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!
Notes On Liberty 
[…] 1. Does adjusting for household production make the great stagnation worse yet? […]
[…] 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 … – Read full story at Hacker News […]
Umm, no, not really. It appears to me (for all the importance of that, not much) that there’s too eager a leap from fewer household production hours (entirely true) to lower household production or output. And it’s that second bit which would need, at the very least, more examination.
So, for example, household washing used to take an entire day a week. That’s without even the ironing. The washing machine has definitely lowered that labour input, no doubt about it. But it’s difficult to see that it has lowered household production of clean clothes. Far from it in fact, we tend to wash clothes more often today than then (It would be most odd today to make shorts with detatchable cuffs and collars so that they could be washed more often than the shirt itself, not back then it wasn’t)
Similarly vacuum cleaners and carpet beating, white stoves instead of having to lamp black then, and on and on. In at least part of household production (leave children aside here) we would probably argue that productivity has risen immensely though automation, possibly to the point that we’re getting more output despite the dramatic decline in hours.
Certainly clothes and houses are cleaner now than then at less effort, arguably food is better (certainly more varied) at much less effort and so on.
I don’t think it’s a slam dunk that household production has fallen at all. Sure, it might be true, but I’m unconvinced.
“shorts”
Shirts, of course.
I am quite willing to entertain the possibility that the household output value has increased, but did it increase at the same pace as accounted-output? If so, the path of growth is probably slower (market and household). The point is that there is a “net” effect to be considered.
However, I prefer shorts 😉
Reblogged this on Utopia – you are standing in it!.
“However, when they were at-home, these married women produced something … When they entered the labor force, they produced less of that something.”
Or perhaps they produced the same amount of that something at much high efficiency due to the proliferation of modern time-saving appliances. In fact, one might view the entire increase in female participation in the (measured) labor force as being driven by the ability to run a household using considerably less labor.
Hi from Sweden.
In Sweden women produced a lot of something before. Cloth, repair of cloth, home made food,
bread, preserved food for the winter, picking berrys and mushroms. Autumn was a busy time.
[…] I am still writing and for which I need more data, notably to replicate something like this paper) regarding the role of the unmeasured household economy. There, I argued that the shift of women from the household to the market over-measures the actual […]
[…] in the relative size of these sectors alter growth rates by substantial margins. Another example, which I discussed in this blog post based on articles in the Review of Income and Wealth, is that when you make the adjustment over four decades of available […]
[…] Did the Thirty Glorious Years actually exist? Vincent Geloso, NOL […]
[…] years back takes us to 1969. The postwar boom has faded. The so-called Thirty Glorious Years are almost over. The Cold War against the Soviets will be fought for another […]