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The Other Half of Macroeconomics and the Fate of Globalization
Get a new perspective from the 'other half' of macroeconomics
The failure of the vast majority of economists in government, academia and the private sector to predict either the post-2008 Great Recession or the degree of its severity has raised serious credibility issues for the profession. The repeated failures of central banks and other policymakers in all advanced countries to meet their inflation or growth targets in spite of astronomical monetary easing, have left the public rightfully suspicious of the establishment and its economists.
The Other Half of Macroeconomics and the Fate of Globalization elucidates what was missing in economics all along and what changes are needed to make the profession relevant to the economic challenges of today. Once the other half of macroeconomics is understood both as a post-bubble phenomenon and as a phase of post-industrial economies, it should be possible for policy makers to devise appropriate measures to overcome difficulties advanced countries are facing today such as stagnation and income inequality.
- Shows how it's possible to devise appropriate policy response to slow wage and productivity growth in these economies
- Demonstrates that the effectiveness of monetary and fiscal policy changes as an economy undergoes different stages of development
- Argues that tax rules, regulations and even educational system must be revised to match the need of pursued (by emerging nations) countries
- Explains the 200-year process of economic development and where that process is taking all of us
Inside, Richard C. Koo offers a completely new way of looking at the economic predicament of advanced countries today.
The failure of the vast majority of economists in government, academia and the private sector to predict either the post-2008 Great Recession or the degree of its severity has raised serious credibility issues for the profession. The repeated failures of central banks and other policymakers in all advanced countries to meet their inflation or growth targets in spite of astronomical monetary easing, have left the public rightfully suspicious of the establishment and its economists.
The Other Half of Macroeconomics and the Fate of Globalization elucidates what was missing in economics all along and what changes are needed to make the profession relevant to the economic challenges of today. Once the other half of macroeconomics is understood both as a post-bubble phenomenon and as a phase of post-industrial economies, it should be possible for policy makers to devise appropriate measures to overcome difficulties advanced countries are facing today such as stagnation and income inequality.
- Shows how it's possible to devise appropriate policy response to slow wage and productivity growth in these economies
- Demonstrates that the effectiveness of monetary and fiscal policy changes as an economy undergoes different stages of development
- Argues that tax rules, regulations and even educational system must be revised to match the need of pursued (by emerging nations) countries
- Explains the 200-year process of economic development and where that process is taking all of us
Inside, Richard C. Koo offers a completely new way of looking at the economic predicament of advanced countries today.
- GenresEconomicsNonfiction
320 pages, Kindle Edition
Published February 12, 2018
41 people are currently reading
321 people want to read
About the author
Richard C. Koo
18 books45 followersRichard Koo (born 1954) is Taiwanese American economist. He is chief economist at the Nomura Research Institute in Japan.
He studied at the University of California, Berkeley and Johns Hopkins University, where he got his PhD.
He studied at the University of California, Berkeley and Johns Hopkins University, where he got his PhD.
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Displaying 1 - 6 of 6 reviews
September 19, 2020
Keep Wall Street humming, and build some SOEs.
Richard Koo who two decades ago coined the term “balance sheet recession” and used it to explain why Japanese refused to borrow and invest in spite of very low interest rates has just published a new book, The Other Half of Macroeconomics. He extends his analysis to the rest of the world and has some great insights - particularly on EU banks’ weakness. It is important to forget capital ratios and prudential rules - or so he argues. That’s how American banks acted in 1982 when Mexico debt crisis struck. Indeed he’s glad Japan did just that after the bubble burst in the early 1990s.
I’m obsessed with state-owned enterprises (SOEs). Say what you will, but they have served China well. I urged Western countries to give it a try in an op-Ed at Financial Times four years ago. Readers’ comments had flooded in before FT blocked more comments. “China’s example has policy lessons for the west“
Richard Koo who two decades ago coined the term “balance sheet recession” and used it to explain why Japanese refused to borrow and invest in spite of very low interest rates has just published a new book, The Other Half of Macroeconomics. He extends his analysis to the rest of the world and has some great insights - particularly on EU banks’ weakness. It is important to forget capital ratios and prudential rules - or so he argues. That’s how American banks acted in 1982 when Mexico debt crisis struck. Indeed he’s glad Japan did just that after the bubble burst in the early 1990s.
I’m obsessed with state-owned enterprises (SOEs). Say what you will, but they have served China well. I urged Western countries to give it a try in an op-Ed at Financial Times four years ago. Readers’ comments had flooded in before FT blocked more comments. “China’s example has policy lessons for the west“
May 31, 2019
3.5/5
Interesting book overall even if a little repetitive in places. A new phenomenon I learned about was the Lewis Turning Point, [LTP], which is when all rural labour has been recruited in expanding industry sectors and the inability of industries to find new labour to increase productivity pushes labour wages up. Although the book is focused on the American and Japanese economies a moral to be drawn for India is that the LTP has not been reached. A consequence of this is that India can continue to draw investment from foreign firms who can use low skill labour at lower wages than can be recruited in any higher income countries.
There is hope that wages commanded by labour will rise to levels not hitherto anticipated. However, jobs are increasingly being automated away or becoming complex enough to require higher education and training which the Indian labour pool, rural and urban, doesn't have in the proportions needed to attract foreign and even local investment sustainably. This is a challenge other high population low skill labour markets face as well.
The key idea of the book, discussed at length, is that of balance sheet recessions--caused by lack of borrowers-- which create a situation not adequately theorised in conventional macroeconomics where profit maximization is considered to be the governing condition for all market participants at all times. Lack of borrowers may cause balance sheet recessions due to i. difficulty finding attractive investment opportunities, ii. risk aversion in the aftermath of a crisis, iii. desire to repay old debt, or iv. desire to stay debt free even at cost of losing out on profit maximizing opportunities which would need debt funding.
Any of these conditions, argues the author, can cause deflationary spirals which can only be averted by increasing deficit spending by government on projects that can pay for themselves over the long term. In championing this specific recommendation the author shows himself to be a Keynesian. However, the analyses of pre and post-LTP economies, the dynamics of labour markets in them, and the monetary and fiscal policies recommended in these unique circumstances is novel.
Interesting book overall even if a little repetitive in places. A new phenomenon I learned about was the Lewis Turning Point, [LTP], which is when all rural labour has been recruited in expanding industry sectors and the inability of industries to find new labour to increase productivity pushes labour wages up. Although the book is focused on the American and Japanese economies a moral to be drawn for India is that the LTP has not been reached. A consequence of this is that India can continue to draw investment from foreign firms who can use low skill labour at lower wages than can be recruited in any higher income countries.
There is hope that wages commanded by labour will rise to levels not hitherto anticipated. However, jobs are increasingly being automated away or becoming complex enough to require higher education and training which the Indian labour pool, rural and urban, doesn't have in the proportions needed to attract foreign and even local investment sustainably. This is a challenge other high population low skill labour markets face as well.
The key idea of the book, discussed at length, is that of balance sheet recessions--caused by lack of borrowers-- which create a situation not adequately theorised in conventional macroeconomics where profit maximization is considered to be the governing condition for all market participants at all times. Lack of borrowers may cause balance sheet recessions due to i. difficulty finding attractive investment opportunities, ii. risk aversion in the aftermath of a crisis, iii. desire to repay old debt, or iv. desire to stay debt free even at cost of losing out on profit maximizing opportunities which would need debt funding.
Any of these conditions, argues the author, can cause deflationary spirals which can only be averted by increasing deficit spending by government on projects that can pay for themselves over the long term. In championing this specific recommendation the author shows himself to be a Keynesian. However, the analyses of pre and post-LTP economies, the dynamics of labour markets in them, and the monetary and fiscal policies recommended in these unique circumstances is novel.
April 18, 2019
Put simply, this is likely the most important economics text since the turn of the century. Accessible and thought provoking.
Want to read
September 14, 2020Recommended by Mohnish Pabrai & Li Lu
December 2, 2020
Solid content, the author presents a rare perspective with good detail... but the editing could have been much more thorough. The same paragraphs frequently repeated with very similar wording.
January 11, 2021
If you already have read holly grail of macroeconomics than that is enough. You can read it if you want deeper and most recent understanding of balance recession.
Displaying 1 - 6 of 6 reviews