Japan’s Best Official Economists: Clueless on How to Restart Japan
|December 24, 2013||Posted by Nicholas Rosen under Editorials|
There’s an article in The Wall Street Journal (Monday, September 30, 2013, p. A18) about Japan’s attempt to regulate its economy, titled, “Japan to Pair Tax Rise and Stimulus.” In a saner world, it wouldn’t be an article in the WSJ; it would be an article in The Onion.
Japan has a high and increasing national debt, thanks largely to its attempts to “stimulate” its way out of the lost decade following the bursting of its real estate bubble. The Japanese, whatever their faults, seem at least to see a little further ahead than some of our politicians, so they’re trying to raise taxes to stop going further into debt, which may be a defensible policy. But they’re doing it by raising the sales tax from 5% to 8%, which is an indefensible idea (note page 4 of Professor Gaffney’s essay for a paragraph about Japan).
Apparently someone is bright enough to grasp that raising the sales tax is the next worst thing to running the economy through with a naginata, so they’re trying to counteract the damage by stimulating — or I should say, “stimulating” — the economy. And according to Keynesian doctrine, the way to do this is by government spending. The government will hire people to repair the infrastructure or something, these people will spend their money to create jobs for more people, and the entire economy will flourish.
If it could work, it would have done so by now; the Keynesian view of stimulus neglects the problem that the money which the government spends to stimulate has to come out of someone’s pocket, one way or another, so there is an anti-stimulus to match the stimulus.
You might think that anyone outside an Onion story would be able to see this. You might think that people would react to this proposal for stimulus the way they would react to a proposal to make a blanket longer by cutting strips off the top and sewing them to the bottom to keep a sleeper’s toes warm.
Failing that, you might think that Japan’s economy were under the management of dull-witted children or certifiable lunatics. Or if you are more humble, you might think that Japan’s best economists — the learned men running the Finance Ministry and the Bank of Japan — must possess a superior understanding of economic questions that you and I lack.
But no. These are intelligent, educated men, who are presumably capable of good management in their private affairs. And yet, they do not possess a genuinely superior knowledge of economics, as witness the fact that for year after year, their attempts to restore prosperity have not worked.
They are acting like imbeciles because they have been miseducated into believing grossly mistaken ideas about how economies work, what causes unemployment and depressions, and how to cure them. The extensive educations which they may well possess in some respects are rendered largely worthless by their basic ignorance of land rent and the real causes of speculative bubbles and subsequent crashes. Being an expert in Keynesian economics is like being an authority on phlogiston chemistry or the Ptolemaic system of epicycles.
To avoid seeing more Onion like article in the serious financial press, we have a simple but immense and difficult task before us: We need to educate the world about Georgist economics.