Home > Uncategorized > Shifting attention: two ideas for a genuine micro founded macro-economic master thesis

Shifting attention: two ideas for a genuine micro founded macro-economic master thesis

from Merijn Knibbe

I’m trying to write a book about the relation (not) of neoclassical macro-economic concepts to the concepts of macro-economic statistics. Which leads one to interesting places one can’t explore. If there is anybody out there in search for an interesting idea for a master thesis or something light that, these might do:

  1. A qualitative and quantitative exploration of ‘hoboism’ in the 1930’s looking at it using the lens of ‘involuntary part time unemployment’
  2. An international and historical extension of existing estimates of domestic servants and how this relates to our estimates of GDP.

Ad 1. If you do this well you can make it to the American Economic Review. It’s also great fun. In the thirties, there were hundreds of thousands of ‘hobo’s’ in the USA, mainly young men free riding trains (very dangerous!), begging and sleeping wherever it was dry. These hobo’s had an obsession: finding ‘gainful employment’. Here you will find scores of fascinating ego documents of these men (and some women). As such, their existence is a negation of the Cole and Ohanian approach to unemployment during the Great Depression. They do not look at individual people. So, forget about their statement that their ideas are micro-founded: they’re not. instead, they look at ‘average hours worked’ and model the decrease of the average number of hours worked as a voluntary choice of the USA population for more ‘leisure’ – therewith negating the fact that many people had full time jobs while others worked zero hours. Look here for details. The idea for this study is however is to look at individual people who were only partly uneployed (sometimes, the hobos had a gig job) and to make a qualitative study of their search behaviour as well as a quantitative estimate (guesstimate) of their number as well as aggregate the individual data. And to estimate the extent to which USA unemployment data during the thirties have to be increased to account for these hobos. After Pearl Harbour, the hobos almost instantly disappeared. To an extent this was surely caused by labour demand from an overheated war economy. To an extent the political system might (I’m not entirely sure about this) have changed the rules (also because of the war economy, of course): hoboism was not tolerated anymore. This has to be analyzed, too.

Ad 2. In 1946 George Stigler published the NBER study ‘Domestic servants in the United States, 1900-1940‘. He did not underestimate the importance of domestic servants. Quote: “in 1939 there were as many domestic servants as employees of the railroads, coal mines, and automobile industry combined“. Using census information, he gives some comparative information about the historical number or servants in the USA, Germany and the UK. There are many local studies about domestic servants, but a comparative historical overview seems absent. It is possible to extend Stigler’s information backward and forward and to a larger number of countries. Some preliminary work shows that it was only after 1950 that the amount of domestic servants dwindled, at least in rich countries with low unemployment. Many historical censuses are however not on the internet, but the International Labour Organization does have a non-internet databank of 2.000 censuses which might be used. Domestic servants do have their attention (their estimate of the amount of servants world-wide is 52 million). One reason to extend the estimates is of course that macro information about domestic servants is interesting in its own right: it was and is an important aspect of the world of labour. And production. Focussing on this last aspect it is possible to relate the information to ideas about the household as a production entity and changes in the structure of the household, as well to its size and the amount of children, the relation between household production and the market or the mechanization of the household (the washing machine…). The decline of domestic service however seems to have been led by a dwindling supply of servants (mainly: unmarried, young women and, as Stigler notes, in the USA mainly black or immigrant young, unmarried women), not by lower demand. This, however, has to be investigated. There are scores of studies which enable a qualitative assessment of this process on the micro level.  If you manage to make a reliable qualitative assessment of why domestic service declined and a guesstimate of the extent to which this influenced out estimates of nominal and real GDP, it might surely be published in the Review of Income and Wealth or a comparable publication. We can try if the ILO will reimburse travel expenses to Switzerland.

  1. David Harold Chester
    July 16, 2018 at 2:49 pm

    It is a serioius mistake to associate microeconomics with macroeconomics.Whilst it has been taken in the past that macro is big macro, some better examination of the facts (as in my recent book “Consequential Macroeconomics”) clearly explains that these concepts are very different.

    • merijntknibbe
      July 16, 2018 at 3:21 pm

      Dear David,

      I fully agree – when it comes to the way neoclassicals define the word ‘microfounded’. They use it to state that something akin to the micro-economic theory of the homo economicus has been used to model society. I use the word in the right, i.e. statistical, sense: micro measurements which are aggregated (using a model, be sure) into macro aggregates.

  2. Robert Locke
    July 16, 2018 at 3:02 pm

    I was born in 1932. When I was a young boy my mother kept a pot of navy beans on the stove from which she fed men who knocked at the bad door and asked for something to eat. I would sit at the table with these hobos and talk with time (about 1940). We could call this working class solidarity, because my mom was the daughter of a sharecropped and knew what it meant to be hungry. It was foolish, of course, for a young woman to let these guys into our house, because of he danger to my mom. But it didn’t seem to bother her. This happened in Los Alimitos, California.

    • merijntknibbe
      July 16, 2018 at 3:27 pm

      Dear Robert,

      This memory totally fits with the ego documents on the linked website! The hobos were desperately seeking employment. Desperately They did not even have the means to survive and were dependent on private charity like your mother provided. In a sense, they were earning below-maintenance wages, just like the people in Stalin’s Gulag in the USSR. It is outright insulting that economists like Cole and Ohanian, and many other economists with them, deny the idea of ‘involuntary unemployment’ in such a situation.

  3. July 16, 2018 at 4:23 pm

    These can be interesting topics for those students in a training course. However, there is much more challenging theme young economists should try. It is to give theoretical foundations for Post Keynesian and Evolutionary economics. This is not to give macroeconomics microfoundations based on neoclassical micro theory (or a form of general equilibrium models). This was the old research program that was adopted by New Keynesians and has proved to be a complete failure. New microfoundations require two things: (1) To build a theory which well describes behaviors and interactions of economic agents with bounded rationality and very limited information for each agent. (2) To give theoretical foundations to those macroeconomics like Evolutionary and Post Keynesian economics.

    • merijntknibbe
      July 16, 2018 at 4:33 pm

      I’m talking about micro foundations of measurements. In a sense, economic statisticians do a lot better than physicists when it comes to measurement as they actually are able to aggregate micro measurements to macro aggregates. The theoretical side of this is imo not so interesting. The neoclassical approach is even a trainwreck – it does not have any kind of systematic overaching system like the periodic tables to give some empirical discipline to the models

      • Frank Salter
        July 16, 2018 at 7:35 pm

        “In a sense” Please explain, what sense is that?

  4. Calgacus
    July 16, 2018 at 6:54 pm

    On the first topic, the pioneering hobo sociologist Nels Anderson’s The Hobo: The Sociology of the Homeless Man, The Right to Work and other works are places to start.

    On the second topic, the following from Abba Lerner, who elsewhere [I don’t recall] speaks of the disappearance of hobos, accurately predicted the disappearance of servants in a full employment economy in his essay in Abba Lerner, Frank Graham- Planning & Paying for Full Employment- Princeton (1946)

    There are a number of minor discomforts which will arise in a full employment economy. It will not be so easy to get men to sweep the streets in case of sudden snow-fall. . . . Employers and foremen may sometimes miss the servility that insecurity breeds in those that are dependent on them. They will speak of the difficulty of maintaining discipline. Servants will be hard to get. … And there will be hundreds of minor nuisances of this kind some of which we can observe around us and which we tend to blame on the war, or on reconversion, when they are really nothing but some of the concomitants of a high level of employment.

    All of these nuisances are the obverse of the benefits of full employment. No one can seriously complain about such nuisances unless he does not realize that he is really asking for others to be servile to him in a manner that is incompatible with our alleged belief in the principle of the equality of man. The abolition of the slavery of unemployment necessarily carries away with it some of the pleasantness and comforts that others have derived from such slavery. To make the complainant ashamed it it is only necessary to point out what he is asking of others.

  5. Helen Sakho
    July 17, 2018 at 1:21 am

    Dear Merijn Knibbe,
    Both topics are interesting and worthwhile to undertake of course.
    What would, in my view, be even more pertinent right now is to link, for example, the second topic to today’s labour markets. Ample evidence exists to indicate that the same labour implications are still fully operational and need be explained through the same processes only in much more polarised markets.
    Such a study can be based on a detailed enough investigation of private home care on the one hand, and domestic care secured by mostly imported cheap labour on the other. The picture is global. The class disparity is enormous, as are the consequences for all concerned.
    If you wish, I would gladly supply you, or your students, with ample evidence of both, in both the US and in Europe. Other already published works by me and other academics are a starting point, but the candidate would clearly have to undertake further work. I would be very glad to co-operate to share a number of case studies that I have not yet had time to write up myself. Let me know, and if there are other colleagues who wish to pursue this kind of work or pass it on to a potential candidate, do let me know also.

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