had solved that problem and life became a bit more agreeable. But of course, it took longer, much longer, to work it all out.

Please be aware that it was not all misery and gloom. Over these 15 years I could go to 7 Dutch economics ‘research days’, visit 3 European Economic Association congresses and visit the occasional colleague and professor. There are also nice events that happen when you approach people with some novel ideas. I still enjoy the tour of Cambridge that Richard Layard gave to Assar Lindbeck and me; this was in 1991 when Layard, Nickell & Jackman (1991), “Unemployment”, had just appeared. Mr. Emile van Lennep, former head of the OECD, then retired as Minister of State but still at the Dutch Treasury, agreed to talk to me, and afterwards helped me to get an interview at the US Treasury in the Summer of 1993: but to no avail, the person that I talked to was too absorbed by the Clinton Health Plan, and said something like ‘Well, if Europe wants to adapt its constitution, be my guest’. It also appeared that the OECD did not have information on tax exemption in the member states. It was worth a try, and fun to do. I also have had great fun developing my “Economics Pack”, applications for Mathematica. It is good software, it brings me in contact with interesting economists all over the world, and of course it includes, amongst other projects, also some of the material of this book - which should do something for the spread of the ideas as well.

So now the book is here. It collects and combines the various articles written since 1989, and gives the final twists that come from integration.

Note that I as a researcher claim ‘novel results’, while I at the same time say, at the risk of an inconsistency, that ‘either governments already knew how to solve unemployment and then neglected human suffering, or they could find out how to do it and then at least failed in co-ordination’. ‘Novelty’ and ‘it was known’ are at risk of being inconsistent. I have removed this risk (a) by making the novel results available since 1990, which was 10 years ago at the first edition of this book in 2000 and now in 2005 is 15 years ago, (b) by gathering information about the abuse afflicted on myself, and making this information available to others, and (c) by showing that important parts of the whole analysis (without my contributions) were already known before. Cohen Stuart in 1889, and policy makers in the 1950s already knew that tax exemption should be at the subsistence level. One does not really need a CWIRU concept to see that. While this was known, my novel contribution then has become to analyse the ‘loss’ of this information as an institutional and Public Choice problem - or bad co-ordination between the Treasury and the Ministry of Labour. As a ‘novel contribution’ it has its limits - though in the 1980s it took me a decade of eliminating other causes before I discovered, and indeed with surprise, how dumb and insensitive these bureaucrats can be. But other novel insights have a more enduring character, and that is a relief.

Yes, some friends have advised not to tell all of this, others have advised to do so. I once entertained the thought to skip my Dutch examples, and concentrate on, say, the US. This might enhance the argument, since readers would be less inclined to think that I am partial to the argument. I hesitated doing that, since (a) I am not partial anyway, and (b) it would eliminate that very example of the current structural deficiencies in economic policy making.

What is new in this analysis ?

‘New’ is taken here in comparison to others, and thus includes points also made in my earlier publications on this analysis. New is:

1) clarification that if you don’t index subsistence for average income, then you create poverty

2) clarification that minimum ‘income’ is not an ‘income’ but a mechanism (with multiplier)

3) the concept of the Tax Void

4) the dynamic marginal tax rate, and its relation to labour supply and macro-economics

5) these explanations for the shift of the Phillipscurve:

a) by the minimum wage and tax void, or poverty

i) directly, and caused by differential indexation of exemption and subsistence

ii) indirectly, by the crowding out effect, shifting of the tax burden etc.

b) by misguided macro-economic policy (not understanding taxes, fighting inflation with the wrong means)

6) clarification that ‘there is no poverty trap’

7) suggestion for a simple nonlinear tax function, clarification for households

8) suggestion of a possibly ‘dromedary shaped’ labour supply

9) clarification on the concept of a ‘free lunch’

10) proper definitions of risk and uncertainty

11) clarification for the impact of the minimum wage (tax void) on sheltered and exposed sectors

12) clarification on the Definition & Reality methodology

13) the theorem on the possibility of full employment, via the reduced form

14) integration of deontic logic with preference theory

15) the proper interpretation of Arrow’s Theorem

16) the Borda Fixed Point method

17) the theorem on the possibility of co-ordination, via the reduced form

18) description of actual bureaucratic processes on these subjects, so that we better understand how the Great Stagflation came about (comes about)

19) the concept of the Economic Supreme Court, in its political and historical relation to both the Trias Politica and economic science, and a draft constitutional amendment to start thinking about

20) clarification of the moral imperative with regards to Russia and Eastern Europe

21) positioning this analysis with respect to a standard small macro model and the work of other authors.

Abstract

The prime conclusion of this book is that Western democracies are well-advised to install an Economic Supreme Court. This volume includes a draft constitutional amendment that shows that such a measure can indeed enhance democracy.

The fundamental structure for current policy making in a democracy is Montesquieu’s model of the separation of powers, i.e. the Legislative, Executive and Judicial branches that form the “Trias Politica”. It appears that this structure still allows room for economic policy making that is detrimental to the life and liberty of the citizens of the state. The key issue appears to be that there is no independent protection of the quality of information. With all the social, economic and political interests involved, the current process of economic policy making allows the current constitutional powers too much room for distortion of the information. Economic theory then suggests the creation of an Economic Supreme Court as a separate constitutional power with the task of the scientific management of information. The legislative and executive branches would still decide on policy targets and policy execution, but they would lose the power to interfere with the scientific handling of information. This argument can be developed purely theoretically. The economic experience of the last century shows that the argument is also practically relevant.

Political Economy as a science has the general objective of explaining and advising the management of the state. Two hallmark reference points exist in the General Theory by Keynes (1936) and the analysis by Tinbergen (1956) on the principles and design of economic policy making. These studies show that the state can be subject to long periods of economic recession and even depression if not properly managed. Since the end of World War II, application of these ideas has allowed spectacular economic growth while depression has been prevented indeed. However, the economic record especially since the 1970s is mixed, with issues like stagflation, problems with the welfare state and continued poverty and also with the issue of sustainable development and protection of the environment. It can be shown beyond reasonable doubt that economic policy has been detrimental to the life and liberty of many of its citizens while this came about by mismanagement of the available information.

An element of self-reference arises when economic policy uses economic theory itself, so that theory should include theory. Increasingly over the years, economic theory has gotten a role in the management of the state, and developments in the real economy cannot be properly understood without reference to the economic ideas adopted for national policy. Since economic theories give conflicting advice, part of the management problem of the state is the selection of the appropriate theory, and this selection is more and more the key management problem. At the next higher level of abstraction, the process of selection becomes the focus of attention. The problem then becomes what that process is, what criteria of transparancy and fairness it satisfies, and how the process itself affects the economy. The current structure gives too much room for political elites and bureaucrats to neglect the basic rights of the population at large. The criterion to judge an optimal improvement in the structure of economic policy making is not just economic growth but can be taken in the concept of democracy itself and the citizen’s right to be properly informed.

Keynes’s General Theory can be generalised even further by the inclusion of endogenous government in the model, and in particular economic policy making itself as that is guided by economic theory. Keynes clearly anticipated this line of thinking, where he wrote: “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.” (GT:383) The new point now is that this does not only concern “practical men” but economists themselves too, and the whole institutional framework for economic advice. When economic policy making itself is part of the model, economic stagnation can be explained as stagnation in that realm, and the solution for economic stagnation can be found there too.

OECD nations had full employment in the 1950-1970 period, and Japan and Sweden had it much longer. So it would seem that full employment at least is feasible. However, after the period of full employment, all nations showed the phenomenon of stagflation, which is a worsening trade-off between inflation and unemployment (represented as the shift of the Phillipscurve), frequently associated with stagnating growth. Instead of full employment and a steady growth of welfare, OECD nations suffered a long period of insecurity from 1970-2005.

This volume analyses the different periods and finds the likely cause. The fundamental cause is the common Trias Politica structure of economic decision making that all OECD nations share over time and space. At an operational level, stagflation can be explained by the tax policy that OECD nations have in common as well.

The common tax policy is based upon a particular economic theory that has become the conventional economic view of our time. This conventional theory sees tax as a penalty on work effort and holds that statutory marginal rates have major disincentive effects. Marginal tax rates are a useful penalty on (inflationary) wage claims in wage-bargaining, but the conventional view is that the disincentive effect dominates. Following this theory, policy has been to reduce marginal rates at the cost of lower exemption. Another measure was to switch from the income tax to a Value Added Tax (VAT) that has no exemption at all.

The common tax policy has static and dynamic components. Statically, exemption is low. Dynamically, there is the tendency of reducing exemption even further. The low and ever lower exemption causes rising tax levels and hence either poverty or higher labour costs in the lower wage brackets, causing unemployment, and causing higher taxes to pay for the benefits. What is crucially wrong about current policies is the phenomenon of differential indexation. Exemption is indexed on inflation, while subsistence, by social psychological causes, rises with inflation and real income. This differential indexation causes ever increasing problems with poverty and unemployment.

The OECD countries have been pursueing this policy now for more than three decades, and rather little is being achieved. It is time to seriously wonder whether policy is on the right track. This book shows where the conventional theory goes wrong.

A first feature is the tax void. The tax void is the region of productivity and income between the net minimum wage and the gross minimum wage. The difference between net and gross is normally called a ‘tax wedge’, but this term is inadequate since a wedge is commonly thought to apply at a particular level while the void is a range. The income range between the net and gross minimum wage is a void since there are official tax statutes for that range but no true revenues. People are not allowed to work below the gross minimum and thus cannot pay taxes there (that is, for full timers). Ideally, as in the 1950s, the net minimum should be equal to the gross minimum so that the void is zero, and so that such workers can start earning their own living without paying taxes. Because of the current practices for tax indexation, the tax void has grown over time so that the gross minimum wage has risen much more than the net minimum wage. By result, more and more low wage workers are subject to that excessively high gross minimum and are effectively removed from the labour market. The shift of the Phillipscurve can be explained partly by this growing component of minimum wage unemployment. This analysis also points to a solution. For the tax void, no taxes are collected (on full timers), thus abolishing such void taxes will not cost anything. The argument is not quite that lowering the minimum wage will create new job opportunities, but rather that not raising the gross wage costs so excesssively would not have destroyed the opportunities that already existed. This argument designs an experiment at no cost.

The tax void causes needless unemployment for millions of people all over the world and its plain bureaucratic stupidity is a blow to naive ideas about democracy (that the current democratic structure would be adequate and provide adequate information).

The second feature in the new analysis concerns the dynamic marginal tax rate. Marginal tax rates are important - since economic theory indeed assumes optimising economic agents - but these marginal rates should be properly computed. This analysis not only considers the partial effect, assuming other things constant, but rather considers the total effect that includes all simultaneous changes. A change in a marginal tax rate is usually accompanied by a change in exemption, and both generally happen at the same time, either annually or in computer policy simulations. Private and national income change at the same time too. Individuals are frequently aware that their own fortunes are linked to the fortunes of the national economy and they will be sensitive to their relative position in the distribution of income. Work incentives may be more guided by the average tax rate rather than the statutory marginal tax rate. Hence, ‘incentives’ may not be a convincing argument against higher marginal tax rates, even though policy makers have been advancing that argument forcefully. That, in fact, the converse is true, fits perfectly with the experience of the last decades. The reduction of the statutory marginal rates, as the policy was, appears to have had little incentive effects, since the true incentive effect depends more on the average tax over time, and this average has remained high due to the problems of unemployment, poverty and lower growth.

This book concludes that macro-economic policies in OECD nations have not countered stagflation but have actually increased it. Current policies add to labour costs, reduce incentives, fuel forward shifting of the tax burden, and worsen the trade-off between inflation and unemployment.

The new analysis points directly to a policy that will be successful and that will allow a return to full employment under stable prices like in the the 1950s. If exemption is put at subsistence, then jobs can be created at the low end of the labour market, which would save benefits and reduce average taxes, which again would increase incentives. The alternative structure and policy would also be beneficial for inflation. If low productivity labour has a stronger position in the labour market, then the risk of unemployment is spread more evenly, and trend-setting high productivity labour will be cautious about wage claims.

A welfare state is defined as a state that doesn’t let people die and thus provides benefits for the lowly productive anyway. The welfare state can be run more efficiently by using those resources, instead of going into benefits, to instead reduce labour costs and to price the lowly productive into jobs. The analysis on inflation and unemployment thus results into the proposition that, since the present situation is inefficient, an improvement is possible from which everybody can benefit.

This book provides theorems in mathematical economics to prove its points. The central questions in the political economy of employment in the welfare state are: can one solve unemployment, does one know how, and does one want to ? The book presents a model that satisfies the stylized facts and thus serves theoretical and empirical uses.

· The first result is a possibility theorem (can) that there are two regimes of either full employment or unemployment.

· The second theorem explains the choice by know and want causes. Full employment results from conscious choice or chance (while lacking knowledge). Unemployment results from conscious choice or wrong co-ordination (where a Pareto optimising change is blocked only by lack of knowledge - and a lack of knowledge not by the economists but by the incompetent or insensitive policy makers).

The analysis shows mathematically that democratic goals indeed can be blocked by special interests or neglect, for example within the bureaucracy. A policy conclusion is to improve informational (planning) procedures.

The discussion of taxes, unemployment and inflation is basically just a minor point of the book. The major point of the book concerns the co-ordination problem. Western democracies apparently allow long periods like the Great Depression or the Great Stagflation that are detrimental to the economic well-being and security of large sections of their populations. Ideas of economists that point the way to recovery are only slowly accepted. Key examples are the ideas of Tinbergen and Keynes: for them it took World War II before they got listened to. Eventually, the political powers of that time accepted that they had to redesign the structure of economic policy making, and they gave more room to the scientists, but did not dare to give up their ultimate power to meddle with the information. Currently, the world faces the challenge of the growth of the world population from 6 billion people around 2000 to likely around 8 billion people around 2025. To manage this process, mankind would benefit from a structure of economic decision making that is both democratic and that respects the citizen’s right to know.

Literature

EWP references are to the Economics Working Papers Archive at the Washington University at St. Louis: http://econwpa.wustl.edu. See also http://www.dataweb.nl/~cool.

Note: Colignatus is the name of Thomas Cool in science. Some archives may not recognize that name.

ACB = Albeda Conference Book (1990), Concept, WRR, The Hague

AD Tijdsdocument (2002), “Fortuyn. De opkomst, de moord, de nasleep”, Het Spectrum

Adriaansens, H. (1990), ‘Naar een aangepaste verzorgingsstaat”, Intermediair April 20, p17—23, adapted version 354th Dies, University of Utrecht

Albeda, W. (1990), “Nieuwe studie naar functioneren SER is wenselijk”, De Volkskrant 16/10/90

Ancot & Hughes Hallet (1984), “Establishing public preferences for coalition government: an empirical study in economic planning behavior”, De Economist, p153-170

Aoki (1990), “Towards an economic model of the Japanse firm”, JEL 28, pp 1-27

Aronson, E. (1972, 1992a), “The social animal”, Freeman, sixth edition 1992

Aronson, E. (ed) (1973, 1992b), Readings about The Social Animal”, Freeman, sixth edition 1992

Arrow, K, & T. Scitovsky eds. (1969), “Readings in welfare economics”, Allen & Unwin

Arrow, K. & F. Hahn (1971), “General competitive analysis”, North Holland

Arrow, K. (1950), “A difficulty in the concept of social welfare”, J. of political economy, pp328-346, reprinted in Arrow & Scitovsky (1969) pp147-168

Arrow, K. (1951, 1963), “Social choice and individual values”, J. Wiley

Ash, T.G. (2004), NRC Handelsblad, April 29 (Dutch translation)

Ashenfelter, O. & R. Layard eds. (1986), “Handbook of labour economics”, North Holland

Auerbach & Kotlikoff (1987), “Dynamic fiscal policy”, Cambridge

Ayer, A. (1936, 1978), “Language, truth and logic”, Pelican

Bakhoven, A. (1988), “Een marktgerichte oplossing voor het werkloosheidsprobleem”, Economisch Statistische Berichten January 13

Barndorf-Nielsen, Gill and Jupp (1998), “An introduction to quantum statistics” - www.math.uu.nl/people/gill/

Barro, R.J. & X. Sala-i-Martin (1995), “Economic growth”, McGraw-Hill, NY 1995

Barro, R.J. (1996), “Getting it right”, MIT

Barrow, J.D. (1998), “Impossibility. The limits of science and the science of limits”, Vintage

Barten, A, (1988), “The history of Dutch macroeconomic modelling (1936-1986)”, p39-98 (on Tinbergen p39-55), in Driehuis, Fase & Den Hartog (1988), “Challenges for macroeconomic modelling”, North-Holland

Beckerman, W. (1999), “Technical progress, finite resources, and intergeneral justice”, in Van Ierland (1999).

Beenstock and associates (1987), “Work, welfare and taxation”, Allen & Unwin

Begg, D., S. Fischer & R. Dornbusch (1984, 1997), “Economics”, McGraw-Hill

Beld, C.A. van den (1987), “Het Centraal Planbureau, un peu d’histoire”, pp 213—225, in Knoester ed. (1987)

Bellman, R. (1968), “Some vista’s of modern mathematics”, University of Kentucky Press

Berg, R. van den (2004), “Briljant bedrog”, NRC-Handelsblad December 4, wetenschapsbijlage

Bergeijk, P. van (1994) “Op zoek naar een gratis lunch”, ESB 9-11-1994, pp1013-1017 (“In search of a free lunch”) (Dutch)

Bergeijk, P. van, c.s. (1997), “Economic science and practice”, Edward Elgar

Bernstein (1992), “Capital ideas”, The Free Press

Bernstein (1996), “Against the gods”, Wiley

Besseling, P. & A. Brandsma (1988), “Forecasting the world economy 1988— 1992”, Occasional Paper 43, CPB

Blanchard, O. & S. Fischer (1989), “Lectures on macroeconomics”, MIT

Blanchard, O. (1999), “What do we know about macroeconomics that Fisher and Wicksell did not?”, Tinbergen lecture (KVS, Holland), MIT

Blaug, M. (1988), “Great Economists since Keynes. An introduction to the lives & works of one hundred modern economists”, Harvester Wheatsheaf 1985, reprinted 1988

Bochenski (1956, 1970), “A history of formal logic”, 2nd edition, Chelsea

Bochove, van, e.a. (1990), “Een opdracht, geeft niet hoe en met wie”, Ministerie van Sociale Zaken en Werkgelegenheid, The Hague

Borjas, G. (1996), “Labour economics”, McGraw-Hill

Boumans, M. (1992), “A case of limited physics transfer”, Tinbergen Institute Research Series 38, Amsterdam

Bovenberg, A.L. & F. van der Ploeg (1994), “Effects of the tax and benefit system on wage formation and unemployment”, Mimeo KUB April

Bovenberg A.L., J. J. Graafland and R.A. de Mooij (1998), “Tax Reform and the Dutch Labor Market: An Applied General Equilibrium Approach”, Research Memorandum 143, Central Planning Bureau

Bovenberg, A.L. and J.J. Graafland, R.A. de Mooij (2000), “Tax reform and the Dutch labor market: an applied general equilibrium approach”, J. of Public Economics 78, 193-214

Brittan, S. (1990), “New roads to jobs”, Financial Times October 18

Broeder, G. den (1989), “Alternatieve heffingsgrondslagen voor de sociale zekerheid, Micro-, meso- en macro-economische effecten”, Magnana Mu Publishing & Research, & No 17 Commissie Onderzoek Sociale Zekerheid, Ministerie van Sociale Zaken en Werkgelegenheid

Broer, P., N. Draper, F. Huizinga (1999), “The equilibrium rate of unemployment in the Netherlands”, CPB research memorandum 156, The Hague

Bron, J. (1989), “Creatie van werk”, 100, Den Haag

Bruno, M. & J. Sachs (1985), “Economics of worldwide stagflation”, Blackwell

Bruno, M. (1990), “Economic analysis and the political economy of policy formation”, European Economic Review 34 273-301

Buitenhuis, P. (1989), “The great war of words. Literature as propaganda 1914-18 and after”, Batsford

Cavalli-Sforza, L.L. (2000), “Genes, peoples and languages”, Penguin

Centraal Bureau voor de Statistiek (1991), “Inkomen en vermogen”, Sociaal Economische Maandstatistiek 91/2, p44-52

Centraal Bureau voor de Statistiek (1994), “Comparability of the sector General Government in the National Accounts”, National Accounts NA-066

Central Planning bureau (1989b), “Macro-economische effecten van de verkiezingsprogramma’s 1990-1994 van CDA, PvdA, VVD en D66”, werkdocument 32

Central Planning bureau (1973, 80, 86, 88), “Centraal Economisch Plan”, The Hague

Central Planning bureau (1988), “Gevolgen verlaging minimumloonkosten, een verkenning”, werkdocument 25

Central Planning bureau (1989a), “Collectieve uitgaven, tekortreductie en lastenverlichting 1990-1994: een indicatie van de beleidsruimte”, werkdocument 27

Central Planning Bureau (1990), “Athena”, Monograph 30, The Hague

Central Planning Bureau (1991), “Centraal Economisch Plan”, SDU

Central Planning Bureau (1992a), “Scanning the future”, SDU, The Hague

Central Planning Bureau (1992b), “Nederland in drievoud”, SDU, The Hague (“Netherlands in Triplo”)

CEPS (1990), “European labour markets: a long-run view”, by Bean, Bernholz, Danthine, Malinvaud; CEPS paper 46, Brussels

Cnossen S. & C. van Ewijk (1995), “Introduction”, De Economist, Vol 143, No 2 (May 1995), p107

Coase R. (1994), “Essays on economics and economists”, Chicago

Colander, D, & A.W. Coats (eds) (1989), “The spread of economic ideas”, Cambridge

Colignatus & Tinbergen (1991), “What might the Soviet Union learn from the OECD countries in economics and politics ?”, unpublished

Colignatus (1989), “Neoklassieke knelpunten voor de Nederlandse economie voor de ontwikkeling op langere termijn”, Central Planning Bureau III/90/20, The Hague. (In Dutch.) Included in Colignatus (1992b)

Colignatus (1990a), “After 20 years of mass unemployment; Why we might wish for a parliamentary inquiry”, Central Planning Bureau III/90/38, The Hague. Ecozoek 1991 and included in Colignatus (1992b)

Colignatus (1990b), “Opmerkingen over de loonvergelijking in lange termijn perspectief”, CPB internal note III-5

Colignatus (1990c), “Why a social welfare (meta) function does exit: The Arrow Impossibility Theorem for Social Choice resolved, A better analysis suggested,” internal note Central Planning Bureau, The Hague, reprinted in Colignatus (1992b) pp57-104

Colignatus (1991), “Eenvoud niet alleen via prioriteitsstelling”, CPB internal note III-15

Colignatus (1992a), “On the reasonableness and the moral desirability of the conditions of Arrow’s Theorem”, published in Colignatus (1992b) pp273-285

Colignatus (1992b), “Definition and Reality in the general theory of political economy; Some background papers 1989-1992”, ISBN 905518-207-9, Magnana Mu Publishing and Research, Rotterdam

Colignatus (1994a), “Tax structure, inflation and unemployment”, Magana Mu Publishing & Research, Rotterdam, ewp-mac/9508002

Colignatus (1994b), “Trias Politica & Central Planning Bureau”, Samuel van Houten Genootschap, The Hague, ISBN 90-802263-1-9

Colignatus (1995a), “On the political economy of employment in the welfare state”, improved from the version included in Colignatus (1992b), ewp-mac/9509001

Colignatus (1995b), “How a dead wrong OECD tax policy causes mass unemployment. An explanation using data for Holland 1950-1995”, ewp-mac/9508003

Colignatus (1995c), “Individual labour supply: A suggestion”, ewp-lab/9509001

Colignatus (1995d), “Belastingstructuur, inflatie en werkloosheid”, in NAD/CBS (1996) “Nederlandse Arbeidsmarktdag 1995, congres rapport”, pp 173-188

Colignatus (1995e), “Economics programs written in Mathematica”, ewp-prog/9508001

Colignatus (1996a), “Unemployment solved ! A breakthrough in economic analysis”, ewp-get/9604002

Colignatus (1996b), “A constitutional amendment for an Economic Supreme Court”, ewp-get/9604003

Colignatus (1996c), “Enable Russia to help itself”, econwpa get/9604004

Colignatus (1996d), “An institutional explanation of stuctural unemployment of low income labour,” Presentation for the 7th Research Day of the Social Sciences, Amsterdam, ewp-oth/9605001

Colignatus (1996e), “Dynamic curvature of the tax wedge”, ewp-pe/9604001

Colignatus (1996f), “On the nature and significance of a free lunch”, ewp-get/9607003

Colignatus (1996g), “Differential impact of the minimum wage on exposed and sheltered sectors”, ewp-get/9608001

Colignatus (1997a), “Unemployment Solved: An answer to Krugman, Phelps, Ormerod and Heilbroner”, ewp-get/9704002

Colignatus (1997b) “The solution to Arrow’s difficulty in social welfare”, ewp-get/9707001

Colignatus (1997c), “The dynamic marginal tax rate”, ewp-get/9708002

Colignatus (1998a), “Will the West repeat Versailles ?”, ewp-get/9808002

Colignatus (1998b), see Hulst (1998)

Colignatus (1998c), “On the paradox of efficiency improvement at the micro level and Productivity Slowdown at the macro level: The case of Efficient Inventory Control”, ewp-get/9805003

Colignatus (1999), “The Economics Pack, Applications for Mathematica”, Scheveningen, JEL-99-0820, ISBN 90-804774-1-9

Colignatus (1999a), “Proper definitions for risk and uncertainty”, EconWPA ewp-get/9902002, Internet

Colignatus (2000), “Definition & Reality in the General Theory of Political Economy”, First Edition, March & June 2000, ISBN 90-802263-2-7

Colignatus (2001), “Voting theory for democracy”, Thomas Cool Consultancy & Econometrics, ISBN 90-804774-3-5

Colignatus (2002), “Without time, no morality”, ewp-get/0202003

Colignatus (2003), “On the value of life”, ewp-pe/0310003

Colignatus (2004), “After 35 years of mass unemployment: An advice to boycott Holland”, ewp-get/0405001

Colignatus and H. Hulst (2003), “De ontketende kiezer”, Rozenberg Publishers

Congressional Budget Office (1977), “Recovery with inflation”, reproduced by Teigen (1978) p114-120

Cox & Alm (1999), “Myths of Rich and Poor: Why We’re Better Off Than We Think”, Basic Books

Csikszentmihalyi, M. (1997), “Living well. The psychology of everyday life”, Weidenfeld & Nicolson

Cullis, J. & Ph. Jones (1992), “Public finance and public choice,” McGraw-Hill

Dahl & Lindblom (1976), “Politics, economics and welfare”, Chicago

Dahl, R (1956), “A preface to democratic theory”, Chicago

Damasio, A. (2003), “Looking for Spinoza. Joy, sorrow and the feeling brain”, Harcourt

Dasgupta, A.K. & D.W. Pearce (1980), “Cost-benefit analysis”, Macmillan

Dasgupta, P. & K.-G. Mäler (1999), “Net National Product and social well-being”, forthcoming in the journal ‘Environment and development economics’.

Dasgupta, P. (1998), “Modern economics and its critics, I” at http://www.econ.cam.ac.uk/faculty/dasgupta and “Messages from the President”, EEA July 1999

DeLong, H. (1971), “A profile of mathematical logic”, Addison Wesley

Diamond, J. (1997), “Guns, germs, and steel”, Norton

Dilnot, A. and J. McCrae (2000), “The family credit system and the working families tax credit in the United Kingdom”, OECD Economic Studies 31, 2000/II, p69-84

Doel, J. van den, and B.C.J. van Velthoven (1990), “Democratie en welvaartstheorie”, Samson

Don, F.J.H. & P. van den Berg (1990), “The Central Planning Bureau of The Netherlands — its role in the preparation of economic policy”, November CPB internal note 3 (D) / 40 (1)

Don, F.J.H. (1996), “A letter of introduction”, CPB report 1996/1, The Hague

Dopp (1969), “Formale Logik”, Benziger Verlag, Einsiedeln

Dornbusch, R. & S. Fischer (1994), “Macro economics”, 6th edition, McGraw-Hill

Drèze (1987), in Lawrence & Schultze, “Barriers to European economic growth”, Brookings 1987 page 90.

Driehuis & Van der Zwan eds. (1978), “De voorbereiding van het economisch beleid kritisch bezien”, Stenfert Kroese

Driehuis, Fase & Den Hartog eds. (1988), “Challenges for macro-economic modelling”, North Holland

Drissen & Van Winden (1990), “A general equilibrium model with endogenous goverrument behavior - an analytical approach”, Research memorandum 9005, University of Amsterdam

Eatwell c.s. (1998), “The New Palgrave”, Macmillan (entries risk, risk aversion, CAPM)

Eijk, van (1989), “Concerted action: a remedy against persistent unemployment ?”. pp 62-71, in Muller & Zwezerijnen (eds), “The role of economic policy in society”, Rotterdam UP

Enden, F. van den, (1665, 1992), “Vrije politieke stellingen”, Wereldbibliotheek

ESB 3739: Economisch Statistische Berichten, January 3 1990

Ferguson, Th. (1967), “Mathematical statistics”, Academic Press

Feynman, R. (1965, 1998), “The character of physical law”, MIT

Fitoussi, J.-P. (2000), “Payroll tax reductions for the low paid”, OECD Economic Studies 31, 2000/II, p115-131

Flanning C. and D. O Mahony (1998, 2000), “The general theory of profit equilibrium. Keynes and the entrepreneur economy”, MacMillan

Freeman, R. (1996), “Why do so many young American men commit crimes and what might we do about it ?”, Journal of Economic Perspectives, Spring

Friedman (1991), “Monetarist economics”, Blackwell

Galbraith, James K. (1996), “What is To be Done (about Economics)?” - taken from the Internet. This essay will appear in “Foundations of Research in Economics: How Should Economists Do Economics”, S. Medema and W. Samuels (eds), Edward Elgar Publishing, June 1996, ISBN 1 85898 163 8. Details available from Publicity@e-elgar.co.uk. Note the discussion about this with Krugman, see http://members.home.net/copernicus/dialogue.html

Galbraith, James K. (1998), “Created unequal”, Free Press

Galbraith, John K., “The nature of mass poverty”, Harvard (Dutch: “Armoede”, Elsevier 1979)

Galbraith, John.K. (1977), “The age of uncertainty”, Book Club Associates

Galbraith, John.K. (1992), “The culture of contentment”, Houghton Mifflin

Gambs, J., & J. Komisar (1968), “Economics and man”, Irwin

Gelauff (1992), “Taxation, social security and the labour market”, Thesis Katholieke Universiteit Tilburg

Gelauff e.a. (1990), “Towards an analysis of tax effects on labour market and allocation, a micro/macro approach”, research memorandum 68, CPB

Gelauff, G.M.M. and J.J. Graafland (1994), “Modelling welfare state reform”, North Holland

Gill, J. and J. Gainous, (2002), “Why does voting get so complicated? A review of theories for analyzing democratic participation”, Statistical Science, Vol 17, No4, 383-404

Gill, R. (1996), “Quantum Probability and the Impossible Coupling” - www.math.uu.nl/people/gill/

Gill, R. (1997a), “Critique of ‘Elements of quantum probability‘” - idem

Gill, R. (1997b), “Roundtable discussion on education of physicists” -idem

Good, A. & F. Graybill (1950, 1963), “Introduction to the theory of statistics”, McGraw-Hill

Gould, S.J. (1980), “The panda’s thumb”, Norton

Gould, S.J. (2000), “The living stones of Marrakech”, Harmony Books

Graafland (1990a), “Persistent unemployment, wages and hysteresis”, Thesis Erasmus University

Graafland (1990b), “Effecten van marginale belasting- en premiedruk op loonvorming”, CPB internal note I/1990/41; CPB 1991 onderzoeksmemorandum no 78

Graafland (1990c), “Insiders and outsiders in wage formation: the Dutch case”, CPB - paper for the EEA Lisbon convention

Graafland, J. & F. Huizinga (1999), “Taxes and benefits in a non-linear wage equation”, De Economist, 147, p39-54

Graafland, J.J. and A. Nibbelink (1999), “Explaining the equilibrium unemployment: A test on the historical performance of MIMIC”, CPB-Report 99/4, p35-39

Graafland, J.J. and R.A. de Mooij (1998), “MIMIC, An Applied General Equilibrium model for the Netherlands”, CPB-report 98-3, p27-31

Grafstein, R. (1992), “Institutional realism. Social and political constraints on rational actors”, Yale

Grandmont (1983), “Money and value”, Cambridge UP

Groot, H.de & H. Keuzenkamp (1995), “Groei en convergentie”, Economisch Statistische Berichten 28-6-1995 p 615

Guépin, J.P. (1985), “De beschaving”, Bert Bakker

Guépin, J.P. (1994), “Het verschil van mening”, Ambo

Hadjimichalakis, M. (1984), “The Federal Reserve, money, and interest rates”, Praeger

Hall, R.E. (ed) (1982), “Inflation: causes and effects”, NBER

Hansen & Clemence (1953), “Readings in business cycles and national income”, Allen and Unwin

Hartog (1989), “Distribution policies in the Netherlands”, in Muller & Zwezerijnen (1989) p17-46

Hartog, Den, e.a. ed. (1984), “Toegepaste economie, grenzen en mogelijkheden”, CPB

Hayek, edited by Nishiyama & Leube (1984), “The essence of Hayek”, Hoover

Hebden, J. (1983), “Applications of econometrics”, Philip Allen

Heilbroner, R. & W. Milberg (1995), “The crisis of vision in modern economic thought”, CUP

Heilbroner, R. (1953), “The worldly philosophers. The lives, times and ideas of the great economic thinkers”, Simon and Shuster, reprint 1986

Helliwell (1988), “Comparative macroeconomics of stagflation”, JEL XXVI March pp 1-28

Hendry, D. (1995), “Dynamic econometrics”, Oxford

Hersoug, T. (1984), “Union wage response to tax changes”, OEP 36, p 37-51

Hersoug, T. and K.J. Kjaer, A. Rodseth (1986), “Wages, taxes and the utility-maximizing trade union: a confrontation on Norwegian data”, OEP 38, 37-51

Hicks (1937), “Mr. Keynes and the ‘classics”’, Econometrica vol v no 2 April, reproduced in “Critical essays in monetary theory”, Oxford 1967 and Hicks (1982)

Hicks (1981), “Collected essays on economic theory, volume I; Wealth and welfare”, Blackwell

Hicks (1982), “Collected essays on economic theory, volume II; Money, interest & wages”, Blackwell

Hicks (1983), “Collected essays on economic theory, volume III; Classics and moderns”, Blackwell

Hicks (1989), “A market theory of money”, Oxford

Hillier, F. & G. Lieberman (1967), “Introduction to operations research”, Holden Day

Hofstra (1975), “Inkomstenbelasting”, Kluwer

Hornby (1985), “Oxford advanced learner’s dictionary of current English”, Oxford

Hotz, V.J. and J.K. Scholz (2000), “Not perfect, but still pretty good: The EITC and other policies to support the US low-wage labour market”, OECD Economic Studies 31, 2000/II, p25-42

Hueting, R. (1980), “New scarcity and economic growth”, North Holland

Hulst, H. & A. Hulst with collaboration of Th. Colignatus, (1998), “Werkloosheid en armoede, de oplossing die werkt”, Thesis Publishers 1998, ISBN-90-5179-447-X (“Unemployment and poverty, the solution that works”)

Hum & Simpson (1991), “Income maintenance, work effort and the Canadian Mincome experiment”, A study prepared for the Economic Council of Canada, Canada Communication Group - Publishing, Ottawa

Ierland, E. van (ed) (cs) (1999), “International symposium Valuation of Nature and Environment”, Draft papers

Ierland, E. van, J. van der Straaten en H. Vollebergh (eds) (2001), “Economic growth and valuation of the environment: a debate”, Edward Elgar

Jacobs, D. (1996), “De Amerikaans ‘crime machine’”, ESB June 26

Johansen (1969), “An examination of the relevance of Kenneth Arrow’s general possibility theorem for economic planning”, Economics of planning 9, pp5-41

Johnson, H. G. (1975), “On economics and society”, Chicago, paperback 1982

Johnston, J. (1963, 1972), “Econometric methods”, McGaw-Hill

Jones, H (1975), “An introduction to modern theories of economic growth”, Thomas Nelson & Sons

Jongen, E.L.W. and J. J. Graafland (1998), “Vouchers for the long-term unemployed: a simulation analysis with MIMIC”, Research Memorandum 139, Central Planning Bureau, The Hague

Jorgenson, D. (1990), “Aggregate consumer behavior and the measurement of social welfare”, Econometrica 58 no 5 pp1007-1040

Kam, C. de, & Van Herwaarden (1989), “De Prijs van de Beschaving”, Academic Service

Kam, De & Nypels (1990), “Het stuwrneer loopt over”, Intermediair 45

Keizer (1990), “De Zweedse crisis”, ESB May 9 1990

Kennedy, D.M. (1999), “Freedom from Fear; The American people in Depression and War”, Oxford

Keuzenkamp, H. (1994), “Probability, econometrics and truth; A treatise on the foundations of econometric inference”, thesis KUB, Tilburg February 25

Keuzenkamp, H., F. van der Ploeg & A. van Soest (1991), “Vicious circles behind the dykes: Disability and unemployment in The Netherlands”, KUB

Keynes, J.M. (1919, 1971), “The economic consequences of the Peace”, Macmillan

Keynes, J.M. (1936), “The general theory of employment, interest and money”, MacMillan

Keynes, J.M. (1939), “Professor Tinbergen’s method”, Economic Journal, September, reprinted in, Hansen & Clemence (1953) with Tinbergen’s reply and Keynes’s final comment p330-355

Klamer, McCloskey & Solow eds. (1988), “The consequences of economic rhetoric”, CUP

Klever, W.N.A. (1981), “Dialectisch denken. Over Plato, wiskunde en de doodstraf”, Wereldvenster

Klever, W.N.A. (1990), “Zuivere economische wetenschap”, Boom

Knegtmans, P.J. (1989), “Socialisme en democratie. De SDAP tussen klasse en natie (1929-1939)”, IISG

Knoester ed. (1987), “Lessen uit het verleden”, Stenfert Kroese

Koopmans, L. (1975), “Overheidsfinanciën”, Stenfert Kroese

Korliras, P. & R. Thorn (ed) ( 1979), “Modern macroeconomics”, Harper & Row

Krugman (1999a), “Thinking about the liquidity trap”, his website

Krugman, P. (1993), “How I work”, the American Economic Review (1993), nr 2, p25-31, reprinted in Rutten, F. (1996), “KVS, Jaarboek 1995/96”, ESB Rotterdam p221-231

Krugman, P. (1994a), “The Age of diminished expectations”, 4th revised and updated edition, MIT

Krugman, P. (1994b), “Peddling prosperity”, Norton

Krugman, P. (1995), “Development, geography and economic theory”, MIT

Krugman, P. (1996a), “Pop internationalism”, MIT

Krugman, P. (1996b), “The self-organizing economy”, Blackwell

Krugman, P. (1999), “The return of depression economics”, Norton

Krugman, P. (2001), “Fuzzy math. The essential guide to the Bush tax plan”, Norton

Krugman, P. (2003), “The great unraveling. Losing our way in the new century”, Norton

Kuhn, Th. (1962, 1994), “The structure of scientific revolutions”, Chicago

Kuipers & Van Ees (1990), “Macro-economische theorie en economische politiek”, ESB 3714 June 6, pp 32-43

Laidler (1990), “Hicks and the classics”, J,. of Monetary Ec. 25 pp 481-489

Lakatos & Musgrave eds. (1970), “Criticism and the growth of knowledge”, CUP

Lambert, P.J. (1985), “Advanced mathematics for economists”, Blackwell

Layard, Nickell & Jackman (1991), “Unemployment”, Oxford

Layard, R. (1988). “How to beat unemployment”, Oxford UP

Leontief (1990), “Some Soviet lessons”. Challenge Sept-Oct. pp 14-15

Lindbeck & Snower (1988). “The Insider-Outsider theory of employment and unemployment”, MIT

Lomborg, B. (2001), “The skeptical environmentalist. Measuring the real state of the world”, Cambridge

Lucas, R. & Th. Sargent (ed) (1981), “Rational expectations and econometric practice, Vol. 1”, Minnesota

Luce & Raiffa (1957), “Games & decisions”, J. Wiley

Luenberger, D. (1998), “Investment science”, Oxford

Mankiw, N.G. (1992), “Macroeconomics”, Worth Publishers

Mankiw, N.G. (1998), “Principles of economics”, The Dryden Press

Marsden, M. (1995), “The impact of industrial relations practices on employment and unemployment”, OECD Jobs Study Working Papers Series no 3

Marshall, A. (1890, 1947), “Principles of economics”, Macmillan

Mas-colell, A., M. Whinston and J. Green (1995), “Microeconomic theory”, Oxford

McCloskey, D.N. (1989), “Knowledge and persuasion in economics”, Cambridge

Meade, J.E. (1975), “The intelligent radical’s guide to economic policy”, George Allen & Unwin

Meade, J.E. (1985), “Wage-fixing revisited”, IEA occasional paper 72

Meade, J.E., Committee chaired by, (1978), “The structure and reform of direct taxation”, IFS, George Allen & Unwin (in particular p308-316)

Memories van Toelichting, “Wijziging van de Wet minimumloon en minimumvakantiebijslag”, Tweede Kamer 1988-1989, nr. 21014 (zgn. “WAM met beleidsmatige aanpassing”), en “Wijziging van de Wet minimumloon en minimumvakantiebijslag”, Tweede Kamer 1990-1991, nr. 22012, (zgn. “Wet Koppeling met Afwijkingsmogelijkheid”).

Minford & Ashton (1993), “The poverty trap and the Laffer curve: What can the GHS tell us?”, in Knoester, “Taxation in the United States and Europe”, St. Martin’s press

Minford & Rastogi (1989). “A new classical policy programme” In Britton (ed), ‘Policymaking with macroeconomic models”, Gower

Mirowski (1989), “More heat than light”, Cambridge

Montesquieu (1748), “De l’Esprit des Lois” (Spirit of the laws), internet http://www.constitution.org/

Mooij, R.A. de (1999), “Taxation and employability in MIMIC”, CPB-Report 99/4, p31-35

Mueller, D. (1989), “Public Choice II”, Cambridge

Muller & Zwezerijnen eds (1989), “The role of economic policy in society”, Rotterdam UP

Muysken (1989), “Unemployment In the Netherlands: who cures? Who pays ?”, Maastricht

Nafziger, E.W. (1998), “Root of human suffering”, Financial Times January 21

Nentjes (1971), “De ontwikkeling van de economische theorie”, Wolters-Noordhoff

Neubourg, De (1990). “Unemployment and labour market flexibility: The Netherlands”, ILO Geneva

Noguchi, Asahi (1993), “General Equilibrium models”, in Varian (ed), “Economic and financial modeling with Mathematica”, Springer Telos 1993 pp 104-123

OECD (1986), “An empirical analysis of changes in personal income taxes”, OECD studies in taxation, Paris

OECD (1990), “Progress in structural reform; supplement to OECD economic outlook 47”, Paris

OECD (1990). “Progress in structural reform; supplement to OECD economic outlook 47”, Paris

OECD (1994), “The OECD Jobs Study - Facts, Analysis, Strategies”, Paris

OECD (1995) “Taxation, Employment and Unemployment”, OECD, Paris

OECD (1998), “The OECD Observer”, No. 213 August/September 1998, OECD Paris

OECD (2000), “Outlook”, OECD, Paris, in particular chapter 2, “Making the most of the minimum: statutory minimum wages, employment and poverty”

OECD (2003), “Policy Brief: Disability programmes in need of reform”, OECD Observer, March

Oers, F.M., R. A. de Mooij, J. J. Graafland and J. Boone (1999), “An Earned Income Tax Credit in the Netherlands: Simulations with the MIMIC model”, Research Memorandum 150, Central Planning Bureau, The Hague

Okroi, L.J (1988), “Galbraith, Harrington, Heilbroner”, Princeton

Okun, A. (1975), “Equality and efficiency”, Brookings

Okun, A. (1981), “Prices & Quantities”, Blackwell

Okun, A. (1983), “The economist and presidential leadership”, reproduced in Pechman (1983) p579-583

Opstal, R. van (1990), “Minimumloon en werkloosheid; een empirische analyse of micro-data uit 1979 en 1985”, Research memorandum 69, Centraal Planbureau

Ormerod, P. (1994), “The death of economics”, Faber & Faber

Palley, Th. (1999), “Review: Created Unequal”, Challenge, March-April p130-135

Patinkin (1976), “Keynes’ monetary thought”, Duke

Pearson, M. and S. Scarpetta (2000), “An overview: What do we know about policies to make work pay?”, OECD Economic Studies 31, 2000/II, p11-24

Pechman, J.A. (ed) (1983), “Economics for policy making. Selected essays of Arthur M. Okun”, MIT

Pechman, J.A. (ed) (1989) “The role of the economist in government. An international perspective”, Harvester Wheatsheaf

Pelkmans, J., Interview with, (1990), “Dr Jacques Pelkmans (Kroonlid): ‘Analyse Is voor de SER belangrijker dan politieke invloed’” Maatschappijbelangen nr 10 Oct. Haarlem, pp 246-248

Pen, J. (1987), “Feestbundel”, ESB November 18, pp 1099-1100

Pen, J. (1989), “De economen en de politiek: een interessante relatie”, pp 113—128 in Van Braband et al. (eds), “Openbare financien in drievoud”, Thieme Zutphen

Pen, J., & J. Tinbergen (1977), “Naar een rechtvaardiger inkomensverdeling,” Elsevier

Phelps, E. (1994), “Structural slumps: The modern equilibrium theory of unemployment, interest and assets”, Harvard UP

Phelps, E. (1997), “A strategy for employment and growth: the failure of statism, welfarism and free markets”, Rivista Italiana degli Economisti, a. II. n. 1. aprile p121-128

Phelps, E. (2000), “The importance of inclusion and the power of job subsidies to increase it”, OECD Economic Studies 31, 2000/II, p85-113

Pikkemaat, A. (1990), “Arrow’s significance for economic science in the Netherlands”, De Economist 138 No 3 p235-255

Piore (1987), “Historical perspectives and the interpretation of unemployment”, JEL XXV 4 pp 1834-1850

Ploeg, F. van der & R. de Klerk, (1992), “Overheid en markt in het maatschappelijk debat”, ESB March 18 (see Colignatus (1994b:76-81))

Postma, R. (2004),”Midden-Europa achter de schermen”, Prometheus / NRC Handelsblad

Praag, B, van & V. Halberstadt (1980), “Towards an economic theory of non-employability, a first approach”, pp 211-222 in Roskamp ed. (1980), “Public Choice and Public Finance”, Editions Cujas

Quah (1993), “Galton’s fallacy and tests of the convergence hypothesis”, Scandinavian Journal of Econometrics, 1993 pp427-443

Reijn, van (1989), “Van basisinkomen naar verlaging minimumloonkosten”, SER-bulletin augustus/september

Reuten, G. (1992), “Waarheid in de economie”, ESB 16/12/92 pp1208-1216

Rijken van Olst, H. (1969), “Inleiding tot de statistiek”, deel I, II, III, Van Gorcum

Roebroek (1990), “Sociale zekerheid in Nederland: Pappen en nathouden”, Intermediair 41. October 12 pp 51-63

Rostow, W. (1990), “Theorists of economic growth from David Hume to the Present”, Oxford

Rutten, F. (1989), “De betekenis van Tinbergen en Zijlstra”, SLA lecture, Dutch Ministry of Economic Affairs.

Saari, D. (2001a), “Chaotic elections”, AMS, 2001, www.ams.org; or

Saari, D. (2001b), “Decisions and Elections. Explaining the unexpected”, CUP

Samuelson, P. (1947, 1983), “Foundations of economic analysis”, Harvard, enlarged edition

Schaaijk, M. van (1983), “Loondifferentiatie en werkloosheid”, (“Wage differentiation and unemployment“), Economisch Statistische Berichten September 21

Schaaijk, M. van (1988), “Overzicht gewaarborgd”, Maandschrift Economie, pp 372-378, CPB reprint no 214 (“Microtax ‘88”)

Schaaijk, M. van, & Verkade (1988), “Eenvoud verzekerd: Microtax 88”, Central Planning Bureau OM 43, The Hague

Schrijver (1987), “Analyse van macro-economische beleidspreferenties met behulp van optimale besturingstheorie”, Research memorandum 35, CPB

Schuyt, C. (1990), “Het suddert voort, zolang er wat te halen valt”, De Volkskrant October 6, het vervolg page 9

SCP (1990), “Sociaal en cultureel rapport 1990”, Rijswijk

Sen, A. (1986), “Social choice theory,” p1073-1181 in Arrow & Intrilligator eds. (1986), “Handbook of mathematical economics, Volume III”, North Holland

Sen, A. (1970), “Collective choice and social welfare”, North Holland

Sen, A. (1999a), “Development as freedom”, Knopf

Sen, A. (1999b), “The possibility of social choice”, AER p349-366 (excluding literature)

Shapiro,C. and H. Varian, (1999), “Information rules”, HBS press

Shiller, R.J. (2003), “The new financial order. Risk in the 21st century”, Princeton

Shone, R. (1998), “Economic dynamics”, Cambridge

Skidelsky, R. (1975), “The reception of the Keynesian revolution”, in Milo Keynes, “Essays on John Maynard Keynes”, CUP

Skidelsky, R. (1983), “John Maynard Keynes. Hopes betrayed 1883-1920”, Macmillan

Skidelsky, R. (1992), “John Maynard Keynes. The economist as saviour 1920-1937”, Macmillan

Skidelsky, R. (2000), “John Maynard Keynes. Fighting for Britain 1937-1946”, Macmillan

Smith, A. (1759, 1984), “The theory of moral sentiments”, Liberty Fund

Smith, A. (1776, 1974), “An inquiry into the nature and causes of the wealth of nations”, Penguin (edited and with an extensive preface by Andrew Skinner)

Solow, R. (1976), “Down the Phillips curve with gun and camera”, reproduced in Teigen (1978) p146-157

Solow, R. (1980), “On theories of unemployment,” AER Vol 70 no 1, p1-11 (AER presidential address)

Standing, G. (1988), “Unemployment and labour market flexibility; Sweden”, ILO, Geneva

Stevers, Th. (1979), “Na prinsjesdag in de Volkskrant”, Stenfert Kroese

Stiphout, H. van (1989), “Unemployment components and employment policies: a reflection on the capacities of the economy”, paper for the conference “The art of full employment” Maastricht 28—30 September 1989.

Sudgen, R. (1999), “Book review: On voting. A public choice approach. By Gordon Tullock”, JEL 1715-1716 (December)

Sulloway, F. (1996), “Born to rebel. Birth order, family dynamics, and creative lives” (Dutch: “De rebel van de familie”, Prometeus 1998).

Summers, L. (1990), “Understanding unemployment”, MIT

Swank, O. (1989). “The objectives of Democrats and Republicans In the United States, 1956—1984”, Rotterdam

Szenberg, M. (1992), “Eminent economists. Their life philosophies”, Cambrigde

Tajuddin, I. (1996), “A simple measure of skewness”, Statistica Neerlandica pp 362-366

Takayama, A. (1974), “Mathematical economics”, The Dryden Press

Teigen, R. ed. (1978), “Readings in money, national incme and stabilization policy”, Irwin

The Economic Journal, Volume 114, no 494, March 2004 (various papers)

The Economist (1991), “How to make anti-poverty policies popular”, April 27th, p45-46

The Economist (1993), “Economic focus: indirect taxes”, 4th December

The Economist (1994a), “Schools Brief”, Februari 19th and 26th, “Getting back to full employment”, March 5th

The Economist (1994b), “No free lunch for the jobless”, August 20th 1994

The Economist (2000), “Wim Kok, the Netherlands’ modest achiever”, February 19th 2000, p34

The New Palgrave, Macmillan 1988 - see Eatwell

Theeuwes, J. (1998), “Arbeid en belastingen”, in Praeadviezen van de Kon. Ver. voor de Staathuishoudkunde 1988, “Belastingheffing en belastinghervorming”, Stenfert Kroese

Theil, H. (1971), “Principles of econometrics”, John Wiley

Throgmorton (1991), “The rhetorics of policy analysis”, Policy Sciences 24 p153-179

Tiger, L. (1992), “The pursuit of pleasure”, Little, Brown & Co.

Tinbergen, J. (1956), “Economic policy: principles and design”, North-Holland

Tinbergen, J. (1985), “Production, income and welfare: the search for an optimal social order”, Weatsheaf books, Harvester press

Tintner, G. (1968), “Methodology of mathematical economics and econometrics”, Chicago

Tobin, J. (1972), “Inflation and unemployment”, AER vol 62 March, pp1-18, reprinted in Teigen (1978), pp121-133

Tobin, J. (1990), “On the theory of macroeconomic policy”, Tinbergen Lecture, De economist 138 pp1-14

Tyrväinen, T. (1995), “Real wage resistance and unemployment: Multivariate analysis of cointegrating relations in 10 OECD countries”, OECD Jobs Study Working Papers Series no 10

Uno (1989), “Measurement of services in an input-output framework”, North-Holland

Varian, H. (ed) (1993), “Economic and financial modeling with Mathematica”, Springer Telos

Varian, H. (ed) (1996), “Computational economics and finance”, Springer Telos

Velthoven, B. van (1990), “The applicability of the traditional theory of economic policy”, J. of Economic Surveys Vol 4 no 1

Visscher, G. (1990), “Het enquete-recht en de botheid van een minister”, Trouw 18/9/90 p11

VN (1990): “Het grote heimwee van minister Bert de Vries”, Ornstein & Van Weezel, Vrij Nederland 15 september 1990 pp 6-10

Volkskrant (2002), “Het fenomeen Fortuyn”, Volkskrant

Waal, F.B.M. de (editor) (2001), “Tree of origin. What primate behavior can tell us about human social evolution”, Harvard UP

Wemelsfelder, “Onaardige economie”, De Bussy 1964

Williams, B. (2002), “Truth and truthfulness”, Princeton

Wilson, E.O. (1995), “Naturalist”, Warner Books

Wilson, J.Q. (1993), “The moral sense”, The Free Press

Wilson, R. and E.A.C. Crouch, (2001), “Risk-Benefit Analysis”, Harvard UP

Wolfram, S. (1992), “Mathematica”, Addison-Wesley

Wolfram, S. (1996), “Mathematica 3.0”, Cambridge

Wolfson, Commissie, “Niemand aan de kant”, PvdA 1992 pag. 41 tweede kolom tweede alinea.

Wolfson, D. (1990), “Towards a theory of subsidisation”, De Economist 138, nr 2, p107-122

Workswick, D. & J. Trevithick (eds) (1983), “Keynes and the modern world”, Cambridge

Zijlstra, J. (1956), “Economische orde en economische politiek”, Stenfert Kroese

Zoon, C. (2004), “Interview met José Saramago”, Volkskrant April 30

Index

Acceleration, 116, 120, 121, 225

Adriaansens, H., 311

Albeda, W., 263, 311

Alm, R., 232, 242, 243, 244, 245, 246, 314

Ancot, 311

Animal spirits, 218

Annan, K., 233

Aoki, 125, 311

Arminius, 78, 80

Aronson, E., 70, 72, 107, 298, 311

Arrow, K., 27, 31, 84, 158, 159, 160, 161, 162, 163, 164, 165, 166, 168, 169, 170, 171, 172, 173, 174, 175, 176, 180, 183, 206, 234, 278, 300, 306, 311, 313, 314, 317, 319, 320

Ash, T.G., 259

Ashenfelter, O., 96, 99, 311

Ashton, 94, 96, 318

Auerbach, A., 94, 311

Bacon, 17

Bakhoven, A., 206, 298, 303, 311

Balkenende, J.P., 258

Barndorf-Nielsen, 78, 311

Barro, R.J., 22, 98, 100, 110, 233, 311

Barrow, J., 71, 75, 76, 278, 279, 311

Barten, A., 15, 32, 311

Basic income, 127, 138, 272, 278

Basic insurance, 110, 127

Bean, 313

Beatrix of Orange, 279

Beckerman, W., 13, 311

Beenstock, M., 94, 311

Begg, D., 311

Beld, C.A. van den, 150, 311

Bellman, R., 224, 311

Bentham tax, 45, 49, 50, 54, 55, 93, 109, 112, 115, 128, 131, 139, 140, 141, 142, 145, 146, 147, 204

Berg, P. van den, 314

Berg, R. van den, 33, 279, 301, 311

Bergeijk, P. van, 28, 187, 312

Berlin, 3, 18, 22, 31, 35, 66, 68, 197, 260, 271, 303

Bernholz, 313

Bernstein, 197, 219, 312

Besseling, P., 312

Blair, T., 56, 258, 259

Blanchard, O., 13, 28, 40, 94, 312

Blaug, M., 276, 312

Blinder, A., 218, 288

Bochenski, 82, 312

Bochove, van, 312

Booker, C., 259

Boone, J., 97

Borda, 173, 175, 177, 178, 179, 180, 181, 183, 300, 306

Borjas, G., 41, 42, 94, 95, 97, 108, 312

Bos, W., 258

Boskin, 245

Boumans, M., 15, 312

Bovenberg, L., 312

Braband, van, 319

Brandsma, A., 312

Brittan, S., 312

Britton, 318

Broeder, G. den, 96, 264, 312

Broer, P., 37, 97, 312

Bron, J., 312

Bruno, M., 28, 30, 93, 225, 237, 312

Buchanan, 14

Buitenhuis, P., 312

Buridan, 166

Burns, A., 287

Bush, G.H.W., 284

Bush, G.W., 158, 178, 254, 302

Cairncross, 30

Card, D., 297

Carter, J., 237

Cavalli-Sforza, L.L., 184, 185, 301

Centraal Bureau voor de Statistiek, 43, 274, 312, 313

Central Bank, 24, 59, 92, 222, 225, 237, 238, 281

Central Planning Bureau, 13, 14, 20, 28, 32, 37, 38, 40, 43, 69, 86, 94, 96, 97, 135, 138, 139, 150, 151, 158, 172, 206, 250, 251, 252, 253, 254, 255, 260, 261, 262, 263, 264, 272, 289, 298, 302, 303, 304, 311, 312, 313, 314, 315, 316, 319, 320

CEPS, 313

Chaos, 64, 81, 85, 168, 229

China, 22, 217, 234

Chirac, J., 178

Clemence, 316, 317

Clinton, W.J., 56, 288, 289, 293, 304

Cnossen, S., 186, 187, 313

Coase, R., 13, 113, 187, 239, 313

Coats, A.W., 313

Cohen Stuart, 56, 57, 62, 109, 204, 305

Colander, D., 313

Colignatus, Th., 1, 2, 13, 26, 37, 59, 70, 72, 86, 94, 99, 129, 137, 151, 156, 159, 171, 172, 179, 181, 184, 195, 206, 212, 221, 251, 254, 255, 260, 261, 262, 275, 298, 299, 300, 301, 303, 304, 313, 314, 316, 320

Competition, 41, 58, 62, 67, 68, 72, 116, 141, 149, 185, 223, 230, 239, 240, 288, 297

Computer, 69, 78, 83, 152, 181, 209, 264, 304, 309

Condorcet, 27, 165, 166, 169, 170, 173, 177, 178, 179, 180, 183

Congress, 15, 17, 130, 219, 235, 238, 279, 284

Congressional Budget Office, 97, 314

Constitution, 3, 12, 13, 14, 16, 18, 25, 26, 29, 30, 33, 35, 68, 85, 159, 160, 161, 162, 163, 165, 167, 168, 170, 171, 172, 206, 232, 256, 260, 271, 272, 277, 279, 288, 301, 304, 306, 313, 318

Consumer Price Index, 150, 218, 245, 246, 281

Cool, Th., 2, 289, 300

Council of Economic Advisers, 13, 14, 22, 24, 25, 68, 85, 110, 208, 251, 256, 282, 283, 284, 285, 286, 287, 288, 303

Cox, W.M., 232, 242, 243, 244, 245, 246, 314

Crouch, E.A.C., 197

Crowding out, 36, 122, 123, 126, 213, 236, 305

Csikszentmihalyi, M., 184

Cullis, J., 314

CWIRU, 84, 117, 118, 119, 120, 121, 122, 128, 135, 207, 218, 299, 305

Dahl, R., 314

Dam, M. van, 258

Danthine, 313

Darwin, Ch., 11, 78

Dasgupta, P., 12, 218, 231

Deficit, 25, 42, 67, 87, 92, 110, 113, 280, 285, 286

Definition & Reality, 3, 83, 85, 86, 198, 212, 277, 278, 306, 313

DeLong, H., 73, 314

Delors, J., 259

Depression, 3, 14, 17, 18, 19, 23, 24, 26, 30, 31, 34, 64, 66, 67, 156, 192, 224, 299, 307, 310, 317

Dewey, J., 269

Diamond, J., 184

Differential indexation, 43, 48, 56, 57, 62, 126, 132, 145, 236, 238, 305, 308

Dilnot, A., 247

Doel, J. van den,, 314

Don, F.J.H., 200, 251, 261, 314

Dopp, 314

Dornbusch, R., 13, 28, 87, 311, 314

Draper, D., 312

Drèze, J., 314

Driehuis, W., 150, 311, 315

Drissen, 207, 315

Duisenberg, W., 59, 98

Dukakis, M., 287

Dutch Disease, 149, 150

Dylan, B., 254

Earned Income Tax Credit, 248, 249, 250, 288, 293, 294, 295, 296, 297, 299

Eatwell, J., 196, 315, 321

Economic Supreme Court, 3, 11, 12, 14, 16, 22, 24, 25, 26, 28, 29, 31, 32, 33, 66, 72, 85, 97, 232, 234, 238, 256, 260, 264, 279, 280, 281, 288, 301, 306, 313

Economist, The, 12, 94, 130, 187, 321

Edgeworth-Bowley, 153, 189, 190, 191

Eenhoorn, 258

Ees, van, 318

Eijgenraam, C., 264

Eijk, van, 315

Eisenhower, I., 287

Enden, F. van den, 302

Epimenides, 173, 279

Equilibrium rate (ERU), 117, 118, 119

Erasmus MC, 261, 302

Erlang, 78

Euclid (geometry), 73, 75, 76, 279

Europe, 3, 18, 22, 23, 31, 35, 37, 38, 41, 45, 56, 58, 59, 60, 61, 62, 64, 66, 68, 97, 124, 125, 150, 156, 218, 220, 223, 229, 231, 234, 238, 239, 244, 246, 251, 258, 259, 260, 263, 270, 289, 303, 304, 306, 312, 313, 314, 318

Ewijk, C. van, 186, 187, 313

Executive, 3, 12, 16, 17, 25, 279, 282, 286, 287, 288, 303, 306

Exemption, 45, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 59, 62, 63, 82, 99, 108, 109, 124, 125, 126, 127, 128, 129, 130, 131, 133, 135, 137, 138, 139, 140, 141, 142, 143, 146, 202, 203, 204, 206, 215, 246, 272, 304, 305, 308, 309

Falsification, 72, 76, 77

Fase, M., 150, 311, 315

Federal Reserve Bank, 218, 237, 238, 281, 285, 316

Feldstein, M., 283

Ferguson, Th., 197, 315

Feynman, R., 315

Fischer, S., 13, 28, 40, 87, 94, 311, 312, 314

Fitoussi, J.-P., 247

Flanning, C., 14

Folmer, H., 264, 300

Fortuyn, W.S.P., 256, 257, 258, 259, 260, 262, 301, 302

Freeman, R., 124, 311, 315

Friedman, M., 40, 94, 121, 241, 315

Gainous, J., 160

Galbraith, James K., 26, 27, 98, 223, 232, 235, 236, 237, 238, 239, 240, 241, 242, 281, 315

Galbraith, John K., 260, 315, 319

Gambs, J., 267, 269, 315

Gastel, L. van, 264

Gelauff, G., 28, 94, 96, 97, 98, 135, 140, 241, 315

Gill, J., 160

Gill, R., 78, 80, 81, 194, 261, 311, 315

Gillingham, J., 259

Gladstone, 277

Globalisation, 31, 37, 42, 57, 58, 61, 62, 68, 221, 236, 239, 298

Gödel, K., 164

Gogh, Th. van, 302

Gogh, V. van, 253, 302

Gomarus, 78, 80

Gorbachev, 22

Gordon, R.J., 240, 321

Gore, A., 158, 178

Gould, S.J., 11, 86, 301, 315

Graaf, T. de, 257

Graafland, J., 14, 97, 155, 241, 315, 316

Grafstein, R., 316

Grandmont, J.-M., 14, 204, 316

Graybill, F., 315

Green, J., 165, 175, 318

Greenspan, A., 238

Groot, H.de, 99, 316

Guépin, J.P., 302

Hadjimichalakis, M., 237, 316

Hahn, F., 311

Halberstadt, V., 93, 320

Hall, R.E., 316

Hansen, 316, 317

Harrington, 319

Harrod, R., 19

Hartog, H. den, 150, 151, 311, 315, 316

Hayek, F., 26, 83, 232, 235, 276, 277, 278, 316

Hebden, J., 40

Heck, A., 264

Heilbroner, R., 12, 219, 220, 221, 227, 230, 231, 314, 316, 319

Heinlein, R., 186

Helliwell, 316

Hendry, D., 27, 316

Hersoug, T., 97, 155, 241, 316

Herwaarden, van, 98, 317

Hicks, J.R., 13, 14, 26, 32, 83, 93, 269, 316, 318

Hillier, F., 316

Hofstra, H., 56, 109, 316

Hornby, 193, 196, 316

Hotz, V.J., 247, 248, 249, 250

Hueting, R., 156, 218, 301, 316

Hughes Hallet, 311

Huizinga, F., 97, 155, 312, 316

Hulst, H. and A. Hulst, 252

Hulst, H. en A. Hulst, 137, 254, 261, 262, 264, 300, 301, 314, 316

Hum, 96, 317

Ierland, E. van, 156, 301, 311, 317

ILO, 219, 241, 318, 321

IMF, 22, 65, 304

India, 217, 218, 234

Inequality, 235, 236, 238, 239, 241, 242, 256

Inflation, 14, 18, 19, 27, 31, 36, 37, 38, 39, 40, 41, 42, 48, 49, 51, 52, 53, 55, 56, 57, 58, 59, 60, 61, 62, 63, 82, 89, 90, 91, 92, 96, 97, 104, 109, 115, 116, 117, 118, 119, 120, 121, 123, 125, 126, 127, 130, 132, 133, 139, 143, 144, 146, 198, 207, 218, 219, 223, 225, 229, 230, 237, 238, 239, 245, 272, 281, 288, 289, 299, 306, 307, 308, 309, 310, 313, 314, 316, 321

Institutions, 14, 26, 86, 126, 158, 207, 220, 232, 238, 262, 263, 270, 283, 286, 298, 305, 313, 316

Insurance, 93, 107, 110, 126, 127, 135, 238, 284, 301

Interest rate, 36, 92, 121, 223, 237, 281, 316

IS-LM, 11, 13, 14, 32, 84, 87, 89, 93

Jackman, R., 28, 94, 304, 318

Jacobs, D., 124, 317

Janus, 79, 80

Japan, 58, 62, 67, 69, 85, 198, 239, 307

Johansen, L., 160, 317

Johnson, H. G., 245, 317

Johnson, L.B., 245, 317

Johnston, J., 317

Jones, Ph., 314

Jongen, E.L.W., 97

Jorgenson, D., 161, 317

Jospin, 56

Judiciary, 16, 29

Jupp, 78, 311

Kalecki, M., 26

Kam, C. de, 98, 317

Kant, I., 163

Keizer, M., 317

Kennan, G., 68

Kennedy, D.M., 17, 19, 20, 23, 317

Keuzenkamp, H., 76, 99, 316, 317

Keynes, J.M., 3, 11, 13, 14, 15, 18, 19, 20, 26, 27, 28, 32, 33, 34, 59, 63, 66, 67, 83, 95, 96, 106, 107, 142, 156, 183, 192, 197, 208, 216, 218, 219, 224, 226, 239, 241, 268, 269, 270, 276, 277, 278, 301, 307, 310, 312, 316, 317, 319, 320, 322

Keynes, M., 19, 320

Klamer, A., 317

Klein, L., 227

Klerk, R. de, 320

Klever, W.N.A., 302

KNAW, 261

Knegtmans, P.J., 317

Knight, F., 196, 197

Knoester, A., 311, 317, 318

Köbben, A.J.F., 252

Kohl, H., 223

Kok, W., 56, 156, 256, 257, 258, 260, 262, 321

Komisar, J., 267, 269, 315

Koopmans, L., 112, 317

Korliras, P., 317

Kotlikoff, L., 94, 311

Koyck, L.M., 251

Kromhout, F., 264

Krueger, A., 297

Krugman, P., 13, 14, 27, 28, 29, 66, 67, 68, 98, 156, 192, 219, 220, 221, 222, 223, 224, 225, 227, 230, 231, 235, 236, 238, 242, 254, 255, 256, 281, 314, 315, 317

Kruiderink, 22

Kuhn, T., 78, 318

Kuipers, S., 318

Kuttner, R., 29

Laffer, 227, 318

Laidler, 318

Lakatos, I., 318

Lambert, P.J., 102, 318

Lawrence, 227, 314

Layard, R., 28, 41, 94, 96, 304, 311, 318

Le Bras, H., 302

Le Pen, 178, 257, 258

Le Play, F., 302

Legislative, 3, 12, 16, 279, 284, 306

Leontief, W., 318

Leube, 316

Levy, S., 264, 275

Lieberman, G., 316

Lincoln, 68

Lindbeck, A., 41, 304, 318

Lindblom, 314

Lissabon Strategy (EU), 157, 300

Lomborg, B., 301

Long, H., 23, 228

Lubbers, R., 256

Lucas, R., 27, 41, 121, 122, 208, 227, 318

Luce, 160, 318

Luenberger, D., 318

Madison, 113, 114, 174, 217

Magaziner, I., 98, 236

Mahony, D.O, 14

Majority, 182

Mäler, K.-G., 218, 314

Malinvaud, E., 313

Mankiw, N.G., 13, 15, 17, 27, 28, 94, 95, 216, 217, 218, 219, 237, 270, 318

Marcott, C., 34

Marginal rate, 45, 54, 55, 63, 69, 94, 96, 97, 98, 99, 126, 127, 128, 129, 137, 138, 140, 141, 142, 143, 145, 146, 147, 148, 157, 202, 203, 206, 217, 222, 223, 225, 301, 308, 309

Markowitz, H., 195

Marsden, M., 246

Marshall, A., 3, 11, 17, 33, 216, 266, 268, 318

Mas-colell, A., 175, 318

Maslow, 243

McCloskey, D.N., 184, 317, 318

McCrae, J., 247

Meade, J.E., 13, 318

Meidner, R., 150

Melkert, A., 257, 258, 262

Methodology, 3, 14, 15, 33, 70, 72, 82, 83, 85, 86, 198, 206, 212, 278, 301, 302, 304, 306

Michielsen, P., 68

Milberg, W., 219, 220, 221, 230, 316

Mill, J.S., 216, 268

Milosevic, S., 22

Minford, P., 94, 96, 318

Minimum wage, 37, 38, 41, 43, 44, 45, 46, 47, 48, 50, 52, 53, 56, 57, 58, 59, 60, 61, 69, 74, 84, 88, 99, 103, 104, 105, 106, 108, 109, 119, 120, 121, 122, 123, 124, 125, 126, 130, 131, 132, 133, 134, 135, 136, 137, 141, 145, 146, 148, 149, 151, 152, 155, 199, 200, 208, 219, 227, 236, 237, 247, 253, 262, 296, 297, 305, 306, 308, 313

Mirowski, 78, 318

Mitchell, W., 268

Monetarism, 26

Monopoly, 29, 72, 239, 281

Montesquieu, 16, 17, 21, 28, 34, 234, 270, 271, 306, 318

Mooij, R.A. de, 14, 97

Mudde, C., 258

Mueller, 28, 158, 171, 318

Muller, 315, 316, 318

Mundell, R., 15, 27, 227

Musgrave, 318

Mussolini, 258

Muysken, J., 318

Nádas, P., 260

Nader, R., 158, 178

Nafziger, E.W., 21, 318

NAIRU (see CWIRU), 84, 116, 122, 226, 227, 229, 237, 240, 241, 299

Natural rate (see NAIRU), 84, 121, 122, 218, 226, 241

Negative income tax (NIT), 138, 139

Nentjes, A., 318

Neubourg, C. de, 318

New Deal, 19

New Economy, 299, 300

Newton, I., 17, 175, 271

Nibbelink, A., 97

Nickell, S., 28, 41, 94, 253, 304, 318

Nieuwenhuis, A., 140

Nishiyama, 316

Nixon, R., 287

Noguchi, A., 264, 275, 319

North, R., 259

Nypels, 317

OECD, 23, 37, 42, 43, 48, 62, 63, 69, 85, 98, 120, 125, 126, 127, 130, 151, 155, 200, 224, 246, 247, 300, 303, 304, 307, 308, 309, 313, 319

Oers, F.M., 97

Oil crisis, 90, 149, 150

Okroi, L.J, 319

Okun, 40

Okun, A., 24, 94, 319

Oort, 98, 131

Oplatka, A., 68

Opstal, R. van, 319

Ormerod, P., 219, 220, 221, 228, 229, 314, 319

Palgrave, The New, 160, 171, 196, 315, 321

Palley, Th., 235, 319

Pareto, V., 21, 57, 74, 102, 162, 182, 183, 206, 212, 215, 220, 225, 232, 309

Parks, B., 264

Parliament, 25, 29, 33, 65, 85, 98, 183, 261, 279, 280, 286, 304

Patinkin, D., 95, 319

Pearce, D.W., 160, 314

Pearson, M., 247

Pechman, J.A., 319

Pelkmans, J., 319

Pen, J., 100, 319

Perry, G., 93

Phelps, E., 28, 40, 94, 121, 122, 219, 220, 221, 222, 224, 225, 226, 227, 229, 247, 314, 319

Phillips, A.W., 40, 41, 93, 99, 121, 125, 320

Phillipscurve, 14, 38, 40, 83, 84, 90, 91, 94, 96, 97, 106, 115, 118, 120, 122, 124, 198, 221, 225, 230, 305, 308

Pigou, C., 33, 34, 96, 109

Pikkemaat, A., 319

Piore, 208, 319

Ploeg, F. van der, 312, 317, 320

Plurality, 177, 178

Political Economy, 3, 11, 12, 13, 14, 26, 34, 82, 183, 184, 198, 212, 216, 222, 231, 235, 237, 252, 266, 267, 268, 270, 289, 301, 307, 309, 311, 312, 313

Popper, K., 76

Postma, R., 259, 260

Poverty, 3, 17, 18, 21, 26, 33, 34, 37, 38, 42, 45, 56, 57, 58, 60, 61, 62, 84, 124, 125, 185, 216, 217, 220, 227, 230, 234, 243, 244, 245, 246, 247, 253, 260, 264, 265, 272, 278, 293, 295, 296, 299, 305, 306, 307, 309, 316, 318

Praag, B. van, 93, 320

President, 13, 14, 24, 25, 29, 33, 59, 68, 85, 109, 143, 158, 180, 183, 245, 251, 253, 270, 279, 280, 282, 283, 284, 285, 286, 287, 288, 289, 293, 294, 295, 314, 321

Probability, 24, 65, 80, 81, 96, 104, 116, 194, 195, 197, 215, 315, 317

Productivity, 12, 27, 37, 41, 42, 58, 60, 61, 62, 63, 89, 93, 97, 99, 100, 102, 106, 107, 116, 123, 124, 125, 126, 129, 133, 134, 135, 138, 139, 145, 150, 153, 155, 156, 198, 200, 201, 204, 213, 218, 222, 223, 227, 239, 241, 246, 275, 298, 308, 309

Progression factor, 112, 113, 114, 127

Public Choice, 12, 14, 207, 250, 305, 318, 320

PvdA, 257, 258, 312, 322

Pythagoras, 72, 73, 74, 75, 76, 78

Quah, 99, 100, 320

Queen, 215, 279

Raiffa, 160, 318

Random, 78, 79, 80, 81, 82, 85, 118, 215, 229

Rastogi, 318

Rational Expectations, 118, 121, 191, 208

Reagan, R., 143, 156, 227, 284, 299

Reijn, van, 320

Reuten, G., 320

Ricardian vice, 82

Rijken van Olst, H., 273, 320

RIVM, 261

Robbins, L., 186, 268, 269

Roebroek, 320

Roosevelt, F.D., 17, 19, 23, 234, 246, 299

Roscher, W., 268

Rosenmöller, P., 257, 258

Roskamp, 320

Rostow, W., 320

Russell, B., 164, 173

Rutten, F., 317, 320

Saari, D., 175, 177, 179, 180, 181

Sachs, J., 28, 93, 225, 227, 237, 312

Sala-i-Martin, X., 100, 311

Samuelson, P., 13, 14, 15, 255, 320

Saramago, J., 254, 256

Sargent, Th., 318

Scarpetta, S., 247

Schaaijk, M. van, 150, 151, 155, 206, 212, 298, 303, 320

Scholz, J.K., 247, 248, 249, 250

Schor, J., 108

Schrijver, 320

Schröder, G., 56

Schrödinger, 78, 81, 279

Schultze, 314

Schumpeter, A., 82

Schuyt, C., 320

Scitovsky, 311

SCP, 261, 320

Segers, H., 252

Sen, A., 13, 21, 22, 158, 160, 171, 172, 174, 175, 217, 218, 232, 233, 234, 235, 278, 320

Shapiro, C., 299, 320

Shone, R., 320

Shultz, G., 285, 287

Siebrand, J., 264

Simpson, 96, 317

Skidelsky, R., 13, 19, 20, 183, 276, 301, 320

Skinner, A., 17, 320

Slesnick, D., 245

Smith, A., 11, 17, 78, 99, 109, 184, 216, 232, 233, 234, 320

Snower, D., 41, 187, 225, 318

Social Security, 36, 93, 108, 110, 139, 154, 207, 208, 219, 232, 238, 285, 298, 315

Soest, A. van, 317

Solow, R., 83, 93, 109, 226, 317, 320, 321

Speth, J.G., 20

Stagflation, 3, 18, 24, 30, 31, 36, 38, 40, 57, 93, 94, 96, 97, 106, 120, 126, 128, 135, 157, 198, 224, 230, 235, 236, 242, 250, 306, 307, 308, 309, 310, 312, 316

Standing, G., 126, 175, 321

Stappershoef, E. van, 264

Statistics, 25, 38, 44, 79, 80, 81, 82, 86, 197, 214, 235, 243, 244, 245, 285, 287, 295, 311, 315

Steuart, J., 267, 268

Stevers, Th., 321

Stiglitz, J., 29, 288

Stiphout, H. van, 321

Stockman, D., 27, 67, 288

Subsistence, 45, 46, 49, 52, 59, 106, 107, 109, 154

Sudgen, R., 321

Sulloway, F., 33, 279, 301, 321

Summers, L., 287, 321

Suppes, P., 81

Swank, O., 321

Sweden, 198, 307, 321

SWF, Social Welfare Function, 79, 151, 152, 158, 162, 172, 188, 189, 190, 207, 209, 211, 212, 213, 215

Szenberg, M., 321

T[.], general tax function, 45, 49, 102, 109, 111, 112, 123, 125, 128, 140, 141, 142, 143, 199

Tajuddin, I., 321

Takayama, A., 321

Tax Void, 43, 47, 48, 51, 53, 83, 138, 139, 186, 305, 308

Tax[.], special nonlinear, 45, 129, 133, 134, 137, 142, 143

Technology, 12, 31, 37, 42, 57, 58, 61, 62, 104, 135, 176, 221, 227, 231, 236, 239, 242, 298, 299

Teigen, R., 314, 320, 321

Theeuwes, J., 96, 264, 321

Theil, H., 241, 251, 321

Thorn, R., 317

Throgmorton, 34, 321

Thurow, L., 231

Tinbergen, J., 15, 32, 33, 59, 63, 67, 83, 100, 208, 216, 221, 222, 224, 233, 250, 251, 252, 307, 310, 311, 312, 313, 317, 319, 320, 321

Tintner, G., 70, 76, 82, 321

Tobin, J., 41, 106, 107, 160, 170, 254, 321

Tocqueville, de, 277

Todd, E., 302

Trevithick , J., 322

Trias Politica, 12, 14, 16, 17, 20, 21, 24, 25, 28, 30, 35, 220, 224, 225, 230, 264, 279, 301, 306, 308, 313

Tullock, G., 14, 27, 321

Tyrväinen, T., 246

Unemployment, 3, 14, 15, 18, 19, 22, 23, 26, 27, 31, 34, 35, 36, 37, 38, 39, 41, 42, 43, 44, 47, 48, 53, 56, 57, 58, 60, 61, 62, 63, 64, 65, 66, 68, 70, 74, 80, 84, 86, 89, 90, 92, 93, 95, 96, 97, 98, 99, 103, 104, 105, 106, 109, 115, 116, 117, 118, 119, 120, 121, 122, 123, 124, 125, 126, 133, 138, 139, 141, 149, 150, 151, 152, 155, 156, 186, 187, 198, 199, 200, 201, 203, 204, 205, 206, 207, 208, 211, 212, 213, 214, 218, 219, 220, 221, 225, 226, 227, 229, 230, 231, 234, 236, 237, 238, 239, 240, 241, 244, 247, 250, 251, 252, 253, 254, 256, 259, 262, 264, 285, 288, 289, 298, 299, 300, 301, 303, 304, 305, 307, 308, 309, 310, 312, 313, 314, 315, 316, 317, 318, 319, 320, 321

Uno, 321

US Federal Reserve Bank, 238, 285

US, USA, 3, 13, 14, 15, 17, 22, 23, 25, 27, 37, 38, 58, 61, 62, 67, 69, 98, 108, 110, 124, 125, 129, 158, 212, 218, 219, 231, 235, 236, 238, 239, 241, 242, 246, 248, 249, 251, 255, 279, 281, 282, 283, 288, 289, 297, 299, 303, 304, 305

Value Added Tax (VAT), 53, 54, 127, 135, 204, 308

Varian, H., 275, 299, 319, 320, 321

Veblen, Th., 268

Velthoven, B.C.J. van, 314, 321

Verdoorn, P.J., 251

Verkade, E., 320

Verkerk, D., 264

Visscher, G., 321

Volcker, P., 237, 285, 299

Vromans, M., 264

Walras, L., 202, 241, 277

Wanniski, J., 227

Weddepohl, H., 264

Wemelsfelder, 322

Whinston, M., 175, 318

Wilson, R., 197

Winden, F. van, 207, 315

Wolff, P. de, 251, 270

Wolfram, S., 264, 322

Wolfson, D., 322

Workswick, D., 322

World Bank, 65, 233, 304

Zalm, G., 251, 258

Zijlstra, J., 320, 322

Zoon, C., 254

Zwan, A. van der, 150, 315

Zwezerijnen, 315, 316, 318

End notes

Greek ‘oikos’ = ‘estate, house’, ‘nomos’ = ‘law, custom’ and ‘polis’ = ‘city, community’. The Dutch word for ‘political economy’ is ‘staathuishoudkunde’ - with ‘kunde’ = ‘theory and art’ and ‘huishouden’ = ‘home maintenance’ (with ‘huishoudster’ = ‘cleaning lady’). See