The Bank of Japan never carried out the policies that Eliezer favored
I regard this claim as unproven. I think it’s clear the Bank of Japan (BOJ) began a new monetary policy in 2013 to greatly increase the money supply, with the intended effect to spur significant inflation. What’s unclear to me is whether this policy matched the exact prescription that Eliezer would have suggested; it seems plausible that he would say the BOJ didn’t go far enough. “They didn’t go far enough” seems a bit different than “they never tested my theory” though.
I’ll just note that the NGDP growth from 2013 to 2017 (when Inadequate Equilibria was published) was about 2% per year whereas RGDP went up by about 1% per year. This definitely makes me sympathetic to “they didn’t go far enough” but I’m still not sympathetic to “they never tested my theory” since you’d still expect some noticeable large effects from the new policy if the old monetary policy was responsible for a multi-trillion real-dollar problem.
Trillions of dollars in lost economic growth just seems like hyperbole. There’s some lost growth from stickiness and unemployment but of course the costs aren’t trillions of dollars.
I was assuming that the lack of inflation meant that they didn’t fully carry out what he had in mind. Maybe something that Eliezer, or Scott Sumner, has written would help clarify things.
It looks like Japan did loosen their monetary policy some, which could give evidence on whether or not the theory was right. But I think that would require a more in-depth analysis than what’s in this post. I don’t read the graphs as showing ‘clearly nothing changed after Abe & Kuroda’, just that there wasn’t the kind of huge improvement that hits you in the face when you look at a graph, which is what I would’ve expected from fixing a trillions-dollar mistake. If we’re looking for smaller effects, I’d want a more careful analysis rather than squinting at graphs. (And when I do squint at these graphs, I see some possible positive signs. 2013-19 real GDP growth seems better than I would’ve predicted if I had only seen the pre-Kuroda graph, and Kuroda’s first ~year is one of the better years.)
I regard this claim as unproven. I think it’s clear the Bank of Japan (BOJ) began a new monetary policy in 2013 to greatly increase the money supply, with the intended effect to spur significant inflation. What’s unclear to me is whether this policy matched the exact prescription that Eliezer would have suggested; it seems plausible that he would say the BOJ didn’t go far enough. “They didn’t go far enough” seems a bit different than “they never tested my theory” though.
They did in fact not go far enough. Japanese GNI per capita growth from 2013 to 2021 was 1.02%. The prescription would be something like 4%.
I’ll just note that the NGDP growth from 2013 to 2017 (when Inadequate Equilibria was published) was about 2% per year whereas RGDP went up by about 1% per year. This definitely makes me sympathetic to “they didn’t go far enough” but I’m still not sympathetic to “they never tested my theory” since you’d still expect some noticeable large effects from the new policy if the old monetary policy was responsible for a multi-trillion real-dollar problem.
Trillions of dollars in lost economic growth just seems like hyperbole. There’s some lost growth from stickiness and unemployment but of course the costs aren’t trillions of dollars.
I was assuming that the lack of inflation meant that they didn’t fully carry out what he had in mind. Maybe something that Eliezer, or Scott Sumner, has written would help clarify things.
It looks like Japan did loosen their monetary policy some, which could give evidence on whether or not the theory was right. But I think that would require a more in-depth analysis than what’s in this post. I don’t read the graphs as showing ‘clearly nothing changed after Abe & Kuroda’, just that there wasn’t the kind of huge improvement that hits you in the face when you look at a graph, which is what I would’ve expected from fixing a trillions-dollar mistake. If we’re looking for smaller effects, I’d want a more careful analysis rather than squinting at graphs. (And when I do squint at these graphs, I see some possible positive signs. 2013-19 real GDP growth seems better than I would’ve predicted if I had only seen the pre-Kuroda graph, and Kuroda’s first ~year is one of the better years.)