The Role of Preconceived Ideas in Macroeconomic Policy: Japan's Experiences in the Two Deflationary Periods

59 Pages Posted: 5 Apr 2005

See all articles by Koichi Hamada

Koichi Hamada

Yale University - Department of Economics

Asahi Noguchi

Senshu University - School of Economics

Date Written: March 2005

Abstract

This paper examines the role of misleading economic ideas that most likely promoted the economic disasters of the two deflationary periods in Japanese economic history. Misleading ideas deepened the depression during the interwar years, and erroneous thinking prolonged the stagnation of the Japanese economy since the 1990s. While the current framework of political economy is based on the self-interests of political agents as well as of voters, we highlight the role of ideas in policy making, in particular, in the field of macro-economy where the incidence of a particular policy is not clear to the public. Using two significant examples, this paper illustrates the role of preconceived ideas, in contrast to economic interests, that dominantly influenced economic policy making.

Keywords: Preconceived ideas, perception on economic mechanism, vested interests, great depression, deflation in contemporary Japan

JEL Classification: B2, F4, N2

Suggested Citation

Hamada, Koichi and Noguchi, Asahi, The Role of Preconceived Ideas in Macroeconomic Policy: Japan's Experiences in the Two Deflationary Periods (March 2005). Available at SSRN: https://ssrn.com/abstract=698181

Koichi Hamada (Contact Author)

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Asahi Noguchi

Senshu University - School of Economics ( email )

2-1-1, Higashi-mita, Tama-ku
9722
Kawasaki, Kanagawa 214-8580
Japan

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