Policy Study

Avoiding an American Lost Decade

Lessons from Japan's Bubble and Recession

The current economic uncertainty in the United States, and the government’s response to it, is eerily similar to that of Japan’s “Lost Decade” according to a new Reason Foundation report.

The study finds that Japan’s housing prices rose by 51 percent and commercial real estate values rose 80 percent between 1985 and 1991. In the U.S., commercial real estate and housing prices both skyrocketed 90 percent from 2000 to 2006.

The Nikkei, Japan’s stock index, fell from 38,975 in 1989 to just 18,934 by the end of 1999. During the continuing economic malaise, it dropped even further to 7,603 in 2003. The Dow Jones Industrial Average hit 14,115 in October 2007. On February 19, 2009, the Dow closed at 7,465, its lowest finish since 2002.

President Barack Obama recently signed a $787 stimulus package that includes over $60 billion for infrastructure and transportation projects. Japan passed 10 stimulus packages in the 1990s that would equal $1.4 trillion in today’s dollars. From 1992 to 1999, Japan spent over $500 billion (in today’s dollars) on public works projects. Despite this infrastructure spending, Japan’s unemployment rate more than doubled and the economy remained stagnant.


Anthony Randazzo

Anthony Randazzo is director of economic research for Reason Foundation, a nonprofit think tank advancing free minds and free markets. His research portfolio is regularly evolving, and he maintains a wide interest in economic policy at both a domestic and international level.

Randazzo is also managing director of the Pension Integrity Project, which provides technical assistance to public sector retirement system stakeholders who are seeking to prevent pension plan insolvency. His research focus on the national public sector pension crisis has a dual focus of identifying the systemic factors that cause public officials to underfund pension obligations as well as studying the processes by which meaningful pension reform can be accomplished. Within the Project he leads the analytics team that develops independent, third party actuarial analysis to stakeholders considering changes to public sector retirement systems.

In addition, Randazzo writes about the moral foundations of economic theory, and is currently developing research on the ways that the moral intuitions of economists influence their substantive findings on topics like income inequality, immigration, or labor policy.

Randazzo's work has been featured in The Wall Street Journal, Forbes, Barron's, Bloomberg View, The Washington Times, The Detroit News, Chicago Sun-Times, Orange-County Register, RealClearMarkets, Reason magazine and various other online and print publications.

During his tenure at Reason he has published substantive research on housing finance, financial services regulation, and various other aspects of economic policy at the federal level. And he has written regularly on labor economics, tax policy, privatization, and Turkish-U.S. political and economic issues.

Randazzo has also testified before numerous state and local legislative bodies on pension policy matters, as well as before the House Financial Services Committee on topics related to housing policy and government-sponsored enterprises.

He holds a multidisciplinary M.A. in behavioral political economy from New York University.

Follow Anthony Randazzo on Twitter @anthonyrandazzo

Michael Flynn is Director of Government Affairs for the Reason Foundation, a nonpartisan think tank whose mission is to advance a free society by developing, applying, and promoting libertarian principles, including individual liberty, free markets, and the rule of law.

Mr. Flynn has more than fifteen years experience in the development, implementation and analysis of public policy. He has provided his expertise to a number of non-profit organizations, including the Employment Policies Institute, the American Beverage Institute, the Center for Consumer Freedom, among others. For a number of years he directed all policy and legislative activities for the American Legislative Exchange Council, the nation's largest bi-partisan membership association of state legislators. He began his policy career in the Illinois General Assembly, where he worked as an analyst both in the capitol and in the Assembly's Washington, DC office.

Mr. Flynn has testified numerous times before the United States Congress. He has also testified before legislative committees in more two dozen states. He has also worked with a number of foreign elected officials helping them understand America's federalist system, including delegations from Brazil, Kazakhstan, Kosovo, the European Parliament and China.

Mr. Flynn is author of more than two dozen policy papers or studies covering a wide range of issues, with a particular focus on federal and state relations. His work has been cited by the Wall Street Journal, Washington Post, New York Post and numerous regional newspapers and radio. He has frequently appeared on a number of broadcast and cable networks, including CNN, CNBC, Fox News, ABC World News Tonight, Reuters Financial and C-SPAN.

Mr. Flynn is a graduate of the University of Iowa, where he studied English and Economics. Immediately after college, he managed a Coca-Cola Bottling distributorship. He is married to the former Maura Whalen, a documentary film producer. They have one daughter and live in Alexandria, Virginia.

Adam Summers is a senior policy analyst at Reason Foundation, a nonprofit think tank advancing free minds and free markets. He has written extensively on privatization, government reform, law and economics, and various other political and economic topics.

Summers' articles have been published by the Los Angeles Times, San Diego Union-Tribune, Orange County Register, Los Angeles Daily News, Baltimore Sun, and numerous others.

Summers earned an M.A. in Economics from George Mason University and Bachelor of Arts degrees in Economics and Political Science from the University of California, Los Angeles.