Keynesian Stimulus and Japan's Lost Decade

Two historical examples of fiscal policies that Keynesians like to point out are the US in the 30s and Japan in the 90s.  I have already looked at the 30s, and the numbers did not suggest a Keynesian conclusion to me.  I am speaking here of the Keynesian theory of stimulus spending. 

Today I will look at the numbers for Japan in the lost decade, supposed to be almost exactly the 1990s.

The chart above shows Japan's government consumption, both in absolute terms and as a percentage of the economy.  All numbers are from stats.oecd.org.  The prime minister at the time purported to be Keynesian, and as the cart shows, they did increase spending significantly throughout the decade.  Total spending, in inflation-adjusted Yen, grew by about 50% during the decade.  As a percentage of the economy, government grew from 31% to 39.5%, spiking at 43% during the 1997-98 Asian crisis.  I am sure some Keynesians will say that no single year constitute a model Keynesian stimulus, but I have heard some of them claim that the Japanese economy supposedly got better when the government was keeping up spending.  Let us look at this claim next.

This chart shows GDP growth; unemployment; government consumption, change over year earlier; and taxes, percent of GDP, change from year earlier.  These measures are all in percent, so that enables us to compare them in one chart.

One thing to be careful about is that the slope at any given segment matters less than the distance from 0.  The last good year of the Japanese economy, 1989, is included, and the GDP line drops dramatically from there.  That just means the economy stopped growing, it did not actually shrink until the 97/98 crisis. 

Taxes are included in the chart, though it stays within 1 percent of change over the previous year (except for 1992).  Apparently the Japanese government did not pursue tax relief or revenue-based austerity over the period.  Without making a comment about the effectiveness of that, it is a bit fortunate from an examination standpoint, because it is then an important variable that is held almost constant.

I make three observations from this chart:

1. Government spending growth does seem to lead to some nominal GDP growth.  It is not a silver bullet: it did not seem to help much in 89-90, where I would have expected stimulus to be most effective, from what the Keynesians tell me.  Neither is it required: Japan's economy had some of its best years from 2004-2007, though government spending levelled off.

2. Japan's attempt at stimulus was enourmously costly, yet its best year gave the Japanese a paltry 2.8% economic growth.  For this, the Japanese government grew permanently from ~30% of GDP to ~40% of GDP, and its debt to GDP ratio went from ~20% to ~80%.  Despite all this increase in spending, the economy never did as well as it had done in the 80s, and neither did it achieve consistent growth.

3. Most importantly, the unemployment rate did worst during years with the most spending.  Unemployment rose steadily during the 94-95 years, when the initial stimulus spending kicked in.  It then levelled off when spending slowed to a more reasonable 1% in 97.  As the 98-99 stimulus spending took off, unemployment went up with it.  Not until spending growth slowed after 2003 did unemployment start to come down, slowly. 

Even if unemployment had stayed neutral, the tradeoffs seems dubious, at best.  With the third point above, one of the best arguments normally presented in favor of stimulus spending seems to be exactly on its head.  If we take the Japanese example as a case in point, stimulus spending is a terrible idea.  Of course, it is possible that this period is not a good example of stimulus spending, but then Keynesians need to stop using it as their poster boy.

Hurry Up and Enjoy Life

I was driving in San Francisco the other day and came up on a lady who was driving badly: a good 10 MPH below the prevailing speed and with her signal persistently flashing.  I could tell by the hesitant maneuvers of those around her that I was not the only one who found it troubling.  She then made a terrible lane change (see option #2).  I was already a bit impatient from other bad drivers that day and could not resist the temptation to honk at her when I was finally able to get past.

A couple of lights later we were backed up.  She caught up with me and pulled up alongside me with her window rolled down.  I rolled down mine as well so she could say her piece.  She asked me -- politely, to her credit -- to slow down and enjoy life more.  Somehow, capitalism was also involved.  I'm fairly certain bad driving and bad logic does not always go together, but I do see a pattern where those defending bad driving does so with poor logic. 

I have heard and read this many times, verbally, in shows, in magazines, etc: in order to enjoy life, it is necessary to go through it slowly.  I fail to understand this premise.  How is speed related to enjoyment, in either direction?  It is true that some experiences are best at a slow pace: enjoying a well-prepared meal, spending a quiet evening with good friends, watching a whale migrating from a lazy sailboat.  Not all of life consists of these types of scenarios, though.  Many other pleasures are best with a potent mix of endorphins and adrenalin: winning a race, watching an intense movie or play, sex. 

Further, I am curious about a philosophy that says optimizing your waiting time at red lights is something to strive for.  Sure, there is a speed in the fast end that increases risk and aggravation, but there is also a speed in the low end that makes it seem like you are driving in slow motion and are getting nowhere fast.  The trouble is that these brackets are different for all of us.  The attentive drivers and the polite ones understand this and act accordingly.  A poor one invents philosophical excuses for being a nuisance.

Personally, I make no excuses for aiming to minimize the cost, in time and pain, of my transportation.  Anticipation accentuates pleasure, but efficiency increases its volume.

Spring in Denmark

It is the first spring I have experienced in Denmark in many years.  The sun is shining, the birds are singing, the flowers are blooming, and the ducklings are out.  I had forgotten how nice a time it can be here.

Buffy the Vampire Slayer: The Perennially Impressive Show

Buffy the Vampire Slayer is not only my favorite show, but is so with an impressive margin.  I am stating it that way to emphasize how great Buffy is, not to denigrate other great shows, of which there are plenty.

One reason Buffy is head and shoulders above others is the many dimensions in which it offers entertainment: drama, humor, suspense, action.  It has elements from several themes, including horror and science-fiction.  Because of this broad coverage, I have heard many times people struggling with placing Buffy in a genre.  I do not find that hard at all: I think Buffy is clearly Fantasy.  It contains all the hallmarks of Fantasy, though its setting is contemporary.

Buffy's greatest strength is that despite some of the show's corny fantasy aspects, the drama is incredibly real.  Buffy has a family, she has friends and she has lovers, and they are all life-like, fallible people.  They lie to each other and let each other down and support each other and lift each other up in ways that are more literary than soap or genre.  I find it supremely ironic, but one of the most supernatural shows that have aired on TV contains some of the most plausible character-driven drama.

I recently watched the fourth season (for who knows which time), and the first episode, The Freshman, is a good case in point.  In it, Buffy struggles to adjust to campus life.  The episode serves as a good miniature of the show as a whole.  While Buffy has to deal with real-life struggles, she is also, for the first time since facing the Master in the first season, bested by vampires.  The metaphoric parallels between her real-life struggles and her combats against demonic villains are sometimes pretty thin, but they still work.

I believe all great shows must have great writers.  Buffy gave me a reverse observation of this.  After I had seen it once or twice, the episode "Inca Mummy Girl" became almost boring for me.  I checked the writer to see which other shows he had done and whether I found the same lack of quality.  It turned out the writer had only done that one Buffy episode.  It is not badly written, but it lacks the quirky humor and the edginess of the rest of the show.

I think the best season is the third one, and I may write about that later if the fancy strikes me.  Like most shows, it is best if watched from the very beginning, though.

The Most Important Supreme Court Case in 50 Years

This week, the Supreme Court is hearing arguments about the constitionality of ObamaCare.  Tim Sandefur calls it the most important case in 50 years.  I agree with Sandefur that the case is extremely important.  The issue of whether the insurance mandate is a good thing or not aside, this will be a landmark case that determines the scope of what congress can and cannot regulate.  It seems with the Raich and Wickard cases, this is already settled, but ObamaCare goes quite a bit further by regulating not just participation in a market, but even non-participation. 

The case has been heard at several lower courts, with mixed results.  Judge Vinson of the District Court in Northern Florida ruled against ObamaCare.  If you are interested in the case at all, and the legal arguments and precedents bearing on it, Vinson's ruling is a great read, regardless what you think of his conclusion.  He goes over the entire background and the legal arguments from both sides.  The text as linked is heavy with quotes, footnotes and parenthesis, which makes it a little hard to read, but it is worth it.  Here is a quote:

It would be a radical departure from existing case law to hold that Congresscan regulate inactivity under the Commerce Clause. If it has the power to compel an otherwise passive individual into a commercial transaction with a third partymerely by asserting --- as was done in the Act --- that compelling the actual transaction is itself “commercial and economic in nature, and substantially affects interstate commerce”, it is not hyperbolizing to suggest that Congress could do almost anything it wanted. It is difficult to imagine that a nation which began, at least in part, as the result of opposition to a British mandate giving the East India Company a monopoly and imposing a nominal tax on all tea sold in America would have set out to create a government with the power to force people to buy tea in the first place. If Congress can penalize a passive individual for failing to engage in commerce, the enumeration of powers in the Constitution would have been in vain for it would be “difficult to perceive any limitation on federal power”[Lopez, supra, 514 U.S. at 564], and we would have a Constitution in name only.Surely this is not what the Founding Fathers could have intended.

Year of the Google Dragon

Happy Chinese New Year!  I believe today is the official new years day and according to the Chinese zodiac, 2012 will be the year of the dragon.  For me, 2011 was the year of the Google dragon, so it is a bit serendipitous.  It was not only the year Android and Chrome ascended to market prominence, it was also the year I got disenchanted.  (I may conflate a bit of history.  Do not take me too literally here).

Microsoft is the software company whose products I use the most.  Comparing Google to them, over any given period of sufficient length, say, 6 months, I run into about as many Google bugs as Microsoft bugs.  At the conscious level, I feel this is being kind to Google, but I also realize that I have used some Microsoft products for many years and they probably have some quirks I work around without thinking about it.  The complexity of the Microsoft functionality I use is several orders of magnitude more than the Google functionality I use.  By the time I booted my system and started my browser, I have already run millions of lines of code.  During most weeks I will use a whole slew of Microsoft products, such as most of the Office suite, Visual Studio, Visio, SQL Server and other back-office products, not to mention several versions of Windows.  (I understand that Google does have an impressive infrastructure, in both the logical and the physical sense, to serve up web pages, fast, to gazillions of users.)

I love my Microsoft products and could write other blog posts about why, but today I have been thinking more about Google.  I keep running into annoying bugs.  The worst is when they lose my blog post, and that only happens when I have been working for hours on one.  I cannot remember the last time a Microsoft product lost my data. 

It gets worse.  I develop browser extensions for a living (OK, that is an exaggeration, but it is part of my job).  In order to test these, I load various browser configurations and then hammer on it with automated tests until it crashes, or several days pass, whichever occurs first.  I can tell you that with IE8 at least, the naked browser does not crash.  (Earlier versions were also pretty solid, but they did have some CPU issues.)  Once I start loading other browser extensions, such as the Google toolbar, the Yahoo toolbar, the Flash plugin, etc, that is when the browser starts to crash.  Of these, the Google toolbar is by far the worst.  The time to live goes from open-ended to hours, singlehanded courtesy of the Google extension. 

Add to this that you have to be on your toes something fierce if you do not want the Google toolbar.  That thing spreads like a virus.  I have on a couple of occasions gotten it installed with some other software, probably overlooking some crucial checkbox, and have had to uninstall it. 

I am a firm believer in Heinlein's Razor: Cock-up before conspiracy. I am fairly certain no sinister plan was in play here.  It would have been a pretty neat trick, though: develop an unstable extension to your competitor's product, propagate it aggressively using any means available, then ship your own product and laud its stability. 

I could say more, but I am going to publish my post before Blogger loses it.

Unintentionally Dislikeable Characters

I watched the first season of Damages, the 2007 show with Glenn Close and Rose Byrne. The show is outstanding and now one of my all-time favorites.  I wished they had stuck to legal and personal drama.  It would have made the show more realistic and there is plenty of tension and suspense to be had using that theme.  They added shocking violence, including several murders and attempted murders, which I thought was gratuitous.  That said, I understand violence sells and it still comes out as a great show to watch.  It is entertaining and the travails Ellen (Byrne's character) has to go through are real and poignant.

One thing I like in particular is that there are no good guys or gals.  There are gradations, of course.  Not all the characters are murderous villains.  There are just no obvious heroes.  Ellen Parsons comes the closest, but even with her, it is clear from the beginning that she is driven mostly by ambition.  There are some villains, but they are not obvious.  Frobisher (Ted Danson), the former CEO defending himself against Ellen's team, is the antagonist, and he is clearly of dubious moral character.  Still, some scenes elicit sympathy even for him, and it struck me that at the end of the season, it has not been revealed to the audience for a fact that he is guilty of all the actions charged.   It is also clear that Hewes (Close's character) is equally as heinous as Frobisher.

The character I disliked the most was Katie, Ellen's potential sister-in-law.  She is initially pegged as a witness against Frobisher.  I found her to be void of redeeming characteristics and full of despicable ones.  She is self-centered, self-righteous, conniving, lying, and vindictive.  She perjures herself out of spite, committing a felony lying about a man because she does not like him.  (There is some indication she is a good cook, which would be a positive, but since that is a skill and not a character trait, I am not willing to let that exonerate her, my high regard for the cooking profession not-withstanding).  I doubt it was intentional, but as written, Katie comes out worse than Frobisher himself.

This reminded me of another character partially fitting the same mold.  In Dollhouse, the main character is Echo, the most talented doll in the house.  Echo's real character, before she entered the Dollhouse and became a programmable doll, is Caroline.  I like Echo as a character and several early episodes piques the interest.  However, Caroline is naive, self-righteous and angry.  That is a dangerous combination.  I did not see a single scene that made Caroline come out in a good light, only as a rebellious, ditzy youth on a destructive bent.  To be sure, she did not have as many bad traits as Katie, but her personality makeup was more scary.

Again, I am doubtful that either of these characters were meant to be so dislikeable.  The shows work anyway.  In Katie's case, because she is not a main character and because everybody in Damages are so shady that she does not stand out so much.  In Caroline's case, because though Echo is a main character, Caroline is not and we see very little of her.