As Japanese and global policymakers are rushing to design policies to counter the looming economic depression, advice from one of my favorite economists, Jean-Baptiste Say, comes to mind. In 1803 he wrote: “In policy as well as in morality, the grand secret is not to constrain the actions, but to awaken the inclinations of mankind.”
By that measure, the move from “keep calm and carry on” toward “don’t panic, but lockdown” is clearly insufficient to get us to a better place. We will need to get to “here’s a vision, so let’s get going.” With a little luck and determination, Japan may lead the way.
Good policy cushions the blow of an economic shock. Great policy accelerates long-needed structural change. So far in the response cycle, Japanese policy leaders stand out as best-in-class on the former, the counter-cyclical side. The speed, the size and the coordination of the macroeconomic resources mobilized so far is impressive. From here, the key question is not whether more is needed, but how to boost the administrative efficiency of implementation.
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