1. Regulatory uncertainty. Prez/Congress are using class warfare rhetoric to argue that every business decision should be disclosed, reported, and scrutinized. It is not clear to anyone just how deep the "crucify them" antagonism goes. So far, no one has seen the bottom. The people the O-bam has appointed are all largely professional activists and cranks, with no conception of what it takes to run a business or create jobs. Businesses are sitting on piles of cash, and the 2008 enthusiasm for Obama has evaporated. He just straight lied about being interested in, or even capable of, bipartisanship.

2. Health care. Republicans in the House and Senate are using class warfare rhetoric to blame poor for needing health care. It doesn't really matter what happens to O-care in the court. In fact, the best thing would be if O-care is found to be unconstitutional. The problem is that real WAGES have stayed flat over the past two decades. But real TOTAL COMPENSATION has skyrocketed, and has stayed the same, basically, as a percentage of GDP. So, workers (the ones who are employed) have no extra income to spend on consumption. But an employer trying to hire (if there were any) has to pay not just the wage, but also that giant wedge of health insurance. So, no new hiring, no new consumption spending.

3. Deficit. Republican in the House and Senate, and the states, and the woodpile, have this amazing ideology that we can't raise taxes. Well, you are DAFT: Deficits are Future Taxes. Conservatism once meant two things: (a) question spending. (b) ensure fiscal responsibility, so that we pay for what we do spend. Sometime around 1980, the Republicans figured out that it worked much better electorally to do THESE two things: (a) question spending (although not really, since spending increases as fast under Republicans as under Democratic administrations) (b) cut taxes. Doesn't matter what the question is, the answer is cut taxes. This is worse than class warfare, this is time machine warfare. We are taking money out of the college funds of children who haven't been born yet. They certainly can't vote. So, while spending is too high, and both the Dems and Repubs share blame for that, taxes are too low, given our level of spending (especially on wars started by Republicans).

My beta indices showed the value of low volatility equity strategies, as the previously high-flying high beta stocks were crushed in May, and so now lag the S&P500 year-to-date.  Low beta strategies, meanwhile, crept up and overtook the basic S&P500 benchmark.   Above is a total return chart for daily data.

These beta portfolios consist of the the top/bottom beta 100 non-etf, non-ADR, non-REIT equities that were in the top 2000 market cap stocks in the US.  Beta was measured using daily data over the prior year as of December 31, 2011.

There may be an argument for taxing fat; but there is no argument for taxing foods that fat people might eat.

The lowest price is usually available only if patients don't use their health insurance. In one case, blood tests that cost an insured patient $415 would have been $95 in cash.

The True Cost of Healthcare

A View of Healthcare Costs from the Inside

By David Belk MD
1. Introduction

  -Almost all prices in health care are hidden from both doctors and patients. Any cost that’s hidden or confusing is easy to inflate.

Cities with the Most College-Educated Residents
Share of residents with college degrees in the 100 largest metro areas, based on data from the Brookings Metropolitan Policy Program.

Jewish-Americans have a long history of finding role models who broke barriers, accomplished great things, or engaged in more mundane acts of heroism. Jewish religious schools are full of discussions of athletes like Hank Greenberg and Sandy Koufax, or the legions of Jewish entertainers and scholars, as ways to demonstrate the accomplishments of American Jews.

But in all those stories many of us heard growing up, one set of brave heroes was never mentioned: the Schechter brothers of New York City. The Schechters were kosher butchers operating in the 1930s who stood fast to their commitment to the dietary laws of kashrut in the face of ferocious pressure and prosecution by a powerful government. They eventually took their case to the highest court in the land—and won—defeating one of the most popular and powerful administrations in American history.

One would think this story of Jewish heroism and commitment to Jewish values would be inspirational for generations of young American Jews. But the Schechter brothers were up against Franklin Delano Roosevelt.

Here are some of the items in a growing library of decelerating growth models.

Policy actions have become increasingly discretionary. Moreover, the financial crisis and associated policy responses have left many central banks operating with their policy rate near the zero lower bound; this means that they are no longer following a systematic rule, if they ever were. Given that central bankers are, in fact, acting in a discretionary manner, whether it is because they are at the zero bound or because they cannot or will not commit, how are we to interpret policy advice coming from models that assume full commitment to a systematic rule? I think this point is driven home by noting that a number of central banks have been openly discussing different regimes, from price-level targeting to nominal GDP targeting. In such an environment where policymakers actively debate alternative regimes, how confident can we be about the policy advice that follows from models in which that is never contemplated?

The Lucas critique, named for Robert Lucas' work on macroeconomic policymaking, argues that it is naïve to try to predict the effects of a change in economic policy entirely on the basis of relationships observed in historical data, especially highly aggregated historical data.[1]

The basic idea pre-dates Lucas' contribution (related ideas are expressed as Campbell's Law and Goodhart's Law), but in a 1976 paper Lucas drove home the point that this simple notion invalidated policy advice based on conclusions drawn from large-scale macroeconometric models. Because the parameters of those models were not structural, i.e. not policy-invariant, they would necessarily change whenever policy (the rules of the game) was changed. Policy conclusions based on those models would therefore potentially be misleading. This argument called into question the prevailing large-scale econometric models that lacked foundations in dynamic economic theory. Lucas summarized his critique:

"Given that the structure of an econometric model consists of optimal decision rules of economic agents, and that optimal decision rules vary systematically with changes in the structure of series relevant to the decision maker, it follows that any change in policy will systematically alter the structure of econometric models."[2]
The Lucas critique suggests that if we want to predict the effect of a policy experiment, we should model the "deep parameters" (relating to preferences, technology and resource constraints) that govern individual behavior. We can then predict what individuals will do, taking into account the change in policy, and then aggregate the individual decisions to calculate the macroeconomic effects of the policy change.[3]

The Lucas critique was influential not only because it cast doubt on many existing models, but also because it encouraged macroeconomists to build microfoundations for their models. Microfoundations had always been thought to be desirable; Lucas convinced many economists they were essential. Real Business Cycle economists, starting with Finn Kydland and Edward Prescott, focused their research on using microfoundations to formulate macroeconomic models. Contemporary macroeconomic models microfounded on the interaction of rational agents are often called dynamic stochastic general equilibrium (DSGE) models.[citation needed]

You know the drill. They try to board us by groups, but people are smashing on the plane like it's the New Delhi train station. When the plane is half full, the overhead bins fill up. Then people start dragging massive bags all the way upstream for gate checks. On and on it goes, tempers frazzling and  a few hundred million dollars of plane, costly crew, and my not so free time sitting idly on the ground.

So I have long wondered: why in the world do airlines charge $25 for checking bags, and not $25 for bringing huge bags on the plane? 

I finally found out the answer, here

Two years ago, [New York Senator Charles] Schumer got five big airlines to pledge that they wouldn’t charge passengers to stow carry-on bags in overhead bins. The promise came after Spirit Airlines became the first U.S. carrier to levy such a fee.
The article is actually about Sen. Schumer's latest great idea, to force airlines to seat families together even if said families don't want to pay the $25 fee for advance seat selection.

Next time you miss your connection because people took too long to stow their steamer trunks in the bins, you know who to thank.

Of course the larger picture is not the silliness of one individual, but the hubris of the Federal Government to try to regulate such things in the first place. 

Mr. Prasad is a contrarian. He calls government welfare programs patronizing. He dismisses the countryside as a cesspool. Affirmative action is fine, in his view, but only to advance a small slice into the middle class, who can then act as role models. He calls English “the Dalit goddess,” able to liberate Dalits.

Along with India’s economic policies, once grounded in socialist ideals, Mr. Prasad has moved to the right. He is openly and mischievously contemptuous of leftists. “They have a hatred for those who are happy,” he said.

The above observations imply that a key finding of the paper—that child mortality fell at the treatment sites at triple the nationwide rural background rate—is incorrect. Child mortality fell at 5·9% per year at the sites versus 6·4% per year on average across all areas of the countries in question (probably more in rural areas alone) according to the available data that most closely match the project period. This difference is not significant.

Germany sold €4.5bn of two-year government bonds at a record low yield of 0.07 per cent, underscoring the strong demand for safer assets amid fears that Greece could be forced out of the eurozone.
The German Bundesbank said the two-year “Schatz”, which was sold with a zero-coupon for the first time, received bids for €7.7bn, compared to a maximum sales target of €5bn.

My colleagues and I found dramatic evidence of this positive relationship between markets and morality in our study of fairness in simple societies—hunter-gatherers, horticulturalists, nomadic herders, and small-scale sedentary farmers—in Africa, Latin America, and Asia. Twelve professional anthropologists and economists visited these societies and played standard ultimatum, public goods, and trust games with the locals. As in advanced industrial societies, members of all of these societies exhibited a considerable degree of moral motivation and a willingness to sacrifice monetary gain to achieve fairness and reciprocity, even in anonymous one-shot situations. More interesting for our purposes, we measured the degree of market exposure and cooperation in production for each society, and we found that the ones that regularly engage in market exchange with larger surrounding groups have more pronounced fairness motivations. The notion that the market economy makes people greedy, selfish, and amoral is simply fallacious.

When nations are ranked by gross national income per capita, the United States comes in sixth, after Luxembourg, Norway, Switzerland, Denmark, and Iceland, confirming one's general impression that the United States is the wealthiest large country; none of the countries ranked ahead of the U.S. have more than a fortieth of the U.S. population (Switzerland, the most populous of the group, has a population of 7.5 million). But when countries are ranked by the United Nations' Human Development Index, which rates 177 of the world’s 193 countries, the United States falls to 12, Denmark to 14, and Luxembourg to 18; and among the nations promoted above the United States are Australia, Canada, Sweden, Japan, the Netherlands, France, Finland, and Spain (in that order). The composition of the Index reflects dissatisfaction with income as a measure of well-being. And of course it is a limited measure; income is not the only argument in a person's utility function. The Human Development Index is an attempt to develop a better measure of well-being. It is a composite of three indexes: GDP per capita (computed on a purchasing power parity basis, to correct for distortions introduced by using currency exchange rates); life expectancy at birth; and a combination of the adult literacy rate and the combined primary, secondary, and college/university enrollment rate, with the adult literacy rate being weighted twice as heavily as the enrollment rate. For each component index, the value of 0 is assigned to the minimum level of the development indicator (income, life expectancy, and enrollment) and 1 to the maximum, and each country's score is the percentage of the maximum level that it achieves. A country's Human Development score is the simple average of its scores on the three indexes. I cannot myself see the value of the Human Development Index. Not that per capita income, life expectancy at birth, and level of education as proxied by adult literacy and school enrollments are unimportant; a ranking of each of these aspects of human development might be a good first step in identifying areas of weakness that a society might wish to devote additional resources to improving. It is the combining of the indexes and announcing that the combination offers a ranking of nations by the degree of their "human" as distinct from narrowly defined "economic" development that strikes me as dubious, and indeed as senseless. The obvious objection is to the equal weighting of the three indexes, and to the omission of a host of other important dimensions of development, such as housing quality, pollution, tax rates, adult life expectancy, crime rates, unemployment, inflation, quality and variety of goods and services, economic growth, and quality of education--though including them would exacerbate the weighting problem, and some involve serious measurement problems. A less obvious objection, but a general problem with rankings, is that from a sensible evaluative standpoint the distance between ranks is more important than the number of ranks that separate two countries. The wealthiest nation has a per capita income twice as great as that of the 20th wealthiest nation. That is a big difference. But now consider life expectancy at birth. Japan is number 3 with a life expectancy at birth of 82 years; the United States is only number 44, with a life expectancy at birth of 78. A four-year difference in life expectancy is not trivial by any means; but compare it to the difference in per capita income between the third richest country, Switzerland, and the 44th, Palau: the Swiss income per capita is almost eight times as great as the per capita income of Palau. If a country devotes resources to improving life expectancy, it has to give up some other good. It is hard to say that the United States is making a mistake in not spending more resources on extending life expectancy; many Americans think that we spend too much on health care already. One reason (though by no means the only one) that the United States ranks only 44th in life expectancy is that our large black population has an abnormally high death rate; the average life expectancy of black male Americans is only 69. This shockingly high death rate reflects deep-seated problems of American blacks that would probably cost an enormous amount of money to solve. The political will to expend those resources does not exist.

Other scholars, however, say that government itself is the problem. T. N. Srinivasan, a professor of economics at Yale University, says that political freedoms, to work, need to be complemented by economic freedoms. Mr. Sen, he said, ''doesn't emphasize enough the importance of free markets, trade and access to world markets and capital.'' The reason authoritarian China has grown more rapidly than democratic India, he said, is its embrace of economic liberalization. Mr. Sen, he added, ''seems to have a much dimmer view of globalization than people like me, who see open markets as the best opportunity of the last century'' for countries to grow and develop.

The case of medieval Europe makes for pleasant reading – especially for academics. A new form of human capital (legal training) was discovered, elites supported investments in it by establishing universities and giving students privileges (effectively subsidising training); then, secular and spiritual lords hired the legally-trained to work as administrators, and supported contexts in which legal training was valuable (e.g., markets). However, the fact that Roman legal knowledge spread and was ultimately accepted throughout Europe should not be taken for granted. It was not inevitable.
First, a focal point for all students and scholars interested in learning and teaching about Roman law had to emerge; this coordination problem was solved with the rise of Bologna as the preeminent location of legal teaching.
Second, teachers and students of law needed state protection: in the Middle Ages, foreign students’ and faculty’s legal rights were poorly-defined and left them open to expropriation; they needed protection from townspeople; they needed the right to travel. The establishment and protection of university students’ and faculty’s legal rights was a policy choice made by secular and Church lords. Famously, Emperor Frederick I Barbarossa’s Authentica Habita of 1155 granted a range of privileges and protections to students and faculty.
Finally, and perhaps most importantly, Roman and Canon Law had to be accepted by the rulers of the time as their tool of choice to adjudicate cases and manage an administration.2  Without this form of elite support, choosing to study Roman law might have had too low an expected return for students to invest in the training. In addition, had elites found the study of Roman law useless, they may not have supported it by protecting students – indeed, they might have discouraged it if they found legal study threatening to their positions.
Policy choices made by the ‘states’ of the time – both in the education sector per se, and in the labour market – were thus crucial to the success of the first universities, and the investments made in the new form of human capital that they produced. This pattern was repeated in the public support for many of America’s research universities in the 19th and 20th centuries, and it bears remembering in the 21st century.

As Gabriel Kolko (one of the few historians who did understand regulatory economics) wrote in The Triumph of Conservatism, every major regulatory agency established in the Progressive era was established at the request of the regulated industry. There were consumer complaints of course. But the design and thrust of regulation primarily served the interests of the producers, not the consumers. This was also generally true of the whole slew of regulatory agencies created during the New Deal.

The three indexes ended with what were their biggest weekly percentage declines this year. The Dow was down by 3.5 percent, the S.&P. was off 4.3 percent and the Nasdaq ended 5.3 percent lower in the five-day trading period when compared with the previous week.

Euro zone concerns have overshadowed the financial markets as Greece has tried to form a government in the wake of its election, with fears of a possible default and exit from the currency zone sending ripples through the market. But recent developments indicate the country could form a government in the June election, which might be a supportive factor, he added.

The Bureau of Labor Statistics tracks the Consumer Price Index. One of the prices they track is new vehicle costs. THey have data on prices for new cars dating back to 1935. The following is a graph of the price index from 1935 to 2007:

Of the personnel moves, the promotion of Mr Zames is widely seen as the most significant. An alumnus of Long-Term Capital Management, the hedge fund that blew up in 1998, who now advises the US Treasury on its debt issuance, Mr Zames is widely seen as a future contender to be chief executive.

Despite the lack of evidence, it is remarkable how much allegiance the Keynesian approach receives from policy makers and economists. I think it's because the Keynesian model addresses important macroeconomic policy issues and is pedagogically beautiful, no doubt reflecting the genius of Keynes. The basic model—government steps in to spend when others won't—can be presented readily to one's mother, who is then likely to buy the conclusions.

Keynes worshipers' faith in this model has actually been strengthened by the Great Recession and the associated financial crisis. Yet the empirical support for all this is astonishingly thin. The Keynesian model asks one to turn economic common sense on its head in many ways. For instance, more saving is bad because of the resultant drop in consumer demand, and higher productivity is bad because the increased supply of goods tends to lower the price level, thereby raising the real value of debt. Meanwhile, transfer payments that subsidize unemployment are supposed to lower unemployment, and more government spending is good even if it goes to wasteful projects.

It is important to ensure that fiscal adjustment and structural reforms are socially sustainable; to the extent that there is room to mitigate the impact of austerity on growth and employment, this should of course be done – although in some countries the room is limited, or needs to be found by tackling wasteful public expenditures. But it is equally important to recognise where the key structural problems are and to address them. The ambition cannot be simply to go back to the good old days of 30% youth unemployment.

Fortress Shutters Commodities Fund
May 11 2012 | 12:27pm ET
Fortress Investment Group is throwing in the towel on its four-year-old commodities hedge fund following a rough stretch.
The New York-based alternative investments giant said it would close the Fortress Commodities Fund later this month. The fund has lost 12.57% this year, including 4.23% last month.
The Commodities Fund has already seen its assets dwindle by more than half. It launched with $1.1 billion in 2008, but had just $500 million in assets at the end of March. As recently as last year, the fund managed $800 million.
Fortress disclosed its plans in a Securities and Exchange Commission filing this week.
"This will be the final month in which monthly and year-to-date performance data for the Fortress Commodities Fund will be reported on Form 8-K," Fortress wrote in the filing. "On or about May 23, the Fortress Commodities Fund will cease its ongoing operations and will commence procedures to distribute capital to its investors."
The filing was pretty grim reading for other Fortress investors, as well. The firm's Macro Fund lost 2.44% in April and its Macro Asia Fund 2.18%. Both funds, however, remain up on the year, with the former returning 3.6% and the latter 3.5%.

We are left with the question of why, if regulations are usually a legitimate response to mischievous games played by some parties in the private sector, these regulations are often so inchoate, if not outright silly.

Lack of competence among the rule writers — especially unfamiliarity with the operations of those they seek to regulate – may be part of the answer, but probably not a large part.

More important, in my view, is the gantlet that legislation and rule-making must run under our system of governance.

Before an original bill passes Congress, it has been worked over (“marked up”), in each of the two chambers, by sundry committee fiefs whose members may be beholden to a variety of moneyed interest groups, each eager to steer the legislators’ hands.

The specific regulations called for in a bill, once passed, must also survive the scrutiny and influence of special interest groups, which typically work through members of Congress or the upper levels of the executive branch, whose affection they have acquired.

Even the best-written original bill cannot emerge from that process in the form of a coherent set of rules. Many a rule may appear puzzling to straight-thinking people, and some even silly. Chances are they make sense to some interest group that had purchased it, so to speak.

The key result from the paper is that

the average rate of reduction of mortality in children younger than 5 years of age was three-times faster in Millennium Village sites than in the most recent 10-year national rural trends (7.8% vs. 2.6%).

However, when we correct for a mathematical error and use more recent comparison data, we find that under-5 mortality has fallen at just 5.9% per year at MVP sites, which is slower than the 6.4% average annual decline in under-5 child mortality in the MVP countries nationwide.

The economy keeps producing stressful volatility events. Good managers keep shedding risk and monetising losses and are duly fired, leaving us with a monoculture of brazen managers who will never stop loss because they are convinced central banks will print more money.

The recent paper, by economists at Harvard and George Washington University, compared more than 2,650 programs within for-profit schools in three states over multiple years and found that the schools receiving federal grants and loans set their tuition roughly 75 percent higher than those institutions that go without government support.

College tuition wasn’t always a national crisis. As recently as the 1970s, the price of tuition actually declined 17 percent at public universities and 13 percent at private ones, according to data from the American Council on Education, a leading higher-ed lobby.

By the 1980s, things had changed. The price of tuition started to climb: By the end of the decade, it was up 47 percent at public universities and 54 percent at private schools, according to the council. What was different?… the Middle Income Student Assistance Act, which had the effect of offering federally subsidized student loans to anyone who qualified for college, regardless of income. During the Carter and Reagan administrations, the government further expanded federal aid, including Pell grants and Perkins loans for needy students. From 1978 to 1981, total available aid grew 70 percent, to a total of $14.7 billion, according to the Congressional Budget Office.

This morning, a piece in Business Standard, one of India's most respected newspapers, caught my eye.

Examining data on the economic performance of Indian states during a seven-year-period (2004-11), AK Bhattacharya, editor of the newspaper, wrote that he was puzzled by the data on Gujarat.

Gujarat is ruled by Narendra Modi, one of India's most controversial politicians, who has modelled himself as a no-nonsense economic reformer of one of India's fastest-growing states.

In March, a senior minister of his cabinet told me that Gujarat has been recording scorching double-digit growth, prompting even The Economist magazine to call it India's Guangdong. "Modi Means Business" said Time magazine when it put him on the cover recently.

Mr Bhattacharyya, however, wrote in Wednesday morning's edition of his paper that Gujarat's economy grew by 6.3% annually during this period, up from average growth every year of 3.6% - a relatively low base - in a 10-year period ending in 2003.

"It has seen the most stable of governments for the last several years," Mr Bhattacharya wrote. "And yet, it has seen its growth hovering around 6% for the last seven years."

I wrote a blog post with a link to the piece wondering whether Gujarat's red-hot economic growth was an invention of the foreign media which has been written extensively about Mr Modi's reformist government.

I had also wondered whether there was something amiss with the data on Gujarat in the Business Standard article.

Indeed there was - and I have updated the blog post to reflect this.

Since I wrote my earlier version, Mr Bhattacharya has carried out some crucial corrections in his Business Standard article - the modified version appeared on the newspaper's website later in the day.

He has written that Gujarat actually clocked a growth rate of 10.08% annually during a seven-year period beginning 2004-05. That is obviously far better than the 6.3% growth that he mentioned in the earlier version.

He has also taken out a paragraph in which he wrote: "It (Gujarat) has seen the most stable of governments for the last several years. And yet, it has seen its growth hovering around 6% for the last seven years."

Double-digit growth, of course, puts Gujarat in the league of the high growth states in India. The doubts that I had about it after reading Mr Bhattacharya's piece have now been clarified by the writer himself.

He writes in the modified piece:

"… which are the states that clocked double-digit growth in its gross state domestic product during the seven-year period from 2004-05? Only six states will make that list. On top of that list is Uttarakhand at 13.2%, followed, as expected, by Bihar at 10.9%, Maharashtra at 10.7%, Tamil Nadu at 10.4%, Haryana at 10.1% and Gujarat at 10.08%."

In the amended version Mr Bhattacharya also adds that "Gujarat's story is well-known and shows what sustained growth-oriented policies can do to a state's economic fortunes".

There is a vigorous debate on whether such high growth is delivering adequate social development in Gujarat. It is a point which many believe is valid is for the whole of India. But Gujarat, going by the data, is indeed a red-hot economy.

For while the Germans are often portrayed as knuckleheaded advocates of endless austerity, their real message is more sophisticated and convincing. It is that the drive to balance budgets within Europe must be combined with reforms that will encourage private-sector job creation.
The scope for such reforms is enormous. Taxes on labour in France are very high. To his credit, Mr Hollande is promising tax breaks for employers who hire young people. But it would be better simply to cut charges on labour across the board. This is one tax cut that really might pay for itself, by creating jobs.
European businesses are also hobbled by red tape. My favourite recent example was a story in the New York Times of a Greek entrepreneur, whose efforts to start an internet business involved an odyssey of form-filling, culminating in an official demand for a stool sample. High rates of youth unemployment in countries such as Spain and Italy are closely connected to the excessive protections and benefits for workers on full-time contracts – which make employers wary of taking on new hires. As one Spanish businessman recently complained: “In this country, it is easier to divorce your wife than to sack an employee.”
Pushing through labour market reforms is tough and even dangerous. In Italy, in recent years, two economists advising the government on labour-market reforms have been assassinated. But such reforms are the only long-term route to stronger job creation.
By contrast, calls for Europe to spend its way out of debt are an illusion. There is, of course, scope for argument about the pace of deficit reduction. But in a highly-taxed, highly-regulated, highly-indebted continent like Europe, more state-funded public works would simply build another road to nowhere.

Man's performance under scrutiny
 
2007
2008
2009
2010
2011
2012 (YTD)
1. Man AHL Diversified
2. BlueCrest BlueTrend Fund
3. Winton Futures Fund
AHL¹ +19.6% +33.2% -16.9% +14.8% -6.8% +2.5%
BlueTrend² +27.2 +42.8% +3.95% +15.5% +0.12% +1.3%
Winton³ +18.0 +21.0% -4.63% +14.5% +6.29% -1.0%

South Korea may soon be richer than Japan

FOR years, Japan was Asia’s richest and most powerful economy. It was the first Asian economy to industrialise, and the emerging Asian tigers—Hong Kong, Singapore, South Korea, Taiwan and later China—merely followed in its tracks. Now, however, Japan is steadily being overtaken. China’s economy is now bigger than Japan’s, but less noticed is the fact that Asia’s so-called newly industrialised economies are becoming richer than Japan. Most economists reckon that the best way to compare living standards is to take GDP per person measured at purchasing-power parity, which adjusts for differences in the cost of living in each country. On this gauge, Japan was overtaken by Singapore in 1993, by Hong Kong in 1997 and by Taiwan in 2010. But the most humbling re-ranking will be when South Korea becomes richer than Japan. The latest forecasts from the IMF suggest that this could happen within five years. That would be a remarkable turnabout. In 1980 South Korea’s GDP per person was barely a quarter the level of Japan’s.