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World
Israeli Lawmaker’s Tour Stokes Tension Over Holy Site
The visit by the lawmaker, Moshe Feiglin, passed without violence, eliciting only chants of “God is great!” and taunts from Muslim protesters.
World
With Political Rift Still Deep, Russia-Ukraine Gas Deal Is Widely Seen as a Patch
The agreement was reached after both sides accepted the financial realities, in the face of an approaching winter.Sports
Nico Rosberg Wins Austin Pole
Rosberg earned a chance to tighten his Formula One championship duel with his Mercedes teammate Lewis Hamilton by winning the pole position for the United States Grand Prix in Austin, Tex.Business Day
Treasury Auctions for the Week of Nov. 3
The following tax-exempt fixed-income issues are scheduled for pricing this week.Business vs. Economics
"TOKYO
— The Bank of Japan, this country’s equivalent of the Federal Reserve,
has lately been making a big effort to end deflation, which has
afflicted Japan’s economy for almost two decades. At first its efforts —
which involve printing a lot of money and, even more important, trying
to assure investors that it will keep printing money until inflation
reaches 2 percent — seemed to be going well. But more recently the
economy has lost momentum, and last week the bank announced new, even more aggressive monetary measures.
I
am, as you might guess, very much in favor of this move, although I
worry that the policy might nonetheless fail thanks to fiscal mistakes.
(More about that later.) While the bank did the right thing, however, it
did so amid substantial internal dissent. In fact, the new stimulus was
approved by only five of the bank board’s nine members, with those closest to business voting against. Which brings me to the subject of this column: the economic wisdom, or lack thereof, of business leaders.
Some
of the people I’ve spoken to here argue that the opposition of many
Japanese business leaders to the Bank of Japan’s actions shows that it’s
on the wrong track. In saying this, they’re echoing a common sentiment
in many countries, including America — the belief that if you want to
fix an ailing economy, you should turn to people who have been
successful in business, like leaders of major corporations,
entrepreneurs and wealthy investors. After all, doesn’t their success
with money mean that they know how the economy really works?
Actually,
no. In fact, business leaders often give remarkably bad economic
advice, especially in troubled times. And I think it’s important to
understand why.
About
that bad advice: Think of the hugely wealthy money managers who warned
Ben Bernanke that the Fed’s efforts to boost the economy risked “currency debasement”;
think of the many corporate chieftains who solemnly declared that
budget deficits were the biggest threat facing America, and that fixing the debt
would cause growth to soar. In Japan, business leaders played an
important role in the fiscal mistakes that have undermined recent policy
success, calling for a tax hike that caused growth to stall earlier
this year, and a second tax hike next year that would be an even worse
error.
And
on the other side, the past few years have seen repeated vindication
for policy makers who have never met a payroll, but do know a lot about
economic theory and history. The Federal Reserve and the Bank of England
have navigated their way through a once-in-three-generations economic
crisis under the leadership of former college professors — Ben Bernanke,
Janet Yellen and Mervyn King — who, among other things, had the courage
to defy all those tycoons demanding that they stop printing money. The
European Central Bank brought the euro back from the brink of collapse
under the leadership of Mario Draghi, who spent the bulk of his career
in academia and public service.
Obviously
there are business leaders who have gotten the economic analysis right,
and plenty of academics who have gotten it wrong. (Don’t get me
started.) But success in business does not seem to convey any special
insight into economic policy. Why?
The answer, to quote the title of a paper I published many years ago, is that a country is not a company.
National economic policy, even in small countries, needs to take into
account kinds of feedback that rarely matter in business life. For
example, even the biggest corporations sell only a small fraction of
what they make to their own workers, whereas even very small countries
mostly sell goods and services to themselves.
So
think of what happens when a successful businessperson looks at a
troubled economy and tries to apply the lessons of business experience.
He or (rarely) she sees the troubled economy as something like a
troubled company, which needs to cut costs and become competitive. To
create jobs, the businessperson thinks, wages must come down, expenses
must be reduced; in general, belts must be tightened. And surely
gimmicks like deficit spending or printing more money can’t solve what
must be a fundamental problem.
In
reality, however, cutting wages and spending in a depressed economy
just aggravates the real problem, which is inadequate demand. Deficit
spending and aggressive money-printing, on the other hand, can help a
lot.
But
how can this kind of logic be sold to business leaders, especially when
it comes from pointy-headed academic types? The fate of the world
economy may hinge on the answer.
Here
in Japan, the fight against deflation is all too likely to fail if
conventional notions of prudence prevail. But can unconventionality
triumph over the instincts of business leaders? Stay tuned."
Business Day
Popular Demand
HuffingtonPost.com is the most visited political website according to eBizMBA. eBizMBA derives its visitor numbers based on data from Alexa, Compete and Quantcast.The Upshot
Michelle Nunn’s Hopes in Georgia Are Fading in Final Stretch
The Republican in the Senate race, David Perdue, has taken a narrow but consistent lead in the polls.U.S.
Video: The Mind of the Undecided Voter
From Louisiana to Kansas, voters are still struggling to make up their minds about which candidates to vote for in the midterm elections Tuesday.Opinion
Money and Judges, a Bad Mix
There’s growing evidence that donations to judicial campaigns may be influencing rulings.World
Netanyahu Urges Restraint in Row Over Sacred Site
Several lawmakers from Prime Minister Benjamin Netanyahu’s Likud Party have been among a small but vocal group advocating increased Jewish access and prayer at the site, known to Jews as the Temple Mount.Sports
LeBron James’s 36 Points Lead Cavs Past Bulls
James was at his best after struggling the previous night, scoring 8 points in the extra period, and the Cavaliers picked up the win after opening with a loss at home to the Knicks.UConn Women Atop Poll
By THE ASSOCIATED PRESS
Connecticut was the unanimous choice atop the Associated Press women’s
basketball poll. South Carolina was second, the university’s best
ranking since Jan. 3, 1982.
Business Day
Video: Inside the Guts of Macy’s Herald Square
Macy’s Herald Square has been undergoing a luxury makeover. But with a building that is more than a century old, everything from the loading bays to the stockrooms also needs to be overhauled.N.Y. / Region
Condé Nast Moves Into the World Trade Center as Lower Manhattan Is Remade
The media company will occupy floors 20 through 44 in 1 World Trade Center, confirming a shift in the culture downtown.U.S.
Deadly Halloween Across the Nation
At least 15 people were killed and nine others injured in accidents and a fire connected to the festivities from California to New York.Business Day
Punch Line With Real Political Punch
The results of Bill Maher’s bid to influence a House race in Minnesota will be seen with Tuesday’s election returns.U.S.
Alarmed by Ebola, Public Isn’t Calmed by ‘Experts Say’
Shifting guidelines on how to handle Ebola, combined with a mistrust of elites, have fed the public’s mistrust of assurances by government officials and scientists.
U.S.
In North Carolina, Campaigns for Senate Play to Dislikes in an Effort to Stoke Interest
Thom Tillis is partial to Exhibit A from his party’s national playbook this year: mentioning his Democratic opponent, Senator Kay Hagan, in the same breath as President Obama, and doing so as often as possible.Technology
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