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1 Introduction 3 the Myth of an Asian Miracle? 4 Making a Miracle: a New Notes 1 Introduction 1. World Bank (1993); Lucas (1993). It will be clear from the argument devel- oped in the subsequent chapters that the treatment of technology in these widely cited pieces leaves much to be desired. Innovation requires a base of physical and human capital; but it also requires an institutional set up, knowledge creation and application on a sustained basis. The concept of a POLIS is meant to capture these complex processes in a systemic manner. 2.The reader may note that the literature on the endogenous growth theory with interactions between human capital and R&D also offers prospects of sustained growth. Of course, critics in the past have pointed out that any theory that allows growth without limits ignores the second law of thermo- dynamics. See for example Georgescu-Roegen (1971), Daly and Cobb (1989) and Boulding (1966) among others. Therefore, the energy and environmen- tal constraints that might apply should be kept in mind. But for any such set of constraints the above conditions mentioned in the text are assumed to apply when a POLIS exists. 3 The Myth of an Asian Miracle? 1. Indeed after repeating the exercise for a cross-section of Asian economies separately, I could not reject this hypothesis either. 2. Unless one were to assume, in addition, that the ‘true’ depreciation rate is higher in the developing countries than in the developed countries, because of various factors such as the mix of outputs. However, we may also note that Japan, which is supposed to have a high ‘depreciation’ rate, also has a high estimated rate of capital augmentation. In any case, given the magni- tudes of the estimated capital augmentation rates of the developed countries, the implied ‘true’ depreciation rates would have to be implausibly high. 3. Another way in which there may be little or no net increase in value added, even with the adoption of new equipment and technology, is if critical com- ponents that are needed as intermediate inputs can be imported only at high monopolistic prices. Thus, the benefits of the new technology are appropri- ated by the foreign manufacturers and suppliers of the critical components. Examples of such critical components include microprocessors, liquid crystal displays, and MS-DOS and Microsoft Windows softwares for notebook computers; plastic lenses for cameras; and recording heads for video-camera recorders. 4 Making a Miracle: A New Approach 1. It seems to me that theories of both types engage in conceptualization and the exploration of logical relations among concepts. However, appreciative theory proceeds without the help of a formal mathematical apparatus most of the time. 130 Notes 131 2. Solow (1994) is an attempt to assess the achievements and the short- comings of the new growth theoretical models, as discussed later in this chapter. 3. Khan (1997a) presents some preliminary thoughts and a model (in Chapter 2) emphasizing this point. 4. The recent debate on convergence can also be viewed in this context as countries moving through different paths and different equilibria forming a complex of dynamic trajectories. 5. As the subsequent discussion shows, complementarities between R&D and human capital may be far more important than has been thought previ- ously. This is a major aspect of the positive feedback loop innovation systems discussed later. 6. Both types of specifications are possible in principle. In practice, as in the case of South Korea in Chapter 5, the availability of data will often deter- mine what type of specification will be used. 7. If SAMs are available at regular intervals (Indonesia is one such country), then models with flexible prices, different closure rules, etc., can be con- structed over time. 8. This does not imply that these relationships are fixed. The reasonable inter- pretation is that for distinct two technology systems the range of co- variations among the different variables will show distinct and regular patterns in each case. These covariational differences will then establish the differences between the two technology systems. 9. For a description of SAM as a data gathering device, see Pyatt and Thorbecke (1976). 10. In Walrasian general equilibrium models the flexible price vector deter- mines the equilibrium. In a Keynesian (dis)equilibrium model in the short run the quantities vary while the price vector remains fixed. It is, of course, possible to build more complex models of CGE variety based on both orthodox and heterodox economic theories. 11. See Khan and Thorbecke (1976) ch. III; the presentations here follow the cited work closely. 12. Ibid. 13. See Pyatt and Round (1979). 5 Korea: The Making of a POLIS? 1. As emphasized earlier, the evolutionary approach to technology followed here is definitely not a mechanical theory. Even in the economic realm, complexities and uncertainties in economic interaction will take the analysis further from standard practice. The challenge is to do this in a rigorous and (if possible) formal framework. 2. The SAM-TECH built by Thorbecke can be found in Svejnar and Thorbecke (1980, 1982). 6 Taiwan: Builing a POLIS 1. Of course, it is not being claimed that having an apparently self-sustaining innovation structure in one sector is sufficient for a POLIS. For this we must examine the economy-wide linkages. 132 Notes Conclusions 1. World Bank (1993) and Fishlow et al. (1994) present two divergent approaches and conclusions on this. 2. See also the discussion by Crocker (1995) and Khan (2001b). Bibliography Abegglen, J.C. (1994) Sea Change: Pacific Asia as the New World Industrial Center, New York: Free Press. Abegglen, J.C. and G.S. Stalk (1985) Kaisha, The Japanese Corporation, New York: Basic. Abernathy, William J. (1974) ‘Limits to the Learning Curve’, Harvard Business Review 52: 109–20. Abernathy, William J. and Kim B. Clark (1985) ‘Innovation: Mapping the Winds of Creative Destruction’, Research Policy 14: 3–22. Abramovitz, Moses (1956) ‘Resources and Output Trends in the United States since 1870’, American Economic Review 47, May: 5–23 Abramovitz, Moses (1986) ‘Catching Up, Forging Ahead, and Falling Behind’, Journal of Economic History 46, 2: 385–406. Abramovitz, Moses (1989) Thinking About Growth, Cambridge: Cambridge University Press. Abramovitz, Moses (1996) ‘Convergence and Deferred Catch-up’, in Laudau, Ralph, et al., eds The Mosaic of Economic Growth, Stanford University Press. Acemoglu, Daron (1994) ‘Search in the Labour Market, Incomplete Contracts and Growth’, Stanford University, Center for Economic Policy Research, Discussion Paper no. 1026, September. Acs, Zoltan J. and David B. Audretsch, eds (1993) Small Firms and Entrepreneurship: An East-West Perspective, Cambridge University Press. Acs, Zoltan J. and David B. Audretsch (1991) ‘R&D, Firm Size and Innovative Activity’, in Acs, Zoltan J. and David B. Audretsch, eds, Innovation and Technological Change: An International Comparison, Ann Arbor: University of Michigan Press. Adams, Walter and James W. Brock (1978) The Bigness Complex, New York: Pantheon. Adelman, Irma (1984) ‘Beyond Export-Led Growth’, World Development September 12(9): 37–50. Adelman, Irma and Sherman, Robinson (1978) Income Distribution Policy in Developing Countries: A Case Study of Korea, Stanford University Press. Adelman, Irma and Sherman, Robinson (1979) ‘The General Equilibrium Solution for the Korean Model’, World Bank, Washington, DC (mimeo). Adler, Paul S. and Robert E. Cole (1993) ‘Designed for Learning: A Tale of Two Auto Plants’,Sloan Management Review 34: 85–94. Aghion, P. and P. Bolton (1992) ‘Distribution and Growth in Models of Imperfect Capital Markets’, European Economic Review 36: 603–11. Aghion, P. and P. Howitt (1992) ‘A Model of Growth Through Creative Destruction’, Econometrica 62: 323–51. Aghion, P. and P. Howitt (1994) ‘Growth and Unemployment’, Review of Economic Studies 6, 3: 477–94. Aghion, Philippe and Peter Howitt (1998) Endogenous Growth Theory, Cambridge, MA: MIT Press. 133 134 Bibliography Ahearn, Alan G., William L. Griever, and Francis E. Warnock (2000) ‘Information Costs and Home Bias,’ Washington, DC: Board of Governors of the Federal Reserve System. Aigner, D.J., C.A.K. Lovell and P. Schmidt (1977) ‘Formulation and Estimation of Stochastic Frontier Production Function Models’, Journal of Econometrics 6: 21–37. Aitken, Brian and Ann E. Harrison (1999) ‘Do Domestic Firms Benefit from Direct Foreign Investment?’, American Economic Review 89, 3: 605–18. Akoum, Ibrahim F. (1990) Technological Change and Economic Performance: An Empirical Examination of the Newly Industrializing Countries PhD dissertation, University of Texas at Dallas. Alam, M. Shahid (1989) Governments and Markets in Economic Development Strategies: Lessons from Korea, Taiwan, and Japan, New York: Praeger. Albuquerque, Rui (2000) ‘The Composition of International Capital Flows’, University of Rochester, photocopy. Alchian, Armen and H. Demsetz (1972) ‘Production, Information Costs, and Economic Organization’, American Economic Review 62: 777–95. Alesina, Alberto and Dani, Rodrik (1994) ‘Distributive Politics and Economic Growth’, Quarterly Journal of Economics 109, 2: 465–516. Amable, Bruno (1994) ‘Endogenous Growth Theory, Convergence and Divergence’, in Silverberg, Gerald and Luc Soete, eds, The Economics of Growth and Technical Change: Technologies, Nations, Agents, Aldershot: Elgar, 20-–44. Amann, H. (1976) ‘Fixed Point Theorems of Increasing Maps’, SIAM Review 18: 620–709. Amsden, Alice (1989) Asia’s Next Giant: South Korea and the Late Industrialization, New
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