Economists always disagree on how to mend Japan’s flagging economy.
Some say the government should spend more, while others insist on austerity. Some urge the Bank of Japan to do everything possible to create inflation. Others warn that such a policy would risk destroying the whole economy.
To add to the confusion, some change their opinions from time to time — apparently to get media attention.
Who on earth can we trust?
Nonexperts must have a hard time judging the credibility of economists, but there is a rule of thumb, said Satoshi Higashitani, a magazine editor-turned-freelance journalist who has analyzed economists’ comments during the past decade.
“You may trust economists who try to persistently explain the logic behind their theories” on TV programs that require only colorful sound bites, Higashitani said.
On the other hand, he advises, “Don’t take anyone seriously if they begin their comments by saying, ‘The economy can change.’ ” This is often just an excuse for any mistakes they may make, he said.
In his recent book “Dare ga Nihon Keizai o Sukueru no ka?” (“Who Can Save the Japanese Economy?”), he scrutinizes more than 30 well-known economists who commented on Japan after the bubble burst in the early 1990s.
The economists include Eisuke Sakakibara, former vice finance minister for international affairs who used to be dubbed “Mr. Yen”; Richard Koo, chief economist at Nomura Research Institute; Iwao Nakatani, president of Tama University; veteran commentator Keitaro Hasegawa; and Princeton University professor Paul Krugman.
By tracking their comments in newspapers, magazines and books, Higashitani analyzed whether or how they changed their opinions.
Higashitani emphasized consistency. One of the worst economists in his view is Heizo Takenaka, state minister for economic and fiscal policy since April 2001.
Takenaka, who was a professor at Keio University before assuming the post, was critical as of August 2000 of the Bank of Japan’s “zero interest rate” policy, which he said helps even inefficient companies borrow at low cost. But he changed his stance a year later by mentioning the need for inflation targeting, a radical extension of the ultra-easy monetary policy, according to Higashitani.
Takenaka also made an about-face when the economy started worsening in 2001, shifting from his strong advocacy of fiscal austerity to one of extra budgets, Higashitani pointed out.
“I can’t help but suspect that he speaks according to the atmosphere within the government,” Higashitani said. If politics matters to Takenaka more than economic theories, the author asked, “What did the government get an academic economist for?”
The book also cites Sakakibara and Koo as having swung widely: Sakakibara changed to a structural reform advocate and Koo just the opposite.
Trustworthy economists, on the other hand, are those who do not vacillate, he said.
His choices are professor Yoshiyasu Ono and Keio University professor Kazuhito Ikeo, although he does not explicitly say so in the book.
Higashitani said the two economists take different approaches. Ono calls for more government spending to save the jobless, while Ikeo insists on structural reforms that include bad-loan writeoffs by banks.
The author himself is “basically a Keynesian” similar to Ono.
The book is a followup to two articles the author wrote, in 1999 and 2001, for the influential monthly magazine Bungei Shunju. In them, he rated economists in the way U.S. credit-rating agency Moody’s Investors Service Inc. does companies, using such marks as Aaa.
“In Japan, the analytical abilities of economic commentators are rarely evaluated, and they can get away with saying anything,” Higashitani said of the reason why he wrote the articles.
The articles drew no direct reaction from the economists evaluated, but the latest book prompted one economist to send him a letter saying it is a “bad book,” he said.
The sender also defended his vacillating stance by saying, according to Higashitani: “To become influential in the media, it is OK to make comments that contradict what was said earlier. It is OK to lie in some cases. It is impossible to move public opinion without doing that much.”
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