“The Tigers’ Problem Is Cyclical, for the Moment” (Wall Street Journal, November 5, 1996):
South Korea, Singapore, Hong Kong, Taiwan and the mini-tigers, Thailand, Malaysia, Indonesia and the Philippines, are facing flat domestic demand in key industrial countries, inventory corrections in the U.S., oversupply in the electronics industry, U.S. dollar strength and tight monetary conditions at home. These are cyclical problems that will reverse themselves soon enough. Down the line, the tigers may start facing structural constraints if they don’t educate their work force better, start investing more on R&D and become more receptive to skilled foreign workers. But for the time being, much of the present fear is misplaced.
Not everyone shares this view. Among the most famous critics of the “economic miracle” is U.S. economist Paul Krugman, who says that the region’s economies have prospered because of an exceptionally rapid expansion of inputs–labor and capital–rather than robust growth in output per unit of input, also known as productivity gains.
The Krugman thesis rests on the old-fashioned assumption that economic growth can be accounted for in terms of three distinct factors: labor, capital and technological progress. The third factor is considered independent of the other two; technological progress simply descends on an economy like “manna from heaven” instead of being the result of deliberate actions of profit-seeking agents. The thesis also holds that there is no tangible link between investment–in both human and physical capital–and technological progress. Underpinning much of Mr. Krugman’s claim that the input-driven expansion seen in East Asia is subject to constraints is the phenomenon of “diminishing returns.” The advantages derived from progress lessen with each passing day.
Imagine an investor who took Nobel laureate Krugman’s advice and shorted the following stocks in 1996: TSMC, Foxconn, ASUS (all were public companies at the time, ASUS having gone public exactly 30 years ago). How would such a Science-informed investor have done?
Phil, this post is most interesting to me! As a Scientist of great renown, I search for patterns in Complex Data, just as I’m sure you do too (“connecting the dots” as non-Scientists often say). I was recently trying to understand if there is any connection between the following people and wonder if your analytical skills can generate any interesting connections:
Dr. Albert Gore (me!!).
Dr. Barack Hussein Obama
Dr. Paul Krugman.
Dr. Kristin Knouse.
Dr. Gore, your list is very interesting to us. Could it be that Dr. Kristin Knouse possesses the attributes that would merit at least one, and perhaps two, Nobel prizes? Please advise at your earliest convenience.