Monday, November 17, 2014

Japan's Economy and Defying Expectations

Greetings,
Sometimes defying expectations can be a good thing.  In the case of the Japanese economy, things are getting a little rough and it appears that Japan is heading into recession:
http://www.nytimes.com/2014/11/17/business/international/defying-expectations-japans-economy-shrinks-further.html?_r=0

According to the Times article, Japan is facing its fourth recession since 2008.  Ouch!  Part of the problem is that Japan is trying to get away from deflation.  At first glance, lower prices might seem like a good thing.  Where things get tricky is if the promise of lower future prices results in decreased demand today.  When people postpone purchases, it tends to slow down consumer spending.  As Steven Perlberg notes in Business Insider, "Why buy that F-150 today when it will be effectively 'cheaper' next week?":
http://www.businessinsider.com/why-deflation-is-a-bad-thing-2013-11

Nobel Prize winning economist Paul Krugman also noted many drawbacks with deflation:
http://krugman.blogs.nytimes.com/2010/08/02/why-is-deflation-bad/

When evaluating the Japanese economy (or any country's economic situation for that matter), there are usually multiple factors at work.  While deflation is one aspect that has had an impact on the Japanese economy, there are many factors to consider.  And it would be quite a long blog post to delve into all the factors at work.  Indeed, it would be enough material to write a book.  Speaking of which, if you're interested in learning more about the Japanese economy, we have a variety of ebooks on the subject at Old Westbury Library including:

"Japan's Bubble, Deflation, and Long-Term Stagnation"  by Hamada, Kashyap, and Weinstein (MIT Press)

"The Fable of Keiretsu: Urban Legends of the Japanese Economy" by Miwa and Ramseyer (University of Chicago Press)

"The Japanese Economy" by Flath (Oxford University Press)

If you'd rather focus on a less dry aspect of the Japanese economy, Old Westbury Library has you covered.  Check out: "Brewed in Japan: The Evolution of the Japanese Beer Industry" by Alexander (University of British Columbia Press)

Monday, November 03, 2014

Minimum Wage, Revisited

Greetings,
In August, I blogged about Russell Simmons's ideas on raising the minimum wage.  Fast forward a few months later and minimum wage increases are on the ballot in a number of places.  According to this article, they appear to be quite popular in Arkansas, Nebraska, South Dakota, and San Francisco:
http://www.nytimes.com/2014/11/04/business/minimum-wage-state-referendums.html?hp&action=click&pgtype=Homepage&module=a-lede-package-region&region=top-news&WT.nav=top-news&_r=0

Whether or not raising the minimum wage makes good economic sense is something that economists continue to debate.  That being said, Russell Simmons was on to something.  Several states and municipalities have also taken note and added ballot measures.  Further, this is a different approach than raising the Federal minimum wage.  Instead of looking to Washington, DC to increase the minimum wage, this focus is on local and state-wide initiatives.  With these votes, it's a different sort of deal than a politician's campaign promise to raise the minimum wage which may or may not come to fruition.  It's up to the voters to decide on the ballot.  On Election Day, we'll see how it all sugars out.