Krugman’s Blog, 2/9/13

There were 3 posts yesterday.  The first was “Japanese Relative Performance:”

More notes to myself. When people try to assess how Japan has done since its late-80s bubble burst, they often look at per capita GDP. But this can be deeply misleading, because of Japan’s low birth rate and aging population. In the figure below I compared the ratio of Japanese to US GDP per capita (from Total Economy Database) with the ratio of Japanese to US GDP per adult aged 15-64:

Instead of a huge decline, never reversed, there’s a smaller decline, largely reversed. You can argue that Japan should have done better, continuing to converge on US levels. But the seemingly overwhelming failure you see if you don’t take demography into account just isn’t clear.

Next up was “My Head is Everywhere:”

Tomorrow it will be talking on Chris Hayes, Fareed Zakaria, and Maria Bartiromo.

The Chris Hayes show is worth watching.  He actually lets people finish their thoughts, unlike the rest of the Sunday Morning Bobblehead crew.  The last post of the day was “Profits and Business Investment:”

And another notes to myself post. Below are corporate profits (after tax and inventory valuation adjustment) and nonresidential fixed investment (roughly speaking, business investment), both measured as shares of GDP. These aren’t exactly matched figures, because not all business investment comes from corporations. Still, I think they illustrate an important point. Business investment isn’t actually all that low; you expect it to be relatively weak in a weak economy with excess capacity, but in fact it’s about as high a share of GDP as in the middle Bush years. What’s really out of line with previous experience is the level of corporate profits, which is arguably serving as a kind of sinkhole for purchasing power.


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