Debt rating and young workers in Japan

Two related articles on Japan appeared in the NYT today, one on the plight of young workers in what seems like a permanently down economy with ossified corporate structures, and another on a downgrade in sovereign debt rating by S&P. Probably the most humorous part of either is the quote attributed to Prime Minister Naoto Kan in the latter:

“I just heard that news,” a flustered-looking Mr. Kan told reporters. “I am a little ignorant on those kind of matters,” he said. “Let me look into it more.”

Humility? Check. Qualifications for job? Hm.

Not to be cute, but in a nutshell, that's similar to the theme in the first article. Because of rapid declines in fertility and mortality, Japan's age structure is heavily weighted toward the old, who apparently dominate corporate culture. But I'm not sure it matters that much who's in the driver seat as long as they make productive use of it. While the article begins from the perspective of the demographic imbalance, which is real, it quickly drifts to the issue of rigidity in corporate structures and in society, and the lack of entrepreneurial possibilities.

Another antebellum war cost estimate

Another post on the Disunion blog quotes Senator Alfred Iverson of Georgia in his farewell speech to the Senate during the secession crisis.

Iverson estimates that the North's "conquest [of the South], if you gain one, will cost you a hundred thousand lives, and more than a hundred million dollars. Nay more, it will take a standing army of 100,000 men, and millions of money annually, to keep us in subjection."

This certainly closer to the truth than Edmund Ruffin's estimate that appeared in an earlier post on which I commented. But it's still pretty far below the true cost borne by the North, let alone the total cost to the nation.

UPDATE: And here's another cost estimate on the Disunion blog.

A nice overview of the renminbi/dollar exchange rate issues

Paul Krugman provides a nice overview of the Chinese renminbi and U.S. and Chinese monetary policies. But I'd say there are probably two reasons why inflation is running high in China: rapid growth irrespective of the exchange rate policy that is keeping the renminbi undervalued, and the exchange rate policy. Krugman focuses on the latter, but I'm not sure how that could drive broad-based inflation. Maybe he's absolutely right, but I would have imagined that an undervalued currency would drive inflation via the high prices of imports, which would allow domestic producers of substitutes to raise their prices as well. Unless the import is a widely demanded item like oil, I'm not sure why such a dynamic would have such a broad effect on inflation, such as in real estate.

The Obama economic team v1.0

The Times Magazine article on the emerging jobs policies of the Obama administration and its economic team v2.0 - with Gene Sperling, Austan Goolsbee, and Jack Lew having replaced Larry Summers, Christina Romer, and Peter Orszag from v1.0 - focuses more on the challenges faced by the latter group. It provides some insiders' perspectives on the way the 2009 stimulus package was created. And like all media reports, it digs up dirt. I especially liked how Summers gave a three-hour interview over dinner but requested that all quotes come from email correspondence in which he sharpened his messages. It's a wise choice!

Predicting the costs of the Civil War

The Disunion Blog on the NYTimes website, a personal obsession of mine these past several months, included an interesting gem in a recent piece entitled "Declining War, Rejecting Piece." The setting was early 1861, when an uneasy standoff prevailed prior to the assault on Fort Sumter. Quoted in the blog article is a statement by the "Fire-Eater" secessionist Edmund Ruffin in the Richmond Index the week of 1/12/1861 to 1/18/1861, a Saturday to a Friday. He was referring to the costs to the Union of a civil war:

"They could not win such a contest without the sacrifice of fifty thousand lives and one hundred million dollars."

As I recounted in a recent working paper, the actual cost of the Civil War for the North turned out to be 364,511 killed, or more than 7 times as many as Ruffin's guess. The North spent $2.3 billion in current dollars on direct military expenditures, or 23 times more than Ruffin imagined. The benefits that the U.S. would eventually extend to Northern veterans would eventually double that figure in terms of present value.

Ruffin's was only one cost forecast, but he had an incentive to exaggerate it. It would appear this is another example of systematic underestimation of the costs of war (Nordhaus, 2002).

Cuomo's Queens accent

Not that I could ever in a million years distinguish the accents of different boroughs, but apparently the natives of those boroughs can, as recounted in an article on Andrew Cuomo and his accent. Favorite line: "[I]f a New Yorker pronounces 'Korea' and 'career' the same way, he is from Queens."