In reply to Paul Midford:

While I am generally a big admirer of Joe Stiglitz, his analysis of Japan is chock full of errors, misreadings, and false conclusions:

PM:

He argues that adjusted for changes in
labor-force size Japan has been outperforming the US and several other western economies. Japan's economy grew at an annual rate of 0.78% between 2001 and 2011, compared with 1.8% for the US. Yet, the US labor force rose by 9.2% while Japan's labor force shrank by 5.5%, consequently real output per worker grew at a faster pace in Japan than in the US (or in Australia, Germany or the UK).

RK:

Any economist knows that, when you want to compare growth rates of countries, you have to go from the peak of the business cycle to the next peak. In 2001, Japan was at the bottom after five years of zero growth.
Hence much of its growth from then through Jan-march
2008 was simply making up for what had been lost during those five years.

If we start off in 1997, the previous peak year, and end at 2007, the last peak year before the global slump, we find: Japan's PER CAPITA GDP grew a total of 8.8% during those ten years, compared to 22% for the US, 31% for the UK, and 19% for the Group of Seven Average. It grew the least of the G7.

If we look at 1997-2011, Japan's per capita GDP grew a total 5.5% vs. 18% for the US and 16% for the G7 average. It grew the least of the G7

Even during 2001-2011--the period used by Stiglitz--Japan's per capita GDP grew a total of 6.0% vs. 7.3% for the US and a G7 average of 6.5%. It came in 5th out of G7

How about growth in GDP PER WORKER (i.e. people with jobs)? Economists look at this because it a measure of labor productivity, the long-term basis for any improvement in living standards. Stiglitz used instead, GDP per person aged 15-64, which is a screwy number to use for all sorts of reasons.

During 1997-2007, Japan's GDP per worker grew a total of 12.1% over those ten years, vs. 19.4% for the US, and 16.2% for the G7 average. Only Italy did worse.

During 1997-2011, Japan's GDP per worker grew a total of 10.1% vs. 19.8% for the US and 13.8% for the G7 average. Only Italy did worse.

During 2001-2011--the period preferred by Stiglitz--Japan's GDP per worker grew a total of 8.9% vs. 9.8% for the US and 5.3% for the G7. Europe did so badly because it imposed on itself what someone with a perverse sense of humor called "expansionary austerity."

For more on this issue see the Adam Posen section of my analysis of Abenomics at http://www.international-economy.com/TIE_W13_Katz.pdf

PM:

More familiar to those of us who follow Japan, it has achieved this with lower unemployment rates (peaking at 5.5% during the Lehman recession and 5.8% since 1990)

RK:

Again, this is a misleading number. What Japanologists know, but most New York Times readers do not, is that, when a recession comes, the US lays off tons of workers, but Japan carries out a "share the pain"
approach. Instead of workers getting laid off, they are kept at their jobs, but with fewer hours of work and less pay.
>From January 2008 through Dec. 2012, the total number
of jobs in Japan fell by 1.9% but the total number of hours worked by all workers combined fell by 5.4%. A low unemployment rate is not a sign of macroeconomic health, but merely the difference between how Japan deals with macroeconomic problems.

PM:

and less economic inequality (with a Gini coefficient of .38 for the US versus .33 for Japan).

Again, misleading. Any high-income OECD country would look good compared to the US, which is an outlier in terms of both inequality and poverty. Its Gini coefficient is the worst among high-income OECD countries. Japan's once-vaunted income equality has been eroding over the past two decades. And its poverty rate is now the worst among high-income OECD countries, except, of course, for the US.

Richard Katz
The Oriental Economist Report