Hacker News new | past | comments | ask | show | jobs | submit login

Those who think Japan is unique in its condition and/or that the answer to its problems is more of the same old "advice" as proffered by standard issue economists and business types might profit from Robert Gordon's recently published "American Growth". (paper version: http://www.nber.org/papers/w18315.pdf) At least, it can offer a different, longer-term perspective on the issues.

It's not impossible that we will look back in 20 years and see Japan not as some sort of failure but simply as the first society that had to learn to live without growth.




But the growth problems of Japan is largely an illusion and myth caused by population decline. Growth per capita in Japan has been completely normal in the supposed terrible years. It is the population decline which causes the overall GDP growth to look anemic.

Naturally it is growth per capita which matters as this is what improves the living conditions of people. There are many countries with high GDP growth but which also has higher population growth causing everybody actually to get poorer. That is not something anybody should want to emulate.

But of course low total GDP growth looks bad to business because the markets for their goods does not expand.


What time period are you talking about? In 1991, per capita GDP in US and Japan were both ~$32k in 2005 USD. But now it's ~$38k for Japan and $47k for US.

http://www.tradingeconomics.com/united-states/gdp-per-capita

http://www.tradingeconomics.com/japan/gdp-per-capita


Or, looking at even tighter bounds of GDP per working-age person, today the US is at ~$82k/year, and Japan ~$64k/year -- a slightly larger gap. I prefer this metric when talking about "the economy" in the sense that most people interact with it.


Per capita statistics encourage a false assumption of sharing. It isn't measuring what most people think it is.


I was responding to this claim by jernfrost: "Growth per capita in Japan has been completely normal in the supposed terrible years. It is the population decline which causes the overall GDP growth to look anemic."


Household disposable income looks normal enough

https://data.oecd.org/hha/household-disposable-income.htm


Zoom out to include 1995 (the limits of Japanese data for your source). Japan is mid-tier for growth in household disposable income 2010-2014, but consistently among the very slowest growing countries from 1995-2009. This is a difference of 1% average growth vs. 3% average growth across 15 years. That is a huge difference (16% vs. 56% cumulative growth), and very consistent with my claims about the stark disparity between the US and Japan in per capita GDP today.


"A look at the underlying accounting, however, suggests that, far from underperforming, Japan may have outperformed. For a start, in a little noticed change, United States statisticians in the 1980s embarked on an increasingly aggressive use of the so-called hedonic method of adjusting for inflation, an approach that in the view of many experts artificially boosts a nation’s apparent growth rate.

http://www.nytimes.com/2012/01/08/opinion/sunday/the-true-st...

Japan was the "bad guy" in 1990, they had a lot incentive to downplay their position in subsequent years.

[ dang, is that you? chill, dude ]


the only illusion is that they have a good fiscal policy and are willing to change. they got in this mess by having one of the least transparent lending systems, where the government "chose" winners or hid things by lending to preferred groups; does this remind you of China at all? Hence they could fake things for a while.

Eventually that large budget deficit versus GDP (nearly triple the US) combined over the years with even more taxation just sucks the life out of an economy. Throw in a shrinking population and an adverse look at immigrants and its not fun.

So you have their central bank playing with the quantitative easing game for nearly ten years and not getting anywhere. This is mostly because government is borrowing all the money leaving corporate investment to occur mostly as a product of spending their own profits.

Japan is simply proof government cannot buy its way out of a problem, they have been trying for years. Classic money trap that certain economist love to ignore or worse claim the opposite by saying if they just went further, spent more... etc etc.

Oh well, China is similar but the US is too, the difference is the US has quite a bit of immigration to take jobs the locals won't


Population decline is here or in the near future, depending on where you stand on the planet.

Overall GDP growth is needed because it's the fundamental assumption behind both government and private debt.

The US has both had population growth and anemic growth since 2008. So it's not all population bust.


>But the growth problems of Japan is largely an illusion and myth caused by population decline.

The piece that many miss when discussing Japan's high quality of life despite lack of growth is that in order to maintain 0% growth over the last 20 years, the central government had to borrow and spend nearly 10% of GDP every single year.


They borrowed it mostly from themselves though which makes it more complicated and much less of a problem than it might at first appear.


I doubt the average Japanese saver would see it that way.

I agree, we're not talking about an external default, but monetization is still likely to severely impact the wealth of the middle class.


Monetization means inflation, right? That doesn't seem to be happening in Japan. In fact, it's almost the opposite of negative interest rates.


Compound interest isn't a physical system law though, its a human law. Just because it has worked previously because you could continue to extract productivity from labor does not mean that rule will continue.

What if capital loses its value and no longer earns interest? You can't say its not happening, when central banks are charging interest on capital.


I'm not entirely sure what you're referring to, but to clarify, I was discussing the potential impact of sustained deficit monetization on Japan's middle class savers via its effects on the monetary base and inflation.


My understanding of your comment was you pointing out the average Japanese saver would be upset about their savings rate being non-existent due to the debt owed to them being internal (and therefore, dependent on central bank monetary policy). My comment insinuated that Japanese savers may have no other options other than an insignificant savings rate due to internal monetary policy and a bleak worldwide investing landscape.

I should've expounded! My apologies!


>> It's not impossible that we will look back in 20 years and see Japan not as some sort of failure but simply as the first society that had to learn to live without growth.

They still haven't learned, they're trying really really hard to force growth. Negative interest rates can be seen as a tax on inactivity, and while it's been talked about in the US, I think it comes too close to taxing assets for the rich to embrace it.


> I think it comes too close to taxing assets for the rich to embrace it.

What's wrong with taxing assets (wealth)? I don't know the full economic implications, but I think it may be more fair than taxing income. Wealth is a much better measure of a person's financial strength. Consider:

* Because we tax income, a person with $1 billion in assets who makes $100,000 pays less tax than a person with $0 assets and makes $150,000.

* Because we tax income, a person who loses all their assets in the housing collapse but earns $100,000 pays more tax than the person whose assets appreciate $1 million but earns only $50,000 in income.

* If we tax wealth, future taxes are much more predictable, enabling more efficient long-term investment and planning. I could make a pretty good guess about what my tax bill will be next year, 5 years from now, etc. The billionaire can make much longer-term projections.

As a rough estimate of the wealth tax rate: One estimate of total wealth in the US is $80 trillion and the federal government takes in ~$3 trillion in revenue. By those numbers, the wealth tax rate would be 3.75% for the average American, if all that revenue were replaced by a wealth tax.


So, in essence, we punish responsible people who save for retirement. No thanks.

Also, one unintended consequence of this policy would be that the MINIMUM interest rate you would have to pay would be 3.75% because below that it makes more sense to just buy a gold bar and bury it in the backyard vs. lend it out.

Basically, the way you can imagine the impact of that is that your mortgage interest would (today) essentially double. Again, no thanks.


Generally wealth taxes (and many other taxes) will not apply to retirement funds (when said funds are in an account specifically for those)[1]

[1] http://guides.wsj.com/personal-finance/retirement/what-is-a-...


thats great, but 1) a 401k is not sufficient for retirement and 2) the other caveat (adding 3.25% to any interest rate) is far worse.


> the MINIMUM interest rate you would have to pay would be 3.75% because below that it makes more sense to just buy a gold bar and bury it in the backyard vs. lend it out.

I don't quite follow. I have to pay a tax of 3.75% of the gold bar's value whether I keep it or lend it. Even if I only can lend it at 2%, that's still better than nothing.


He's suggesting that you avoid taxes by hiding your assets.


It is used in practice in some countries, although mostly at a rate that's a fraction of a percent and excluding some lower tier.

https://en.wikipedia.org/wiki/Wealth_tax#Current_examples


But wealth isn't just a pile of cash under someone's bed. It's usually held as assets: homes, securities, land, etc.

Do you really want to require someone to sell 3.75% of their stake in a start-up every year so they can pay the taxes on it?


> Do you really want to require someone to sell 3.75% of their stake in a start-up every year so they can pay the taxes on it?

Yes. That's one of the many expected results.


That's a good point, about liquidity. However, not all assets are as illiquid as a stake in a startup; many people have cash, stocks in public companies, etc. Also, they can plan ahead: 'I'll need around $x next year for taxes'.


Eh, it can be a lien, payable upon transfer or death of the owner.


An inheritance tax?


i can't quite tell if this comment is assuming that everyone would agree that inheritance taxes are bad. i certainly would disagree with that assumption. i think inheritance taxes, if implemented properly, could be a great thing, both in terms of providing government revenue and in terms of creating a level playing field for society.

i don't think that a person should be able to give things, after their death, tax free, to their children, with no limitations. i don't think the right to give gifts as you please trumps the right of newborns to a fairer playing field. i think both rights deserve consideration, but i don't think the former is anywhere near absolute. kids should have to earn a living, and shouldn't get huge financial advantages solely because of who they're born to.

besides, if you transfer gifts while you're alive, you're not subject to such high taxes, right? and only gifts over a certain threshold from person to person get taxed anyway, right? if you don't trust your kids to not take the money and run while you're alive, maybe they don't deserve it. i don't think society gets to let you have your cake and eat it too, in terms of both passing on wealth through your bloodline and staying secure yourself. i understand that sort of lineage building is a pretty basic human desire, but there are lots of basic human desires that society doesn't indulge, let alone bankroll.

also, it's not like steep inheritance taxes kick in unless the inheritance is of a decent size.

in the spirit of full disclosure, i don't expect to get any sort of appreciable inheritance, so i'm biased by not having anything to lose here. but this is a thing that seems quite obvious to me, and has seemed obvious for a long time now.


The interesting thing is that countries that lean more to the left/socialism, don't have inheritance taxes. Australia, Canada, Israel, Sweden, New Zealand, Norway all have no inheritance tax.[1]

[1] https://en.wikipedia.org/wiki/Inheritance_tax


that is interesting. i'm not sure what to make of that. i have half-formed ideas about why that might be, or why that might be ok (or not ok), and whether that sort of solution is better in principle than an inheritance tax, if one had to choose. but none of those ideas are fully baked enough to mention.

do you happen to know why that's the case? for example, that wiki entry says sweden abolished the inheritance tax in 2005 (retroactive to 2004). was the motivation that it was unnecessary? did constituents complain about its existence?


Indeed, one may view it as the central banks' wealth tax to reverse (however small) income inequality which will lead back to more growth.


Growth for the sake of growth is cancer


Exactly, you cannot have infinite growth. Consumerism and planned obsolescence depend on ever expanding growth.

Why can't we just have...enough? Why don't we create things that last decades instead of years? We can scale down, consume less, pollute less. We could have fewer factories that produce higher quality products. We could pay people more. We could have a minimum income so we'd get more art and entertainment instead of useless plastic shit.

It's not possible because our current heavily capitalistic world view is ingrained so deeply in the minds of everyone in high income countries.

I've mentioned it before, but Debt: The First 5,000 Years is an incredible book that goes into the history of money, debt and slavery. It's a life-changing book.


I concur with your description of the symptoms and your desired outcome. However, the current state of affairs has less to do with capitalism in general and more to do with the western world's addiction to short term results resulting from subscribing to Keynesian economic theory.


What does keynsiean theory have to do with building low quality goods?


I think there's a Keynsian economist who denies that the broken-window fallacy is a fallacy -- who believes that it's better to have to build and continually replace shoddy goods. Does anyone know the details on this?


There's Keynes himself on generating employment by burying money in the ground.

https://en.wikipedia.org/wiki/The_General_Theory_of_Employme...

I'm not sure if that example is exactly equivalent to breaking windows and paying people to fix them (for example, maybe it matters a great deal for his view that it's the government which is paying for the demand stimulus).


Found it: it's Paul Krugman who advocates for this -- at least if this link (disclaimer: just skimmed the article, didn't check it or its context for their political views) is accurate: http://www.economicpolicyjournal.com/2013/12/lol-more-proble...


"He who knows enough is enough will always have enough" -Lao Tzu

Yes, I would agree that implementing a basic income is not a problem of technical feasibility or lack of resources but a problem of user buy in. I've read at least half of Graeber's book Debt: The First 5000 Years, pretty interesting stuff which points out some of the false assumptions at the heart of the mainstream sociopolitical game. For anyone interested, here is the pdf version:

https://libcom.org/files/__Debt__The_First_5_000_Years.pdf

It will definitely change the way you view "debt" which is such an ambiguous term in this day and age of trillion dollar debts.


Unlimited growth in capital is impossible, see the Solow growth model taught in intermediate macro classes the world over. Growth in human capital, education, productivity and ultimately technology is much harder to analyze. On one hand, these things are subject to decay similar to capital depreciation; on the other, we've escaped every Malthusian catastrophe through innovation and technological growth.


I'd also recommend Byron Tully's _The Old Money Book_; its main advice is to have _enough_, to buy things that last decades instead of years, to scale down, consume less, pollute less... In short, I think you'll agree with what it's saying.


I agree, but we still cannot afford may things we need, such as providing adequate health care to all people.


A society without growth looks like Mandarin China. You want growth for the sake of people, to provide a rising standard of living.


The average fortune is dissipated in three generations. (The average medieval noble family was back to being commoners in three generations; and the average Chinese noble family... well, Chinese noble titles degraded by one rank every generation, and every generation had to pass the imperial examinations to get a lucrative government job, so there was a _lot_ of churn there.)

Even without growth, you have a lot of social mobility -- downwards as well as upwards.


Sure - shirtsleeves to shirtsleeves in three generations.

Surely Europe between, say 1760 and 1900 looks different than China in the same period. Perhaps 100 years from now, it will be decided that the Chinese Mandarins were right after all , but that's not consistent with how we look at the world today.

And given some of the posts I've seen here, maybe it will be like that. You didn't have to explain why growth was of value 20 years ago - outside a few odd cases, it was assumed.


It's really about being able to match growth with sustainability.


Tell that to your VCs.


We cut the VCs out then?


Do we agree on what "growth" means in this instance? Is is possible to have increased leisure/increased standard of living/increased health/decreasing cost of living over time, without having an incerase in GDP and an average positive return on capital? Or do we give up the expectancy of a better life for everyone if we give up economic growth as we know it?


> Do we agree on what "growth" means in this instance?

There's a disconnect between how economists use certain terms as well-defined technical jargon and how non-economists adopt them colloquially.[0] This leads to a lot of confusion when people try to discuss economics without understanding the precise meanings of the terms at play.

For the rest of this comment, I'm going to use the economic meaning of these terms, because there is agreement among economists about what "growth" means (though not how to accomplish it).

> Or do we give up the expectancy of a better life for everyone if we give up economic growth as we know it?

Yes, by definition. It would be impossible to have "a better life for everyone" without economic growth. "A better life for everyone" is economic growth, by definition (the creation of more value - whether tangible or not - given access to the same limited input resources).

> Is is possible to have increased leisure/increased standard of living/increased health/decreasing cost of living over time

That is considered "growth" to an economist, yes.

> without having an incerase in GDP and an average positive return on capital?

In theory, yes, but it turns out that an increase in GDP is so highly correlated with economic growth empirically, as well as so intrinsically linked from first principles, that they are usually used interchangeably in most discussions.

There are a few degenerate cases in which an increase in GDP does not actually correspond to economic growth, but they're pretty esoteric and not broadly applicable.

[0] As an analogy, imagine a bunch of non-programmers debating a CS paper about 'complexity' of an algorithm, and using the term 'complexity' to mean by their ability to understand how it works. That may be a relevant metric, and it may even be related to the technical use of the term 'complexity' (complexity class), but it's not really comparing apples to apples even though it's using the same word.


> "A better life for everyone" is economic growth, by definition (the creation of more value - whether tangible or not - given access to the same limited input resources).

But GDP only measures value that gets traded for money, not all value created. For example, if I care for my child at home for free, I'm creating value that isn't measured in the GDP. If instead I send my child to a child care facility, that is measured.


>It would be impossible to have "a better life for everyone" without economic growth. //

Can you go in to this more - for example I have a better life now on half the wage I had before, less means but more of the non-material blessings of life (time with family primarily). It seems if there was wide scale emulation of this that outputs in the [UK] financial system would decline but happiness/fulfilment would increase.

>That is considered "growth" to an economist, yes. //

Is there a name given to such metric generally? If GDP goes down but leisure time increases and leads a increase in health (and reduced health spending) then generally economists would refer to that as "economic growth"?


Great summary, thanks. This helps with my understanding.

So in other words, zero growth is very likely something we do not want, unless it happens to come with positive benefits that are currently not measured in dollars -- e.g. sufficiently strongly reduced long-term demand for fossil fuels that climate change will have a much smaller negative impact on people's well-being.


Fantastic analogy -will definitely be stealing that from you!


> Is is possible to have increased leisure/increased standard of living/increased health/decreasing cost of living over time, without having an incerase in GDP and an average positive return on capital?

My guess is a very emphatic yes. GDP goes up in a traffic jam; there's such a thing as "bad GDP" as well as "good GDP".




Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact

Search: