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.”