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On-Demand Economics Revised

Thesis: Q’s strategy is not setting a new standard, it’s simply using economics.

Katie Brenner wrote an article in Bloomberg View called “Happiness Can Be an On-Demand App,” where she discusses the hiring tactics of on-demand startups such as Uber. Brenner outlines two different approaches based on two gatherings she attended – one at Uber and another at Q (a New York startup that matches workers with companies that need office cleaning). “At the first meeting, last spring, drivers assembled in San Francisco to protest their treatment by Uber. They said the ride-hailing company was exploiting them. Uber staff members struggled to appease the disgruntled contractors, and the conversations were heated and tense.” The second was a gathering at Q, where “workers, called “operators” mingled with company founders, executives, engineers and sales staff at one of Q’s monthly operator assemblies. The conversations were loud at times, punctuated by hellos, hugs and high fives. They had gathered to express their concerns and problems and learn more about the company’s growth. Several operators told me they loved Q as well as the businesses they cleaned, which they referred to as their clients.”

The Uber protest signifies the first hiring tactic – one in which workers are regarded as contractors “who aren’t necessarily eligible for the minimum wage, benefits or compensation for on-the-job injuries and other claims.” This distinction is a key component of Uber’s competitive advantage and crucial for their long-term success. The reason is because Uber saves an incredible amount of money by avoiding insurance costs, administrative costs, and any legal liabilities.

The second tactic is the Q model, in which “operators are full-fledged employees who get benefits, including health care.” Now you might be wondering how this makes Q different than a regular cleaning service. The reason is that Q uses an algorithm to predict cleaning needs and schedules, and then uses an on-demand model to match workers with clients. With that in mind, we can now analyze Q’s hiring tactic from a strategic standpoint. Q has clearly made a calculated decision because as opposed to Uber, they have chosen to incur the associated costs. However, as evidenced by Brenner’s experience, Q has created a collaborative and friendly work environment that makes them preferable to many of their direct competitors.

Where Brenner goes wrong is that she incorrectly makes the assumption that Q is setting the new industry standard for on-demand workers. One of her arguments is that “when labor markets are competitive — which is increasingly the case in the on-demand sector — workers will take company culture into account. To attract the best talent, companies will need to show they value drivers, handymen and housekeepers in the same way as, say, tech workers who write code.”

Brenner’s point is a valid one, but I don’t see this as a huge revelation. I think this trend is simply an application of the Coase Theorem. We can think about this in terms of vertical integration. The difference between the Q tactic and the Uber tactic is that Q decided to vertically integrate by buying its suppliers as opposed to outsourcing. The Coase Theorem suggests that firms vertically integrate when it is less costly to perform an activity/transacting using a firm’s hierarchy rather than contracting with another firm than a market exchange.

In this case, Q believes that the potential cost of using contracted workers is greater than the cost of hiring them. This makes sense because in Q’s line of work, “Operators cross the threshold between public and private space, so there’s a greater need for the company to create a truly consistent experience no matter which operator cleans an office.” What this means to me is that the potential cost of a mishap using temporary workers is greater than the cost of creating the consistent experience by hiring them. Uber, on the other hand, is in a completely different line of work, where the cost of contracting is not as high, which is why they decided not to vertically integrate.

So in response to Ms. Brenner, I don’t necessarily think that Q “becoming the standard-bearer for a new type of on-demand service company,” I just think the strategy they chose was an application of economics.


38. When to Rob a Bank

Theis: I argue from an economic perspective that individuals may consider robbing banks because they’re cost-benefit analysis mayadvise them to do so, however it is rarely the case that bank robbery is ever economically feasible.


As economists we usually have a different view points about stealing, compared to non-economists. A typical would answer from an economist would be: say we factored in an individual’s level of risk aversion, say 3, in our neat little equation, we may conclude that if an individual’s expected return from stealing exceeds the cost of punishment in fines or even the  income from prison time, then by all means, the consumer should steal because he is welfare maximizing! Ofcourse people would normally site one of the 10 commandments or something as to why stealing is bad, thus justifying that stealing simply morally wrong. However this doesn’t deter everyone from stealing anyways. An old 2012 ‘economist‘ article goes over a nice example using bank robberies.

The story begins with prolific bank robber Willie Sutton, who over a lifetime of robberies was able to earn a hefty sum of $2 million. However bank robbers these days are not nearly as lucky. Using FBI data, they were able to obtain that the average bank haul from a robbery was about $10,025, and the probability of coming out from a successful heist was 90%. This guarantees an expected return of $9,022.5, which seems not too shabby. Although having additional members of your bank heist squad can boost the expected take or increase your probability of a successful heist, having to split the pot makes bank robbery less desirable that it might seem as a one man job. However once factoring the costs for getting caught and charged for bank robbery, the rewards don’t seem appealing anymore.

In the U.S, the punishment for bank robbery varies, but the fines range from $1000 to thousands of dollars, and prison sentences can last from 10 to 25 years. In which case, if we consider the best case scenario of me getting caught and paying a $1000 fine and 10 years in prison, then I might have still gained $9,025 from my heist after subtracting the fee, but 10 years in prison, assuming I could have worked at Starbucks for minimum wage for 10 years, I have forgone about $16,000 a year by working full time, a total of $160,000 over the span of 10 years. The $9000 from my heist simply doesn’t cut it, and I would’ve needed 16 successful heists under my belt to at least break even if I were to get caught and charged with robbery. Hence this demonstrates why economists don’t rob banks, and why U.S law enforcement on bank robberies is pretty successful. Nonetheless bank robbery is only one but many other methods that people cheat/steal, such as corporate embezzlement or medicare fraud. And even still, it may be the case that your potential returns from bank robbery are higher if you actually work for a bank. In the end everyone is mentally calculating expected returns in their head, after factoring in their perceived level of risk aversion, like economists do with cost-benefit analysis, before they make a definitive decision.

Cable Companies Should Stop the Half Measures

Traditional television providers should offer channels a la cart and stop trying to force users to buy packages

The trend of cord cutting has become a huge issue lately with television providers. The transition of many people from traditional television viewing to selecting only the content they desire via the internet is posing a huge threat to companies and many are unwilling to change. With nearly 7.6 million Americans abandoning cable television altogether, cable companies need to get their acts together and realize that they no longer hold the monopoly power that they have for decades. Bundling channels and forcing viewers to pay for channels that they don’t want to watch just so that they can get the few that they do needs to stop and cable companies should offer consumers absolute choice in what they pay for.

Verizon recently took a step in this direction, offering smaller bundle packages that they hope will entice consumers away from purely internet television and back to their more traditional cable TV. This is a great thought by Verizon and arguably a good move to try to retain viewers, but it is too little to compete in the ever growing competition for subscribers. Why would someone pay for a bundle of channels when they can go online and watch and pay for only the certain channels that they desire? The halfhearted attempt just shows the desperation of cable companies, while at the same time highlighting their stubborn streak when it comes to adapting to the present marketplace. Why bother with bundles at all? This half step in the right direction makes no sense when a full step into allowing customers to choose would be a huge step in retaining subscribers and possibly luring back those that have opted out of cable.

Cable television providers need to realize that they no longer hold the position of power that they enjoyed for so many years; we as consumers are no longer beholden to them for our entertainment needs. The explosion of services such as Netflix, Hulu and the new online only HBO subscription present plenty of alternatives to traditional cable and at much lower cost to boot. If you want to have Hulu+, HD Netflix and HBO’s new online service it will cost you a grand total of about $32 a month. A traditional cable package runs far higher, roughly $90 for many consumers.

The obstinate stance of cable companies is just shooting themselves in the foot. They produce a product that is far inferior to many internet services, not just in choice of channels, but also in the limited commercial interruptions that they provide. I’m not advocating for cable companies to sacrifice the cash cow that is the commercial, but the other problem of the lack of choice when it comes to television packages is something that can be easily solved and might even yield a profit in returning customers.

Sadly, sweeping reform from cable companies is not likely, although it is likely the key for their survival. Will they adapt? Possibly. Will it be in time to retain their dominant market shares before people are fed up with their nonsense? Not at the rate that they’re going.

Competition Policy in EU: Gazprom’s Case

Apr 20th 2015

Thesis: EU’s regulations on Gazprom are necessary to keep the competition policy which set fair rules as well as protect EU consumers.



After taking Econ 444, the European Economy, I can understand the structure of EU and its economic policies better. Among various procedures in EU, “Competition Policy” is one of the most important laws, which was made for protecting European consumers from a corporation abusing the monopolistic power. Also, by punishing those illegal activities, European Commission can bring more competitions into the Europe.



Wall Street Journal says that European Union’s competition regulator plans to file charges against OAO Gazprom, a Russian gas company owned by the Russian government. “The European Commission started a formal investigation into Gazprom’s business practices in some eastern and southern European countries in 2012, saying that it suspected the company of abusing its dominant position in those countries’ natural-gas supply (Wall Street Journal).” Many people argue that this decision is not reasonable because Gazprom is the biggest only gas supplier for the Europe (32.6% of total oil import and 38.7% of total gas import – Wikipedia), so if the relationship gets hurt, the negative results will affect on the whole Europe. Also, they worry about some tensions between Russia and the Europe not only in terms of economics but also of politics.

However, I think regulations on Gazprom are unavoidable and necessary for the EU. First of all, I agree with the statement that Ms. Vestager, a Danish politician who serves as a Member of Parliament, said. “It’s very important for me to make sure that any company in the European market is being faced with the same set of rules and the same effort of enforcement.” Also, since the European Commission was established, it has dealt with various corporations from a giant multinational company like Chiquita to a small company like German local beers brewer, treating them all equally within laws. So, Gazprom cannot be the exception. If the EU didn’t take an action for Gazprom (it completed investigations and already found some obvious evidence), it cannot keep competition rules and apply them to any other firms.

Second, those competition policies were made to protect the EU consumers and encourage fair competition between firms in the Europe market. If the Commission doesn’t accuse Gazprom of market partitioning, market foreclosure and different oil prices (price differentiation), consumers will be charged unfair costs, basically harming the EU’s economy. Some people contend that Gazprom is the largest outside (natural gas) supplier so that EU should not hurt the relationship with it. However, because of its huge size and influence, the European Commission and Court should be more careful monitoring its activities.

There is a saying that “when in Rome, do as the Romans do.” The European Union always set its rules to companies in the EU market regardless of their nationalities. It should apply the same laws to Gazprom now. Gazprom’s case will influence on future possibilities of violating the competition policy and strengthening the EU rules, because it shows that there will be no exceptions.

Revised Post 5: Michigan’s Unemployment Rate: An Inadequate Measure

Thesis:  In Michigan, changes in the labor force due to outward migration cause the state unemployment rate to be an inadequate measure for the state’s economic health.


News of an improved, post-recession economy tends to surround decreased state unemployment rates. The unemployment rate is calculated by dividing the number of people employed by the number of people working and actively seeking work (also known as the labor force). While one hopes that the unemployment rate goes down as a result of increasing the numerator, sometimes changes in the denominator are at fault for the changing rate. More precisely, we often assume that employment is increasing rather than the labor force decreasing. In Michigan, changes in the labor force due to outward migration cause the state unemployment rate to be an inadequate measure for the state’s economic health.

During the recession, Michigan was known for having one of the highest unemployment rates. As it has decreased, reporters and government officials have been quick to point out the “improved economy.” Although some celebrate, makes a good point in saying that this is not necessarily as exciting as we would think. The article states in reference to March 2015, “The number of unemployed in the state fell by 14,000 people but total employment only grew by 2,000. That means there was a 12,000 person labor force reduction in March.” 12,000 people either decided to stop looking for jobs or move elsewhere to find jobs. In the case of Michigan, the latter seems more likely.

Looking into outward migration, talks about how college graduates are currently migrating out of state at the fastest rate since 2010. Young, educated people are being lured away from Michigan after graduation. When they are in Michigan we count them as being a part of the labor force. As they get jobs elsewhere, the unemployment rate will decrease because their movement lowers the state’s labor force. Confirming the high outward migration in Michigan is the yearly study done by moving company United Van Lines. The company ranks the top 5 inbound and outbound migrating states and according to their 2012 study, “Michigan fell to the No. 6 from the No. 4 spot it held in 2011. Previously it had claimed the top outbound spot every year from 2006-2009.” Given this long line of outward movement, it is safe to say that this is likely the factor affecting Michigan’s unemployment rate most. Though Michigan’s employment seems to be increasing, it is not doing so nearly as quickly as the unemployment rate leads us to believe.


Revised Post: Switzerland a Study in Arbitrage

Thesis: In the short run in small countries like Switzerland the benefit felt due to changes in the exchange rate by those who live on the border over those located in more central regions may cause an increase in the national welfare.

Much has been made recently about the SNB’s decision to once again float the value of the franc against the euro. As described in this WSJ article the effects of this exchange rate change are being felt almost immediately. Switzerland is more susceptible to the effects of international arbitrage because it a geographically small country with large borders, and a long history of cross border bargain hunting. It is therefore the perfect place to observe the distributional effects of these exchange rate shifts on consumers in different geographic regions in the short run. In the short run in small countries like Switzerland these effects are skewed to benefit those who live close to other countries over those located in more central regions. Furthermore these benefits can result in an increase in overall welfare in the very short run.

One thing I personally found very interesting in my travels in Switzerland was how often people traveled between borders to purchase goods and services. I spent most of my time less than 40 km from the French border, and the family that I lived with would commonly make trips to France to purchase various good from televisions to raw materials for home improvements. It was remarkable to me how much this idea of taking advantage of arbitrage was engrained in the Swiss mentality, especially in these border towns. Therefore it is no surprise that a people that have spent most of their lives growing comfortable with determining value across multiple currencies are exactly the types of people who quickly adapt to a rapidly changing currency. This adaptation to rapidly exchange rates is crucial for taking advantage of potential increases in welfare in the short run.

Although Switzerland is a small nation its borders have a total length of 1,151 miles and touch 4 European Union nations. A very large portion of the country’s population lives along the French border in the cities of Geneva and Lausanne and along the German border in the cities of Basel and Zurich. This means that there is the potential for a great number of transactions to take place between Swiss and European currency. In these areas the consumers are more indifferent between Swiss goods and French goods because the distance to travel to purchase one or the other is much more negligible. This means that a very large portion of the population of the country has the opportunity to partake in the gains to welfare that come from being close to an international border.

In the short run a high exchange rate offers Swiss individuals to increase their welfare by using their wages, paid in francs, to buy relatively more European goods, with euros. For the purpose of this article I reached out to a friend of mine living in Geneva who responded about changes since the currency float, “yeah, for sure I have noticed people going to do their groceries in France, they were already a lot of Swiss doing that before the SNB’s decision, but it is clear that since then there’s been an increase of buying stuff in France. Even I have started to go to France to buy things! Usually I went to a hairdresser just a few minutes from my house, but last week I went to a hairdresser in France, since it’s less expensive and with the exchange rate it was clearly a win-win for me.” Now exchange rates might cause some forward thinking Swiss firms to decrease their production and cut their labor demand in anticipation of decreased international demand. This would result in some individuals losing their jobs and lose welfare. However we would expect these changes to occur across all of Switzerland, and take at least a little bit of time to implement. Given the population distribution of Switzerland being skewed towards its boards and the relative speed at which Swiss consumers in these regions adjust to exchange rates it is reasonable to speculate that the increases to welfare felt by these individuals would outweigh the losses in welfare in the short run.

We do not however experience the same short run positive welfare effects on consumers in large countries such as the United States. A large country like the United States has a relatively small border compared to its area, and its population is generally center away from its boarders. A large amount of capital outflows into the United States would cause still cause the exchange rate and net exports to fall, however it would be driven by large retail operations choosing to stock their stores with foreign goods rather than by consumers in boarder regions doing their shopping abroad. Consumers on the borders of the United States do not have the same tenacity as the Swiss for taking advantage of currency exchange rates and represent too small a percentage of the population for their welfare increases to overwhelm the welfare losses felt by those who are now unemployed. This means that there will be decreases in welfare in the short run for large countries if the exchange rate increases.

It is very important to note that a very large portion of Switzerland’s GDP is a result of exports and thus a higher exchange rate and lower net exports would greatly hurt the economy of the nation in the long run. Once all firms adjusted to new demand for their products there would probably be even more layoffs and decreases in welfare. In the long run it is reasonable to expect that these decreases in welfare would overcome the increases felt by those purchasing European goods on the border and the aggregate welfare would fall.

College Inefficiencies

Thesis: US universities are inefficient because they require students take useless classes, instead of requiring useful ones.

I really enjoyed attending school at the University of Michigan and I will always cherish my time in Ann Arbor. It’s only right that my last post is about ways to improve the university and US colleges in general. I see a huge problem in the US higher education system: students are taking out tens of thousands of dollars in debt in order to learn skills so they can get better jobs. However, they’re required to pay for and take useless classes because it’s a requirement for a degree, which in today’s job market is the golden ticket. I will draw upon my experience at the University of Michigan to illustrate these inefficiencies.

In the College of Literature, Arts, and Sciences, students are very limited by the courses they can take because of distributions requirements: natural sciences, humanities, race & ethnicity, social sciences, and college wide requirements. Although the curriculum is designed to give a broader education, some of the distribution classes I’ve taken were complete jokes. Part of the reason I was driven to take these joke classes is because the bare minimum factor employers take into account is a good GPA and I had a better probability of getting better grades in these courses. The other part is because I just wasn’t interested in any of the classes that were offered. Therefore, LSA required me to take 21 useless classes (7 additional credits in three different areas), which cost a ballpark $37,800 in total (out-of-state median credit price is about $1800/credit).

No matter if you do or don’t have student loans, these distributions are an unfortunate waste of money and learning. I’d much rather have used that time to take classes I was interested in and actually offered me some benefit. As a student in LSA, you’re only allowed to take 20 credits outside of the college that count towards graduating (anything after is just excess). I took many classes outside of LSA that were really useful to me like Sports Management 101, public speaking in the School of Kinesiology, Accounting 300/301/312 and Finance 425 in the business school, but after I hit the 20 credit limit, it didn’t make sense for me financially. If the University as a whole required students to take a strong, diverse set of classes freshmen year such as Accounting 300, Engineering 101, English 101, etc. then students may have a better idea of what they want to learn before it’s too late and they get trapped.

College is like cable TV; you can’t pick and choose which channels you want, you have to pay for everything even if you don’t want certain channels. Recently, the cable industry is being forced to offer more custom offerings because of outside pressure from Apple, and I see online education playing that role of pressure to colleges. Don’t get me wrong – I learned a lot during my time at the University of Michigan, but could I have learned more of what I wanted? The answer is yes.


Over reliance on the US economy

Thesis- The world economy won’t recover by solely relying on US economic growth and demand, they must enact policies focused on increasing domestic demand.

For much of the 20th century, US economic success stimulated the global economy.  Trade lanes were opening, economic recovery from two World Wars was happening, and growth was seen almost everywhere.  Was this all because of the strength of the US economy?  Obviously not, there are plenty of other factors involved but generally over the past half century, the world economy goes where the US economy goes.  This reliance on US economic growth and demand was going to eventually hurt the world economy and this has been attacked at a recent G-20 meeting.  At this meeting, talked about by Wall Street Journal writer Ian Talley, leaders of the twenty largest economies have called for governments and specifically central banks to enact policies to be more proactive in increasing aggregate demand.  This call is important because the world economy shouldn’t rely on one country to fuel economic recovery for everyone.

G-20 leaders have specifically called for the continuation and expansion of policies that  target “easy money.”  The G-20 leaders were rather harsh and called for immediate action…

“Renewed G-20 support for easy-money policies—essentially backing currency depreciation as a tool for promoting growth—underscores concern about the global economy getting stuck in a low-growth rut. It also marks an implicit acknowledgment of the failure across the globe to enact longer-lasting structural overhauls to major economies after years of relying on short-term spending and other temporary stimulus programs.” –WSJ

This is important because at least in the US, there are calls by many economists for the Fed to raise the interest rate and this could have dramatic consequences.

” The International Monetary Fund warned this past week that if the Federal Reserve raised short-term rates sooner or more quickly than markets anticipate, it could cause a rapid jump in longer-term interest rates and a whirlwind of volatility as investors adjust their portfolios across assets and markets.”-WSJ

So if the Fed raises the interest rate, which would be in reaction to the US having continued levels of economic growth, this could throw the world economy into chaos which would encourage more countries to base their currency of the dollar which decreases the own economic strength.  This leads us to the problem that the US has for too long been the basis of the world’s economies and that we shouldn’t revert back to the times when “Mr. Lew(IMF treasury secretary) said. “We are concerned that the global economy is reverting to the precrisis pattern of heavy reliance on U.S. demand for growth.”

As we can see, the G-20 is hoping that that by encouraging easy money policies and less reliance on US demand, that the whole world economy won’t have to rely on the US which can allow both the US and other countries to recover and grow.

Can the Shanghai Stock Connect Help Chinese Investors Diversify?

Yes, but not as much if it were to allow the trading of exchange traded funds. The recent opening of the Shanghai direct stock connect has had many effects — a primary one being that now retail investors in the mainland and Hong Kong are able to buy stocks from each other’s markets. This point about retail is key. Past programs such as the Qualified Foreign Institutional Investor program have allowed institutional investors from outside China to invest in Chinese stocks in controlled amounts. So it’s no surprise to see in the WSJ article that there has been little increase in institutional demand as a result of the stock connect. The real change that we see in the Shanghai stock connect is that there is now a more liberalized attitude towards retail investors in China owning foreign stocks.

Chinese retail investors benefit the most because the addition of Hong Kong stocks to their stock portfolio allows for a dramatic increase in diversification. In effect, retail investors have now gone from a one country world to a two country world. On the other hand, Hong Kong investors could have already invested abroad, so their welfare gains are smaller. And given how much people invest in houses in China, it’s clear that households are looking for other investment outlets through which to channel their savings. Hong Kong stocks can now be one of those channels.

Even if it seems complicated for retail investors to go invest in Hong Kong, now that the connect is open Chinese mutual funds will soon have the ability to go invest in Hong Kong for their clients. In doing so they can build up a diversified basket of constituent stocks in the Hong Kong indices and sell those mutual fund shares to clients.

However, retail investors would be able to circumvent this if only they were allowed to trade exchange traded funds on the Hong Kong stock exchange. This way the retail investors would be able to directly buy diversified holdings of Hong Kong stocks, thus allowing them to capture the diversification benefits of overseas holdings without the costs of using a highly technical stock connect.

Another future benefit of trading exchange traded funds is that it lays the groundwork for Chinese investors to invest in global equities. Imagine a firm like Vanguard offering a cheap ETF on the Hong Kong market that was a Hong Kong dollar denominated fund that bought the SP500 market ETF and some diversified basket of other developed market funds. Then this would fully unleash the ability of Chinese retail investors to diversify internationally and therefore better save for retirement.

Fertility Levels and the Economy

Many countries are below replacement fertility levels due to shifting economic status of women and corresponding role shifts for men in taking responsibility for home and child care. Current research shows this is economically harmful but can be both inflationary and deflationary.

Many wealthy nations are considered to be “below replacement fertility” levels. Replacement level is attained when a country’s average birth rate is 2.1 children per woman, 1 per parent with 0.1 to account for infant and child mortality. One popular opinion on the cause of these low and decreased fertility levels is the economic status of women. Economists Bruce Sacerdote and James Feyrer examine three phases of women’s status and the fertility levels correlated with each phase. In the low-female-status phase, women have very limited if any economic role outside of the home. Fertility in this case is high. In the middle phase, women have roles and responsibilities outside the home yet they are still left with the burden of all home and child care. Fertility is lowest in countries such as Japan, Spain and Italy who find themselves in this phase. In a third phase, women still have opportunity to pursue roles outside the home AND their male counterparts pitch in with maintaining the home and childcare. Fertility is much higher here than in the middle phase.

Sacerdote and Feyrer examine other aspects which impact families’ fertility choices. It is interesting to think that in high-income countries, families make fertility decisions with peer effects in mind. Then in turn, societies with more children may develop more family-supporting infrastructure (e.g. tax incentives, increased maternity leave, and day care subsidies for families with children in France). The multiplier effect of social policy that this leads to is interesting. To think that social policy that supports families could influence one family that could influence many others through the peer effect social multiplier is an interesting concept.

Korea, Singapore & Hong Kong’s fertility levels have decreased from 3.5 to 6.0 children per woman in 1970 to below 1.5 children per woman in 2005. Specifically, Hong Kong’s fertility rate is the lowest in the world at 1.0 children per woman. I find this interesting because I would like to know more about how China’s one-child policy has affected this rate. The article says China’s fertility level is near replacement overall but I wonder how / how quickly this has come to be since the one-child policy was abolished in 2013.

Fertility rates can be difficult to predict for recent years and impossible to predict in real time. The data is difficult to collect and there are multiple ways to collect it. Japan in particular has had a difficult time measuring fertility rates but now that they have, they realize that in 2014, Japan’s birth rate shrunk by the highest amount on record. Their predicted fertility rates have been way off and overestimated consistently since 1965. Ana Swanson writes for the Washington Post:

“A working paper from Tokyo’s Waseda University… argues that the effects of an aging population on deflation are more complicated than typically thought – that aging is deflationary when caused by an increase in longevity but inflationary when caused by a decline in birth rate. Overall, Japan’s aging population generated deflation of 0.6 percentage points annually over the past 40 years, the authors say.”