Intellectual Property Law

Possible History/Economics Lesson from Japan in the 1990s

By Deven Desai

Professor Diego Comin of Harvard Business School has a working paper called An Exploration of the Japanese Slowdown during the 1990s. Here is the blurb from HBS:

Why was the 1990s a lost decade for Japan? HBS professor Diego Comin argues that it was the combination of some shocks that lasted for about three years and the response of companies that drastically reduced their expenses in adopting new technologies and developing new ones. Though the severe shocks that hit the Japanese economy did not persist, the investments that Japanese companies and entrepreneurs did not undertake to improve technology and production methods during the 1990s propagated those shocks and made their effects very long-lasting.

I am sure economists will have more to say than I about the paper and its validity (and to be fair, the paper notes several variables and issues future research should take into account). Here, however, I am interested in the idea that one can have a better sense about the relationship between investment in technology and moving an economy out of a shock event. Models can be broken of course. Nonetheless, it may be that work such as this paper provide insight about factors that open the door to possibly better ways to proceed even if they do not have an absolute prescription for current economic ills. In other words, this paper may not fully support this claim: especially now, broad investment in R&D is something our country must do. Yet, as I digest the paper, I hope it explains the possible truth of that claim.

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Full post as published by Madisonian.net on February 02, 2009 (boomark / email).