6 - Macro-dynamics and the Problem of Unemployment

Summary

Chapter 6 analyzes the trajectory from his early econometric studies to the macroeconomic model he completed in 1936. During this period, he worked at the Central Bureau of Statistics and the Netherlands Economics Institute, to develop new methods to study business cycles. That research was linked to a network of similar institutes across Europe in London, Vienna, Paris, Berlin, and beyond. The chapter demonstrates how the analysis of the dynamics of particular markets provided inspiration for a study of the dynamics of the overall economy. The goal shared by many theorists of the age was to arrive at a dynamic economic theory, as opposed to the static equilibrium models of classical economics. Tinbergen sought to identify the relevant mechanism that could explain the type of movements typically seen in the overall economy: business cycles of about eight years. But the chapter argues that there was also an iterative dynamic between the political and policy issues of the time and Tinbergen’s work, which was never purely scientific or disconnected from practical concerns. The chapter concludes with a sketch of the main characteristics of his econometric work: the dynamic nature, the combination between theory and empirics, the substantive institutional emphasis, and the way in which Tinbergen believed that quantitative econometric studies could help overcome theoretical and political differences.