Criticism of Asian Miracles (1)

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Criticism of Asian Miracles (1)
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1. Back to Convergence Theory

• Paul Krugmans Criticisms
• Growth is due to increased factor intensity, or
  increases in K, and L input, and Not much due to
  Technical Innovation According to Neoclassical
  Theory, there will be convergence, and the East
  Asian growth is not sustainable.
• Of course Krugman does not think much of Social
  Captial, or Human Capital as a separate factor
  for growth

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Evidence

• Growth Accounting applied to East Asia does not
  show Technology as an Important Factor
• Refer to my note on Growth Accounting
• In the East Asian setting but GA is limited and
  incomplete.
• Yes, in Neo-classical model, growth slows down
  without technical innovation.
• However, in Endogenous Growth Model, even if
  technology is not an important factor, it does
  not mean that the growth will slow down.

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2. Asian (Financial) Crisis

• Corruption at all levels of society
• Lack of Transparency - Opaqueness of Governance
• Vulnerable to Herding

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• East Asian economy is declining or
• will decline under its weight of corruption.

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Reflection

• Opaqueness also exists in Western Economies
  Enron, etc.
• Transparency may not be the only way to
  Information Efficiency
• Dominicans and Jews Need not Apply in Cents
  and Non-Senses by J. Carr closed society has
  information advantage
• Transparency may not be culturally possible
  Zen(?) From Heart to Heart(????)
• Asian ways are not necessarily as corrupt as they
  appear to be In the imperfect world, corruption
  may increase the Pareto efficiency. Eg) a
  sub-optimally government service fees create
  excess demand for government services. In fact, a
  speedy train ticket (paid to the officials) may
  be the optimal price for the government service.

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3. Japan Long Term Recession Different Views of
the Cause of the Japanese recession

• What were the causes of the Japanese Economic
  Recession since the 1990s?
• 1) Macroeconomic Imbalance
• too little population
• too much savings and capital
• Hollowing of the Domestic Economy(?? ???)
• too little domestic investment
• too little consumption
• plus Liquidity Trap(Krugman),

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• 2)Endogenous Failure Deteriorating
  Neo-Confucianism
• Fading Neo-Confucianism in Japan is the
  cause of the fall of
• Japan
• - Michi Morishima,Why did I expect Japan to
  collapse?
• -Jon Woronoff,The Human Element Fails,
  Japanese Economic
• Crisis
• 3) Exogenous Failure A Wrong Financial
  Liberalization and
• changes in International Political Economy
• - A forced financial liberalization, or
  financial opening led to a decline in the quality
  of the Japanese financial system, and finally to
  the collapse of financial system.
• Trade Wars with U.S., and the 1986 Plaza Accord
  for Endaka.

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4. East Asian Recovery and

• East Asian Miracles live on declared by the
  recent reports by the World Bank
• And there is another really Big Miracle happening
  in
• China,
• which is the most baffling and complex

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Conclusion

• Thus a variety of criticisms of Asian economies
  about the Asian Financial Crisis or the Fall of
  the Japanese economy do not provide the
  compelling reasons why Asian economies (must)
  fall.
• They do NOT explain the convincing explanation of
  and how why the Asian economies have risen,
  either.