Okay, I am going for a flashy title here. I should have asked whether the Thirty Glorious were as glorious as they are meant to be. This is a question that matters in debates about both inequality and the often-bemoaned growth slowdown.
In the past (say before 1950), labor force participation was quite low (relative to today) by virtue of large family sizes and most married women not working. However, when they were at-home, these married women produced something. That something was simply not included in our national accounts. When they entered the labor force, they produced less of that something. However, since it had never been measured, we never subtracted that something from the actual output generated from their increased participation.
Even before the 1950s, this mattered considerably as growth tended to be heavily underestimated (by 0.3 percentage points from 1870 to 1890, overestimated by 0.38 points from 1890 to 1910 and by 0.06 percentage points from 1910 to 1930).This was at a time when variations between the household economy and the market economy were small. Imagine the importance of overestimates since the 1950s! In a short comment reply to Emily Skarbek last year, I pointed out that adjusting for the size of the household economy meant that 1/7th of Canada’s economic growth from 1960 to 1997 (see image below and this was before one additional surge of labor participation resulting from daycare and unemployment policy reforms).
Recently, I found an old book in my library. It is Kenneth Boulding’s Structure of a Modern Economy. In it, he makes this exact same argument. Basically, actual output today is overestimated relative to output in the past. And there are many, many, many other articles on this. In all cases, the rate of growth is heavily reduced. In a way, that means that the Thirty Glorious are less glorious (which makes the growth stagnation argument seem more defensible).
And you know what? This is consistent with attempts to correct inequality measures. Most of the attempts made to correct inequality for age, number of workers per household, the size of household and prices, they generally increase very modestly the income growth of the bottom centiles and decrease appreciably the actual level of growth of incomes at the top. While these corrections reduce the level of inequality (and the growth thereof), they also reduce the growth rate of incomes.
Is it possible that the correction to make inequality measures more comparable over time are allow us to see the point about overestimating growth since the 1950s? It means that the Thirty Glorious aren’t that glorious (at the very least, they’re overestimated). It also means that someone who could follow some of the proposed corrections to national income accounts (generally, the best source for this is the Review of Income and Wealth) for every year since 1929 (starting date of the US national accounts which could be extended by using Kuznets’s national income measures from 1913 to 1929) could propose the “actual output” of the country and see how glorious the 1945-1975 period was. That is the work of economic historians to do!