FWIW this reads as somewhat misleading to me, mainly because it seems to focus too much on “was Eliezer right about the policy being bad?” and not enough on “was Eliezer’s central claim about this policy correct?”.
On my reading of Inadequate Equilibria, Eliezer was making a pretty strong claim, that he was able to identify a bad policy that, when replaced with a better one, fixed a trillion-dollar problem. What gave the anecdote weight wasn’t just that Eliezer was right about something outside his field of expertise, it’s that a policy had been implemented in the real world that had a huge cost and was easy to identify as such. But looking at the data, it seems that the better policy did not have the advertised effect, so the claim that trillions of dollars were left on the table is not well-supported.
Parts of your description sound misleading to me, which probably just means that we have a disagreement?
My read is that, if this post’s analysis of Japan’s economy is right, then Eliezer’s time1 view that the Bank of Japan was getting it wrong by trillions of dollars was never tested. The Bank of Japan never carried out the policies that Eliezer favored, so the question about whether those policies would help as much as Eliezer thought they would is still just about a hypothetical world which we can only guess at. That makes the main argument in Inadequate Equilibria weaker because one of its central examples of being able to see that experts were getting it wrong is untested rather than confirmed by evidence. And the book has the further flaw that the author mistakenly marked his conditional prediction as “True” rather than “N/A, antecedent not met”.
Phrases like “the better policy did not have the advertised effect” and “the claim that trillions of dollars were left on the table is not well-supported” would be appropriate in a world where the Bank of Japan did raise inflation and keep it high for a few years, and real growth didn’t materialize. But we’re instead in a world where inflation didn’t increase much.
(This is all just accepting this post’s analysis of Japan’s economy, for simplicity.)
The Bank of Japan never carried out the policies that Eliezer favored
I regard this claim as unproven. I think it’s clear the Bank of Japan (BOJ) began a new monetary policy in 2013 to greatly increase the money supply, with the intended effect to spur significant inflation. What’s unclear to me is whether this policy matched the exact prescription that Eliezer would have suggested; it seems plausible that he would say the BOJ didn’t go far enough. “They didn’t go far enough” seems a bit different than “they never tested my theory” though.
I’ll just note that the NGDP growth from 2013 to 2017 (when Inadequate Equilibria was published) was about 2% per year whereas RGDP went up by about 1% per year. This definitely makes me sympathetic to “they didn’t go far enough” but I’m still not sympathetic to “they never tested my theory” since you’d still expect some noticeable large effects from the new policy if the old monetary policy was responsible for a multi-trillion real-dollar problem.
Trillions of dollars in lost economic growth just seems like hyperbole. There’s some lost growth from stickiness and unemployment but of course the costs aren’t trillions of dollars.
I was assuming that the lack of inflation meant that they didn’t fully carry out what he had in mind. Maybe something that Eliezer, or Scott Sumner, has written would help clarify things.
It looks like Japan did loosen their monetary policy some, which could give evidence on whether or not the theory was right. But I think that would require a more in-depth analysis than what’s in this post. I don’t read the graphs as showing ‘clearly nothing changed after Abe & Kuroda’, just that there wasn’t the kind of huge improvement that hits you in the face when you look at a graph, which is what I would’ve expected from fixing a trillions-dollar mistake. If we’re looking for smaller effects, I’d want a more careful analysis rather than squinting at graphs. (And when I do squint at these graphs, I see some possible positive signs. 2013-19 real GDP growth seems better than I would’ve predicted if I had only seen the pre-Kuroda graph, and Kuroda’s first ~year is one of the better years.)
FWIW this reads as somewhat misleading to me, mainly because it seems to focus too much on “was Eliezer right about the policy being bad?” and not enough on “was Eliezer’s central claim about this policy correct?”.
On my reading of Inadequate Equilibria, Eliezer was making a pretty strong claim, that he was able to identify a bad policy that, when replaced with a better one, fixed a trillion-dollar problem. What gave the anecdote weight wasn’t just that Eliezer was right about something outside his field of expertise, it’s that a policy had been implemented in the real world that had a huge cost and was easy to identify as such. But looking at the data, it seems that the better policy did not have the advertised effect, so the claim that trillions of dollars were left on the table is not well-supported.
Parts of your description sound misleading to me, which probably just means that we have a disagreement?
My read is that, if this post’s analysis of Japan’s economy is right, then Eliezer’s time1 view that the Bank of Japan was getting it wrong by trillions of dollars was never tested. The Bank of Japan never carried out the policies that Eliezer favored, so the question about whether those policies would help as much as Eliezer thought they would is still just about a hypothetical world which we can only guess at. That makes the main argument in Inadequate Equilibria weaker because one of its central examples of being able to see that experts were getting it wrong is untested rather than confirmed by evidence. And the book has the further flaw that the author mistakenly marked his conditional prediction as “True” rather than “N/A, antecedent not met”.
Phrases like “the better policy did not have the advertised effect” and “the claim that trillions of dollars were left on the table is not well-supported” would be appropriate in a world where the Bank of Japan did raise inflation and keep it high for a few years, and real growth didn’t materialize. But we’re instead in a world where inflation didn’t increase much.
(This is all just accepting this post’s analysis of Japan’s economy, for simplicity.)
I regard this claim as unproven. I think it’s clear the Bank of Japan (BOJ) began a new monetary policy in 2013 to greatly increase the money supply, with the intended effect to spur significant inflation. What’s unclear to me is whether this policy matched the exact prescription that Eliezer would have suggested; it seems plausible that he would say the BOJ didn’t go far enough. “They didn’t go far enough” seems a bit different than “they never tested my theory” though.
They did in fact not go far enough. Japanese GNI per capita growth from 2013 to 2021 was 1.02%. The prescription would be something like 4%.
I’ll just note that the NGDP growth from 2013 to 2017 (when Inadequate Equilibria was published) was about 2% per year whereas RGDP went up by about 1% per year. This definitely makes me sympathetic to “they didn’t go far enough” but I’m still not sympathetic to “they never tested my theory” since you’d still expect some noticeable large effects from the new policy if the old monetary policy was responsible for a multi-trillion real-dollar problem.
Trillions of dollars in lost economic growth just seems like hyperbole. There’s some lost growth from stickiness and unemployment but of course the costs aren’t trillions of dollars.
I was assuming that the lack of inflation meant that they didn’t fully carry out what he had in mind. Maybe something that Eliezer, or Scott Sumner, has written would help clarify things.
It looks like Japan did loosen their monetary policy some, which could give evidence on whether or not the theory was right. But I think that would require a more in-depth analysis than what’s in this post. I don’t read the graphs as showing ‘clearly nothing changed after Abe & Kuroda’, just that there wasn’t the kind of huge improvement that hits you in the face when you look at a graph, which is what I would’ve expected from fixing a trillions-dollar mistake. If we’re looking for smaller effects, I’d want a more careful analysis rather than squinting at graphs. (And when I do squint at these graphs, I see some possible positive signs. 2013-19 real GDP growth seems better than I would’ve predicted if I had only seen the pre-Kuroda graph, and Kuroda’s first ~year is one of the better years.)