The importance of multiple equilibria for economic policy in Jan Tinbergen’s early works

Abstract

This article provides a comprehensive view of Tinbergen’s macrodynamic models developed during the 1930s and early 1940s, showing how the economist’s concerns evolved from problems of instability to the idea of reaching higher positions of equilibria. Tinbergen built these ideas in the framework of nonlinear models, which he used to shed a new light on several policy problems: wage changes, government expenditure and its relation to pump-priming, and the regulation of purchasing power. This work on multiple equilibria was complementary to the macroeconometric models developed in the late 1930s, where linearity was justified by the assumption of small shocks.