As you may have guessed, this is not some special problem that only Japan has. The whole world is in the middle of that same demographic transition, in more or less dramatic forms. Productivity in the richest countries is growing more slowly than it did during the decades after World War II, which means that the world as a whole is not innovating as fast as it used to. Again, fiscal stimulus is not going to fix that. Fiscal and monetary policy can smooth temporary fluctuations in output. I’m less than convinced that they can, by themselves, improve our economic capacity. Oh, you can make a huge mess with really bad decisions: deflation, hyperinflation, nationalization, confiscatory taxation, and debt crises can have nasty impacts on your economic output that will outlive your macroeconomic mistakes. But ultimately, fiscal and monetary stimulus are better tools for managing temporary crises than long-term growth problems.
Blogs I Follow
- Chang-Rae Lee’s On Such a Full Sea is a readable dystopia that really pushes the reader to think hard
- Enjoyed Cynthia Ozick’s story “The Coast of New Zealand” in The New Yorker
- Boneland by Alan Garner
- Encadrement du responsable du centre multimédia de Houndé (CMH) sur les techniques de rédaction des livres pour enfants
- Funny in Farsi by Firoozeh Dumas
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