Eighteen lessons from Tinbergen by Jan Pronk (Article)

Eighteen lessons from Tinbergen by Jan Pronk (Article)

Fifty years ago, in 1969, Jan Tinbergen (1903-1994) received the Nobel Prize for Economics, together with the Norwegian economist, Ragnar Frisch. It was the first time that this prize was awarded. Several years later, Tjalling Koopmans received this prize as the second Dutch economist to do so. This has remained the situation up until today.

This article by Jan Pronk was published in the 2019 spring issue of Vice Versa.

There were numerous renowned economists at the time who were equally eligible. Many of them were awarded the prize in later years, such as Paul Samuelson, Simon Kuznets, John Hicks, Kenneth Arrow, Wassily Leontief, Friedrich Hayek, Gunnar Myrdal and Milton Friedman. Every student of economics knew them and studied their work. The fact that Tinbergen was chosen as the first was a great honour.

As a student of economics, after my bachelor’s degree I specialised in the economics of developing countries during my master’s studies and wrote a thesis in the area of development programming. I chose this not because I was particularly interested in developing countries at the time, but because I wished to attend lectures given by the leading economist in the Netherlands. Tinbergen enjoyed global fame. After graduating, I became a university lecturer on his team of researchers at the University in Rotterdam. I continued in that position for seven years. It was during that period that Tinbergen received the prize. A few years later, I entered politics.

Tinbergen did not receive the prize for his research into the economic problems of developing countries. He received the prize for his work in the nineteen thirties. He himself had not studied economics , but physics. As a physicist, he was enthralled by an analogy between the trend-based and the cyclical development of physical and economic quantities. Influenced by social issues following the economic crisis of 1929, he switched to economics. He devoted himself to studying dynamic change processes: the economic conjuncture and growth. In doing so, he applied new methods that he had developed himself: econometric models which could be used to explain the economy of a country. This led to a breakthrough in scientific thinking about economics: the statistical-mathematical analysis of the dynamic interrelationships between economic variables. This related firstly to the conjuncture in the Dutch economy during the depression of the thirties and later also the international conjuncture. He did not do so out of a purely theoretical interest in entering new areas and applying new methods, and by doing so acquiring his own place within the world of economists, but because he was gripped by the important problems of his time: the unemployment and poverty of the main victims of the crisis, namely workers.

After the war, he was asked to lead the new Netherlands Bureau for Economic Policy Analysis (CPB) and to develop models which could assist in developing the reconstruction policy of the Netherlands. After this, however, Tinbergen’s interest shifted to developing countries. They were plagued by greater poverty and unemployment than Europe and America. This led him to studies of income distribution, both within and between countries, of education in developing countries, international trade and the place of developing countries in the world economy. In all these areas, models were developed to obtain an insight into development processes and to ensure consistency in policy. In this period, he was also named as a possible winner of the Nobel Peace Prize, because combating poverty and a more equal distribution of wealth were not only important in themselves, but also as an instrument for advancing world peace. If he had had a choice, I think he would have preferred that prize. In that year, the prize was awarded to the ILO, the International Labour Organisation, and in the year following that to Norman Borlaug, the ‘father of the Green Revolution’. Later Borlaug was also criticised because he had paid insufficient attention to the environmental effects of new agricultural technology, although the spectacular increase in wheat production resulted in a strong improvement in food supply, including to the poorest of India’s population. As Pope Paul VI wrote at the time in his encyclical Populorum Progressio: ‘development’ is the new name for ‘peace’.

Lessons

During the half a century that has since passed, the world has changed considerably. Is Tinbergen’s work still relevant today? A biography of Tinbergen, written by Dr Erwin Dekker, who gives extensive attention to the contents of his work, will appear this year. I wish to limit myself to Tinbergen’s scientific method and his approach to researching problems. What lessons can we learn from Tinbergen? This concerns not only lessons for researchers, but also lessons and recommendations for politicians who attach importance to a good theoretical underpinning of policy.

Lesson 1.  Attach a value to sound analysis based on an explicit value system.

A rational insight into the way society operates is not essential for politicians. They can try to pursue policies based on power or intuition. However, not everyone has power and often intuition has shortcomings. Those who do have them, are tempted to use these mainsprings to their own advantage. As a researcher or policymaker, one should protect oneself by aiming to obtain rational insights. However, that is not sufficient: determine beforehand the absolute values that are your point of departure, such as equal rights for all people, whoever and wherever they are.

Lesson 2. Above all, select socially important research topics and political objectives.

The acknowledgement and status which you acquire are welcome, but ultimately what is important is the contribution that you make to the public interest. Feel that you have a responsibility for society.

Lesson 3. Be ambitious in selecting your objectives.

What is important is that both the underdog and the community as a whole are served. Set the bar high, also with regard to the time horizon within which the objectives must be achieved.

Lesson 4. Do not be a dreamer.

Tinbergen did not dream ahead, but thought ahead. He was not elevated above reality, but always tried to offer solutions which, even though they could not be applied immediately, could be realised within a period of 5 to 7 or 10 years.

Lesson 5. The world is makeable.

Do not leave making and directing the world to market forces, but try to participate in giving it direction. Nowadays ‘makeability’ is taboo. Tinbergen’s views on social issues, poverty, international cooperation and aid are not in vogue. Poverty is regarded as being one’s own fault or as a phenomenon characteristic of another world, which is other than ours and can be ignored with impunity. International development aid is regarded as a distortion of the market and as counterproductive; international cooperation, as being at odds with new power relationships in the world and therefore unrealistic. In today’s political discourse, all these areas of attention are approached from the same new perspective: the market, the market and once again, the market. However, if this is left to the market and geopolitical power relationships in the present epoch of globalisation and financial capitalism, the problems will grow ever greater. Do not recoil from seizing the rudder.

Lesson 6. Dare to make plans.

For Tinbergen, planning was not a top-down approach to society, but a systematic way of avoiding undesired outcomes of social development. Planning involves prediction and retrospection. It means looking ahead using scenario analysis, in which not only possible and probable outcomes are considered, but also desired outcomes. This helps to set a course systematically and rationally.

Lesson 7. Look beyond the boundaries of your own discipline.

Carry out research on a multidisciplinary basis. Tinbergen did that by interlinking mathematics, physics, statistics and economics. Go a step further and also take a look from the perspective of other social sciences: sociology, cultural anthropology, psychology and political science. Regard the other perspectives as equivalents and adopt an interdisciplinary approach.

Lesson 8. Do not get stuck on the same research topic or, as a policymaker, on the same problem.

In his work, Tinbergen established a connection to what was to present itself after some time as a new, important and urgent issue. Sometimes new topics presented themselves as a logical consequence of the analysis of preceding themes, in which sticking points or dilemmas were encountered. At the time, that was the case in relation to issues such as the environment, migration and human rights, later in relation to the position of women in the developmental process and the meaning of tradition, religion and culture. At present, it applies to climate and violence and, in the near future, it will apply to artificial intelligence. Regard all these topics not as isolated issues, but as part of the development process as a whole.

Lesson 9. Do not carry out research down to the last square centimetre.

Take a broader view. However, equally you should not allow yourself to be tempted by research—or, as a policymaker, to deal with problems—from an ideological perspective. A ‘greater narrative’ should not be assumed.

Lesson 10. Try to extend boundaries and to innovate.

Do not stay in your own little compartment. Do not limit yourself to walking well-trodden paths that are so worn that you cannot achieve anything with your newly acquired knowledge. Tinbergen adopted a robust approach. He focused on the sticking point, the next quantity to be declared, the next problem. He taught his students that it was not necessary to be knowledgeable of what had already been published in an area such as this. It was better, so he implored us, to use the scarce time that one had to carry out one’s own research. That was quicker than looking up what others had already discovered. He said that before the advent of modern communication technology into academic research. However, even now I think he would have preferred to have done his own thinking and to have committed his thoughts to paper—as far as he was concerned, on the reverse side of paper that had already been written on—than to surf the Internet. It would not have made him old-fashioned, just a ground breaker. Of course, it is not wise to try to reinvent the wheel, but the lesson was this: be creative and innovative, above all by focusing on major problems that have not yet been researched sufficiently, let alone solved.

Lesson 11. In other words, no art for art’s sake; models are not an aim, merely a means.

Tinbergen was the first to build economic models and work with them, but he warned against excessive use of them. He gave that warning on the occasion of the presentation of the Nobel Prize: “Models have become a fashion. Too much value is attached to them.” This was the reason that he demanded that coefficients and variables in a model be measurable. Theory ought not to lose its connection to social reality. That reality should remain recognisable. Science ought not to degenerate into aesthetic snobbery.  The founder of econometrics chose not to refine the discipline beyond the boundaries of what was applicable. He gladly left that to others. Later econometrists criticised him for that. They thought that the founder of the discipline had lagged behind. The opposite was true: Tinbergen had gone ahead.

Lesson 12. Do things in the right order: first select the values and norms that you wish to apply, then the objectives, after this the instruments for realising those objectives and finally the economic system that best serves those values and objectives.

This seems obvious, but often the opposite route is chosen: available resources are regarded as given and the objectives are adjusted. The system—for instance, the free market—is regarded as fixed, despite the consequences, for instance, for climate, the environment and people. Reverse the order. It seems self-evident, but it is revolutionary.

Lesson 13. Do not be short-sighted; acknowledge interrelationships.

If you do X to achieve Y, that also has consequences for Z. After this, feedback effects and the like may occur, leaving aside X and Y themselves. As a result, the intended aim may ultimately be missed entirely or may be overshadowed by something else. Approach problems like a chess player. Think a number of moves ahead.

Lesson 14. Always seek the optimum.

Do not aim for maximum growth, for a perfect system, for equality or the absolute primacy of technology. The largest or the most is not necessarily the best. For everything there is an optimum which is determined by more than one single motive or interest. It is not the task of researchers and policymakers to achieve the maximum, but rather to find the optimum.

Lesson 15. It also applies to the economic order: an optimal economic order is characterised by a reasonably strong public sector.

That is not an outdated position. ‘Public’ is also not synonymous with ‘inefficient’. Promoting the public interest is also not at odds with the freedom of the individual. On the contrary, a public sector, provided it is founded on constitutional values, serves society as a whole, including future generations.

Lesson 16. Proceed step by step.

Keep your eye on the larger picture, but do not take on everything at once. Plan the steps that you wish to take beforehand.

 

Lesson 17. Communicate your insights and message clearly and comprehensibly to others verbally and in writing.

Do not be afraid to repeat yourself. Academic practice does not tolerate self-plagiarism, but does tolerate teaching. The dividing line is thin. You surely wish to point others to a possible solution and elicit counterarguments. That is only possible if your ideas are read and heard. In addition, you also benefit from this yourself, because you will understand something better if you explain it to someone else.

Lesson 18. Always start by listening to the people concerned.

Listen to people who themselves do not have any power, but are subjected to the power of groups who have placed themselves above them. Listen to scientists and policymakers from the South of the world. Listen to refugees and migrants. Do not lend an ear to an elite that can care for itself perfectly well, but rather to people from the underclass in the North and the South.

Fifteen years ago I wrote an essay on the occasion of Tinbergen’s hundredth birthday. I had forgotten it, but when I reread it I saw that in the text I had tried to summarise Tinbergen’s message to his students. I will do that again now, as a final conclusion to the lessons, which we can still take to heart: see the interrelationships, try to understand them, build a model, make your values explicit, formulate an aim, be rational, plan for the future a little, rather than leaving it to forces which do not bear any responsibility for the whole, create a better system, influence the process, make policy makeable, search for the optimum, assume your public responsibility, together with others, combat poverty, give others assistance and enable them to assist themselves, divide wealth and scarcity fairly and reasonably, do not exclude anyone, do not do so to countries and large parts of the world’s population, understand that as a result not only a more just world will be created, but also that efficiency will be promoted and that, as a result, shared interests will emerge which will make further cooperation achievable, seize that opportunity, work globally and organise peace.

Jan Pronk