Jan Tinbergen, Pioneer of Central Planning

  • Jan Tinbergen

Once in a blue moon, the Austrian school attracts the attention of serious scholars outside of its tradition. In the months after Janek Wasserman at University of Alabama published The Marginal Revolutionaries in 2019, lots of Austrians revisited the old masters and the fin-de-siécle Vienna from which they stemmed: they found lots to like and even more to dislike, but it was still a contribution from which we could learn a thing or two.

An even wider attempt was made by Erwin Dekker of Rotterdam’s Erasmus University when he published his PhD thesis with Cambridge University Press: the result was The Viennese Students of Civilization: The Meaning and Context of Austrian Economics Reconsidered, which occupied me in greatly when it came out a few years ago. In it, Dekker makes a rather convincing case that the scholars of Vienna—of which the Austrian economists were but a few—were students not narrowly of economics but of civilization. Markets, prices, and property were as essential to civilizations flourishing as culture or language or law. They wanted to depict and uncover its secrets, repeatedly “marvelling at the workings of the market” and the cultural civilization that surrounded them.

From having investigated the origin of economists who perhaps more than any others admired that market system and wanted to discover how it operated, Dekker made a full turn to the opposite. In his comprehensive four hundred–page work published this month, Jan Tinbergen (1903–1994) and the Rise of Economic Expertise, he details the life of an original central planner—the corecipient of the first ever Riksbank Prize in economics. It’s part biography of a man who shaped modern economic policymaking more than most people would be comfortable with, part intellectual summary of this prolific man’s writing.

In contrast to the Viennese subjects of a few years ago, Dekker’s new subject had grand ideological goals in mind and was unafraid to wrap them in scientific clout. Trained as a physicist in the 1920s Netherlands, he went into economics for two major reasons: first, he had the mathematical skills that could be of service to what he saw as such an underdeveloped discipline; and second, economics would be a better avenue for him to pursue his ideological goals.

Jan Tinbergen was indeed a dangerous man, and one wonders how much harm in the world has been done through his work, words, and beliefs. Reading about his life and ideas is nothing short of scary—from the socialist youth camps of the 1920s to his planning visits to Turkey, India, and Indonesia after he in the 1950s had converted to the economics discipline’s planning stronghold (“development economics”). What’s worse is that plenty of his MO is reflected in policymaking today: establish a goal, run some numbers, and order society such that the goal is achieved. In 1936 he wrote to his Nobel corecipient, Ragnar Frisch, that “the purpose of the econometrician is to calculate how human well-being could be increased.”

He was crucial for the move within economics to not only describe the economic system or analyze outcomes in it, but to formulate the ways in which policymakers could best achieve their goals. From a profession that studied and marveled at the economic world, the generation that Tinbergen epitomized (roughly from the 1930s to the 1970s) set out to control it. Tinbergen believed that it was essential that governments move into people’s lives and change society in what his scientific inquiries had revealed was a better direction.

Dekker writes that Tinbergen “developed a theory of economic policymaking, not a theory of the economy.”

In contrast to modern central planners, Tinbergen at least recognized some limits. He accepted that an activist policymaker could not achieve anything, and his task was to find ways around such obstacles, or optimal compromises. He occasionally praised market prices, vehemently opposed tariffs, and rarely wanted to interfere with the price-finding mechanism of the market, but instead wanted to control quantity, entrance, and, most of all, the decision-making structure of an economy. In the book’s preface, Dekker describes the economic expert as “a government functionary, who works in the service of the economic and social goals of government.” Most eerie of all, the ultimate position of that expert “is not on the throne, but right next to it.”

The research that awarded him the first economics Nobel began in the 1930s and revolved around business cycle research and quantitative assessment of entire economies. These were the times of aggregating data series and early quantitative constructions of the economy that we often associate with Simon Kuznets and national income. Only gradually did Tinbergen move into other policymaking domains, controlling wages for the Dutch economy, matching inputs and outputs for whole Turkish industries, or advocating for world peace and world resource use for various international bodies like the United Nations.

To an Austrian, much of his business cycle research is pretty laughable: barring a coauthored article in the 1960s (about an international reserve currency), Tinbergen never wrote on money. Dekker says: “Tinbergen was never much of a monetary economist, and the monetary side had not been part of his model of the Dutch economy.” Honest and thoughtful scholars can have disagreements over exactly how money impacts the economy and wider society, or to what extent changes in monetary institutions and provision of money contribute to business cycles, but to neglect it altogether seems anything but rigorous.

Every time something good seemed to emerge from Tinbergen’s work, he seems to have managed to twist it in an awful direction. His critique of mainstream quantitative methods—in the creation of which he was foundational—was based on an unwavering questioning of the static: in a world that can and does change, predictions and econometric point estimates are excruciatingly pointless. When the institutional background setting shifts, the result will be worthless. Unfathomably, from this Tinbergen drew an absolutely contrary conclusion: we must target, organize, order, and mold society’s scaffolding such that we can get what we want—really, what I want—a tradition that most government officials and modern monetary theory proponents to this day have wholeheartedly embraced. At the bottom of Tinbergen’s restless, productive, and prolific soul lies an all-encompassing social planner.

In short, here’s a brilliant guy who metaphorically wanted to orchestrate space shuttles and car races before he had learned how to walk: he doesn’t grasp subjective value; he doesn’t understand money; and he wants to run others’ lives for them. And it didn’t much bother him that the means for achieving those high-flying socialist and cultural goals were underspecified, unspecified, or wholly unbelievable. “For the expert, an economy is not a natural system he studies as a physicist would, but a system that he can steer—and improve.”

Jan Tinbergen was both one of the first highly erudite technocrats, and a compulsively obsessed authoritarian.

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