Paul Krugman on Japan

[Lawrence]

I was away for a few days, sorry if this was already discussed. Did any of you catch Paul Krugman's piece in the
Sunday Magazine of the NYTs? He suggests ways America might be in similar straits to Japan 10 years ago, and then
he suggests ways in which we might be different. I thought the tone of the piece a little more alarmist than
needed, but then, his point was to attack the complacency that might allow a worse case scenario to become reality.

One thing jumped out at me in the article. Japan, apparently, engaged in truly dramatic public works spending this
decade, and seemingly for nothing. While it staved off immediate recession, it didn't lead to a sustained take off.

In theory, massive spending on infrastructure should have raised the productivity of Japan's economy and thus
helped spark a recovery, yes?

I was left with the impression that Japan's money would have been better spent on research and universities rather
than concrete (Krugman doesn't mention research, he only mentions that a lot of concrete was poured and that it
didn't lead to a lasting recovery). Is it possible to spend too much on research? I know oversupply of any input
can lead to an investment recession, but research, especially government sponsored research, seems like a special
case. Yes?

--lk