Fads and Trends in OECD Economic Thinking on Denmark: A Word-Frequency Approach

As the post-2008 macroeconomic debate has reminded us, economics is not a cumulative science moving ever closer to truth. The fundamental ideas that shape economic arguments are prone to sporadic fads and more persistent trends. I use the frequency of certain words in the OECD Economic Surveys of Denmark to gain quantitative perspective on how policy relevant ideas in economics change. In the 1960s and 1970s, for example, “demand management” and “incomes policy” enjoyed high frequency in the Surveys, but they had all but vanished by 1990. In the 1990s the natural rate hypothesis had replaced the Keynesian framework, and “structural unemployment” suddenly became much more frequent. Special focus was placed on the incentive effects on labor supply of generous unemployment benefits and high marginal income taxes. Prior to 1990 “incentives” was little used, but its usage rose greatly thereafter. In the late 1990s “structural reform” became very fashionable. After the 2008 financial crisis the Surveys began to talk of “macroprudential” policies. Like incomes policy, macroprudential policy is premised on the belief that policymakers should be ready to intervene to curb what is perceived as unsustainable price developments. In this respect the Surveys have come full circle.