It's a very good sign that Kan Naoto is now the Finance Minister in Japan. Unlike the PM Hatoyama, Kan Naoto is actually smart and liberal. He made his mark taking aim at government bureaucrats, which actually control most policymaking in Japan, while the Diet is essentially a rubber-stamp necessary to keep up appearances b/c western nations do not like dictatorships. Kan has spent his career fighting the powers that be to try to change this (actually, it's a mystery to me why the Dems didn't choose him to lead their party...). But here's the thing -- Japanese politicians are almost worthless (Kan and a few others excepted). In practice, they might be better off w/ knowledgeable Toudai (Tokyo University) bureaucrats running things, but I digress...
The Yen fell on the announcement (a good sign), but what the Japanese really need is for Kan Naoto to head the Bank of Japan. In any case, the next day Hatoyama scolded him, and he revised his initial remarks, and the yen gained ground! How stupid!
Anyway, it got me thinking, I wonder how much the grave errors in policy the Bank of Japan has made and is making has to do w/ how many of their top leaders have been trained by know-nothing American Macro Departments/have bought into standard Economic orthodoxy?
The current BoJ leader, Masaaki Shirakawa, who doesn't have a clue how to fix the simple problem of deflation, did his training at Chicago.
Another board governor, Kiyohiko Nishimura, got his Econ PhD from Yale in 1982.
The other board governor and most of the Members of the Policy Board did all of their training in Japan, however, but still, two out of the three leading posts are filled with Economists trained in leading US PhD Econ programs! Most of them went to schools like Tokyo University or Hitotsubashi, and a quick perusal of their homepages was enough to confirm that professors trained at US PhD Econ programs such as Chicago, Harvard, and MIT are well-represented...
And I would suspect that this is a common phenomenon all over the world. I've often taken graduate Economics courses where many of the students are from poor developing countries, where their government paid for them to come to America to do graduate work in Economics, with the understanding that they will go back and work in the Finance or Transport Ministry back in their home country... So, they come, do two years of algebra, and then go back to their home country, having learned nothing useful.
Most economists wash their hands of this problem by saying that, look, if you are interested in policy you should go to a public policy program. The problem is that the outside world is still under the mistaken impression that trained economists are trained to think about economic policy issues. This is why, when you look at leading policymakers around the world, from Masaaki Shirakawa to Ben Bernanke to Larry Summers, their core training is in doing fast algebra.
Give me three months as the Governor of the Bank of Japan and I will cure the country of its economic maladies...
Tuesday: Case-Shiller House Prices
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