Guacamole, tulips and Japan’s lost decade

This week’s blog is based on some insights I’ve gleaned from listening to the Nobel Prize winning economist Robert Shiller.

He said to me that “Since you’re a journalist, I think I have to point out that people who go into journalism do have idealistic purposes. It’s not a field you would go in if you think like a billionaire.”

He’s right, of course, because although there are some reasonably well paid journalists, most of us are much poorer than the famous people we write about, including Nobel prize winners.

Tulip mania

I asked Professor Shiller about the influence of the media. I put it to him that in countries like China, the economic coverage is always upbeat but in the UK, the media sees its primary role as raising concerns.

“The media has a complicated relationship with economics,” he replied. “There was no evidence of speculative bubbles before there were newspapers.”

He reminded me that the price of tulips soared up way beyond their real value when prices were hyped by the media way back in the early 1600s, just at a time when newspapers and magazines were starting to become popular.

Lessons from Japan

Professor Shiller’s new book is called Narrative Economics and as well as speaking at the LSE he also did an interview with the BBC in which he gave an interesting example about the way people respond to rate cuts by central banks.

“When the Federal Reserve in the United States cut its base interest rate to between zero and a quarter of one percent, it launched a narrative which reminded people of Japan’s experience. After the Bank of Japan cut rates to zero, the Japanese economy went through a lost decade.  Using the “Z word” starts a scary narrative which might harm people’s confidence, so central bankers know they have to be careful what they say.”

“I am proposing that the narrative we use causes changes to the economy and you can run controlled experiments to show this,” said Professor Schiller, who is head of economics at Yale University in the United States.

Trump the genius

“I focus on popular narratives which come to mind when people are making economic decisions. And I think that Donald Trump is a genius at one thing, which is judging narratives and packaging them. He manages to be in our faces all the time. He’s learned how to make audiences excited, in the same way that fighters inspire audiences to be excited about a fake wresting match.”

Guacamole

During his speech, at the London School of Economics, Professor Shiller told a story to illustrate how our minds focus on visual images rather than abstract ideas.

Professor Shiller said that students at a law school were offered two accounts of a crime and then asked to decide if the accused was guilty.

The first group of students were simply told some facts but the second group heard a story.
It contained this phase:

“The accused lunged at the victim, and in the process knocked over a bowl of guacamole, which fell onto a white shag pile carpet.”

Professor Shiller said those who heard the guacamole story were more likely to convict the accused than the group who just heard the facts.

Professor Shiller concluded: “Economists like to think we are the queen of the social sciences because we don’t have to deal with fuzzy stuff, only the data” but he went to explain how the stories we tell affect people’s emotions and have a big economic impact, which can be measured.”

Pink Floyd’s swipe against Japan

I once worked with a woman who sang vocals on a number one hit single by the legendary British rock band, Pink Floyd.

When I met her, she was a hard-working radio producer at the BBC.

But when she was a schoolgirl in 1979, she was picked to be in the video of the song Another Brick In the Wall and gleefully expressed her anger at an oppressive regime.

“We don’t need no education, We don’t need no mind control,” she sang, as part of a choir of children from Islington Green School, in London.

“Hey, teachers, leave them kids alone!”

Hit and miss

Another Brick In the Wall remains Pink Floyd’s most recognisable song. It has catchy lyrics set to a disco beat, with searing electric guitar. It’s sold millions of copies worldwide.

But four years later in 1983, Pink Floyd put out another single called Not Now John which was a commercial failure.

The track contained a lot swearing, although there was a censored version for the radio. The other problem was the complexity of the song’s subject. It deals with the resentment felt by blue collar factory workers against foreign rivals in the manufacturing sector.

When Rachel Mann reviewed it for the website Quietus she concluded that Not Now John was written in the voice of an arrogant man and although she thinks it’s a fun song, in her view it is “musically crass and obvious.”

The wily Japanese

The song’s narrator complains that he must compete with “the wily Japanese.” This has led to complaints that Pink Floyd were derogatory to Japan.

Collins Dictionary says that “if you describe someone, or their behaviour, as wily, you mean that they are clever at achieving what they want, especially by tricking people.”

In the video for the song, backing vocals are provided by a trio of geisha girls, played by Caucasian women. The film features an Oriental boy wearing a T-shirt with Japan’s Rising Sun flag, who falls to his death.

I believe that Not Now John reflects the political mood of its time. In the early 1980s, Japan was far from popular in the UK and Europe, partly because of its rising economic power.

Rivalry and protectionism

In his 1983 book The Japanese Mind: The Goliath Explained, Robert C Christopher mentions how European governments tried to exclude Japanese products from their markets and he complained about “the cultural and ethnic arrogance” that Europeans displayed towards Japan.

“Broadly speaking,” wrote Mr Christopher “Western Europeans did not like the Japanese, had no desire to understand them and would devoutly wish they would just go away.”

Partner not rival

I am pleased to say that things have improved.

These days the Japanese are held in respect by many people in Europe, although they do still tend to be stereotyped.

On the whole, Japan is regarded as an economic partner, rather than a rival.

Rock on

My colleague says she enjoyed singing “We don’t need no education” for Pink Floyd.

However, I know that in reality she appreciated her time at school and when she left, she devoted her career to explaining international affairs.

I still like listening to Pink Floyd and am jealous that she sang with them yet I know that a rock song is not the best way to delve deep into economic theory.

Even the great Pink Floyd struggled to have a hit with a reflection upon the political implications of an imbalance of trade.