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'Richard Werner's exploration of the reasons for Japan's long stagnation is simultaneously stimulating and controversial. His study will take the reader on an exciting and well-written detective story to discover the underlying reasons for Japan's asset boom and subsequent long-drawn-out bust. Whether readers will agree with him, or not, they will be forced, by the power of his analysis, to reconsider and to reconfigure their own preconceptions. It is both a powerful and important book, which challenges both much received wisdom and the role of the Bank of Japan.' - Charles A. E. Goodhart, Norman Sosnow Professor of Banking and Finance, London School of Economics and Political Science, University of London
'an ambitious attempt to shape the terms of the economic debate over Japan's decade-long post-bubble economic stagnation.' - William Grimes, Boston University
'What a wonderful read! It must have been exciting to solve the puzzles, and Werner does a very good job in letting the reader share in the excitement of this intellectual quest. Werner develops a simple and elegant model based on empirical observations but sufficiently abstract, and one that stands up to empirical testing impressively well. The potential implications are huge. His findings have become influential with those interested in the real world of (Japanese) finance.' - Dirk Bezemer, Imperial College, University of London
'Werner has done an excellent job of showing the difficulties and conundrums faced by neoclassical theory when confronted with Japan's recent (and older) performance. He demonstrates a scholarly and deep knowledge of the Japanese economy, while maintaining a light touch. Werner's analysis of banking and credit-money creation, in particular, offers new insights into the enigmas of Japanese capitalism. This is a book that will be read by many more than Japan specialists.' - Costas Lapavitsas, SOAS, University of London
'Lucid in presentation, trenchant in critique, Richard Werner has stamped on orthodox neo-classical interpretations of the Japanese economy and joined a group of apostates demanding a new paradigm for the dismal science. The intellectual rigour with which he marshals the evidence to explain the riddle of Japanese macroeconomic performance is impressive. Whilst his focus on the role of the Bank of Japan in the supply of money and credit as his key explanatory variable is bound to spark controversy, for all those interested in the actual workings of the Japanese economy his empirically rich and theoretically robust analysis will prove stimulating and refreshing. It should be read by all students of the Japanese economy and political economy more generally.' - Glenn D. Hook, Professor of Japanese Studies and Director of the Graduate School of East Asian Studies, University of Sheffield, UK
'Werner's exploration of the reasons for Japan's long stagnation is simultaneously stimulating and controversial. His study will take the reader on an exciting and well-written detective story to discover the underlying reasons for Japan's asset boom and subsequent long-drawn-out bust...It is both a powerful and important book, which challenges both much received wisdom and the role of the Bank of Japan.' - Charles A. E. Goodhart, London School of Economics and Political Science, UK
'an ambitious attempt to shape the terms of the economic debate over Japan's decade-long post-bubble economic stagnation.' - William Grimes, Boston University, USA
'What a wonderful read!...Werner develops a simple and elegant model based on empirical observations but sufficiently abstract, and one that stands up to empirical testing impressively well. The potential implications are huge. His findings have become influential with those interested in the real world of (Japanese) finance.' - Dirk Bezemer, Imperial College, University of London, UK
'Werner has done an excellent job of showing the difficulties and conundrums faced by neoclassical theory when confronted with Japan's recent (and older) performance...Werner's analysis of banking and credit-money creation, in particular, offers new insights into the enigmas of Japanese capitalism. This is a book that will be read by many more than Japan specialists.' - Costas Lapavitsas, SOAS, University of London, UK
'A must-read for economists and finance professionals. It will revolutionise economics.' -Tobias Hoschka, Head of Asian Research, McKinsey & Company
'an ambitious attempt to shape the terms of the economic debate over Japan's decade-long post-bubble economic stagnation.' - William Grimes, Boston University
'What a wonderful read! It must have been exciting to solve the puzzles, and Werner does a very good job in letting the reader share in the excitement of this intellectual quest. Werner develops a simple and elegant model based on empirical observations but sufficiently abstract, and one that stands up to empirical testing impressively well. The potential implications are huge. His findings have become influential with those interested in the real world of (Japanese) finance.' - Dirk Bezemer, Imperial College, University of London
'Werner has done an excellent job of showing the difficulties and conundrums faced by neoclassical theory when confronted with Japan's recent (and older) performance. He demonstrates a scholarly and deep knowledge of the Japanese economy, while maintaining a light touch. Werner's analysis of banking and credit-money creation, in particular, offers new insights into the enigmas of Japanese capitalism. This is a book that will be read by many more than Japan specialists.' - Costas Lapavitsas, SOAS, University of London
'Lucid in presentation, trenchant in critique, Richard Werner has stamped on orthodox neo-classical interpretations of the Japanese economy and joined a group of apostates demanding a new paradigm for the dismal science. The intellectual rigour with which he marshals the evidence to explain the riddle of Japanese macroeconomic performance is impressive. Whilst his focus on the role of the Bank of Japan in the supply of money and credit as his key explanatory variable is bound to spark controversy, for all those interested in the actual workings of the Japanese economy his empirically rich and theoretically robust analysis will prove stimulating and refreshing. It should be read by all students of the Japanese economy and political economy more generally.' - Glenn D. Hook, Professor of Japanese Studies and Director of the Graduate School of East Asian Studies, University of Sheffield, UK
'Werner's exploration of the reasons for Japan's long stagnation is simultaneously stimulating and controversial. His study will take the reader on an exciting and well-written detective story to discover the underlying reasons for Japan's asset boom and subsequent long-drawn-out bust...It is both a powerful and important book, which challenges both much received wisdom and the role of the Bank of Japan.' - Charles A. E. Goodhart, London School of Economics and Political Science, UK
'an ambitious attempt to shape the terms of the economic debate over Japan's decade-long post-bubble economic stagnation.' - William Grimes, Boston University, USA
'What a wonderful read!...Werner develops a simple and elegant model based on empirical observations but sufficiently abstract, and one that stands up to empirical testing impressively well. The potential implications are huge. His findings have become influential with those interested in the real world of (Japanese) finance.' - Dirk Bezemer, Imperial College, University of London, UK
'Werner has done an excellent job of showing the difficulties and conundrums faced by neoclassical theory when confronted with Japan's recent (and older) performance...Werner's analysis of banking and credit-money creation, in particular, offers new insights into the enigmas of Japanese capitalism. This is a book that will be read by many more than Japan specialists.' - Costas Lapavitsas, SOAS, University of London, UK
'A must-read for economists and finance professionals. It will revolutionise economics.' -Tobias Hoschka, Head of Asian Research, McKinsey & Company
Product Description
Modern mainstream economics is attracting an increasing number of critics of its high degree of abstraction and lack of relevance to economic reality. Economists are calling for a better reflection of the reality of imperfect information, the role of banks and credit markets, the mechanisms of economic growth, the role of institutions and the possibility that markets may not clear. While it is one thing to find flaws in current mainstream economics, it is another to offer an alternative paradigm which can explain as much as the old, but can also account for the many 'anomalies'. That is what this book attempts. Since one of the biggest empirical challenges to the 'old' paradigm has been raised by the second largest economy in the world - Japan - this book puts the proposed 'new paradigm' to the severe test of the Japanese macroeconomic reality. In the process, the many 'puzzles' surrounding Japan's economy are explained. However, the new paradigm is found applicable far beyond Japan and provides a consistent explanation of events in many industrialised economies and emerging markets. It also overturns the 'Washington consensus' package of economic development policies and presents a starkly different vision of modern economic policy and its potential to improve our lives.
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Customer Reviews
Most Helpful Customer Reviews
6 of 6 people found the following review helpful
Format:Paperback
I am convinced I have just been reading what will become a classic among economic literature. The author's train of thought and his investigative approach is very convincing, and there is no doubt in my mind that global economic policy makers will have to pay attention to this new paradigm. Like every great new idea this one is probably one generation ahead of its time. It will take this long to overcome vested interests, who are not interested in seeing their cherished lifelong theories put into question. It is nothing short of scary that economic policy today is conducted based on erroneous and faulty assumptions. This is the single most important reason to take a hard look at the new paradigm in macroeconomics put forth so eloquently by the author.
4 of 4 people found the following review helpful
Format:Paperback
A superb treatise on money and banking and its relationship to the wider economy. It combines rigorous scholarship, accessible arguments and sane ways out of the financial turmoil and slavery we find ourselves in. Werner reworks macroeconomic theory through the lens of credit, finding that the supposed 'puzzles' of macroeconomics, such as why the velocity of circulation of money appears to bear no stable relationship to real economic activity, dissolve. The key point is that banks create money (credit, debt) out of nothing, they do not act as intermediaries channelling savings to investment. One can then distinguish between credit created for productive purposes and credit created for speculation on rising asset prices in the financial sector. Having done this you find that productive credit creation predicts the path of economic activity remarkably well.
The abandonment of credit controls with the advent of neoliberal ideology has meant that productive activity has been increasingly starved of funds to the benefit of the financial sector, also causing the latter to spiral out of control. We also learn why conventional fiscal policy cannot counter recessions. Unless new credit is created to finance it, all that happens is that investment funds are diverted from non-bank financial institutions. Werner points out that instead (and here he joins a long line of distinguished commentators) money can be created by the government, independently of the banking sector, interest-free. It can be literally spent into existence in the public interest.
These arguments are bolstered with convincing empirical analysis from Japan, where the author has worked in financial institutions. He therefore has an inside view on the money markets and can speak with an authority born of working knowledge, rather than, as is unfortunately the case with most academics, the armchair. The empirical story charts the housing bubble in Japan, the inevitable bust and then failed attempts to stimulate activity. Sounds familiar? There is political insight too, as we learn that the working practice of central banks differs from the ideology they publicly espouse. The current orthodoxy is exposed as effectively a facade behind which rentiers extort the rest of the population. Unusally for such a radical work, the statistical analysis will pass the exacting standards of even the pickiest academic economist. It's technical in parts but justifiably so, and repays the effort many times over. The technicalities refer to real world entities and processes, unlike those of conventional theory, which means that if you dig hard enough you will find your way through.
My one criticism of the book, and this may stem from the period in which most of the painstaking research was conducted, is that there is no link made between the financial crisis and the ecological crisis. It is therefore implicitly pro-growth, and does not speak to current concerns about either climate change or impending energy scarcity. However, Werner's suggestions for a more sane financial system would integrate well with a bona-fide 'green new deal.' Government money could finance programs of energy efficiency and renewables infrastructure, without interest rates imposing short-term time horizon inconsistent with sustainability.
Overall the book is easily of a sufficient quality and insight to cause it to be systematically ignored by the mainstream of the economics profession. I do hope this does not happen, and I'll be using it in my teaching for sure.
The abandonment of credit controls with the advent of neoliberal ideology has meant that productive activity has been increasingly starved of funds to the benefit of the financial sector, also causing the latter to spiral out of control. We also learn why conventional fiscal policy cannot counter recessions. Unless new credit is created to finance it, all that happens is that investment funds are diverted from non-bank financial institutions. Werner points out that instead (and here he joins a long line of distinguished commentators) money can be created by the government, independently of the banking sector, interest-free. It can be literally spent into existence in the public interest.
These arguments are bolstered with convincing empirical analysis from Japan, where the author has worked in financial institutions. He therefore has an inside view on the money markets and can speak with an authority born of working knowledge, rather than, as is unfortunately the case with most academics, the armchair. The empirical story charts the housing bubble in Japan, the inevitable bust and then failed attempts to stimulate activity. Sounds familiar? There is political insight too, as we learn that the working practice of central banks differs from the ideology they publicly espouse. The current orthodoxy is exposed as effectively a facade behind which rentiers extort the rest of the population. Unusally for such a radical work, the statistical analysis will pass the exacting standards of even the pickiest academic economist. It's technical in parts but justifiably so, and repays the effort many times over. The technicalities refer to real world entities and processes, unlike those of conventional theory, which means that if you dig hard enough you will find your way through.
My one criticism of the book, and this may stem from the period in which most of the painstaking research was conducted, is that there is no link made between the financial crisis and the ecological crisis. It is therefore implicitly pro-growth, and does not speak to current concerns about either climate change or impending energy scarcity. However, Werner's suggestions for a more sane financial system would integrate well with a bona-fide 'green new deal.' Government money could finance programs of energy efficiency and renewables infrastructure, without interest rates imposing short-term time horizon inconsistent with sustainability.
Overall the book is easily of a sufficient quality and insight to cause it to be systematically ignored by the mainstream of the economics profession. I do hope this does not happen, and I'll be using it in my teaching for sure.
3 of 3 people found the following review helpful
Format:Paperback
This book is one of the best I read in many years. It answered quite a few questions I had about interventions that can be taken to solve our current financial crisis. It does so by thoroughly reviewing the decade of economic stagnation in Japan, but, written in 2005 before the onset of the global crisis, it is amazingly applicable to the current crisis. It offers a fresh perspective on what can be done to solve crises like these, and at the same time, is critical of the current dominating economic theories as they are taught at universities. In this respect, it truly does offer a new perspective on a number of economic phenomena, and can justifiably be called a new paradigm. At the same time, the book is very accessible: there are few esoteric mentions of economic jargon, and, in a way, the book reads like a detective, where a number of enigma's are being outlined, that makes one curious how they will be solved. An absolute must-read for anyone interested in the current crisis.
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Masterful
This book re-examines modern economic theory in the light of Japan's experience of a prolonged recession. Read more
Published 7 months ago by Richard Glover
Do not ignore this book!
Winston Churchill once said that people `occasionally stumble over the truth, but most pick themselves up and hurry off as if nothing happened'. Read more
Published on 31 July 2007 by C. E. Bazlinton
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