Tuesday, March 1, 2011

A Modest Policy Prescription

Economics has its limits, as this man would be the first to tell you.  He is Bank of Japan Governor Masaaki Shirakawa (Ben Bernanke's Japanese counterpart), and he's out to voice frustration with simplistic criticism of his country's relatively stagnant economic performance.  Since Japan's halcyon days of the 1980's, it has tried nearly everything to arrest a slide in its consumer prices, and stock market performance, all to no avail.  For what it's worth, the US is recycling a number of Shirakawa's innovative ideas, e.g., quantitative easing.  Japan, nevertheless, continues to experience a "decrease in economic metabolism."   That doesn't sound good.  

What especially caught Noman's eye was one cause mentioned of the persistent deflation: declining population.  According to Governor Shirakawa, "Japanese businesses and households have become so discouraged about the economy's long-term growth prospects, largely because of the nation's declining population and slower productivity growth, that they keep reigning in their spending."  Thus, the Japanese could grow out of their economic malaise by simply procreating more.  Noman wonders whey they don't.  It's funny how in the long run, the natural thing to do is also the intelligent thing to do.  What's even funnier--"curiouser" might be a better word--is that people who see the relation in the ecological context, refuse to see it in the demographic context.

The article notes that the BOJ can't fix these problems on its own, even though it is rolling out programs Governor Shirakawa thinks might help.  At the risk of offending the good people who follow this blog, Noman can't resist suggesting one such program: cash for condoms.

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