Getting Relative Prices “Wrong”: A Summary
According to accepted economic theory, industrial expansion can be explained by one of two grand approaches, market oriented or institutional, and success is usually interpreted as a validation of market principles and of the institutions financially supporting them. In South Korea, in contrast, the government made most of the pivotal investment decisions, the firms involved operated with an extraordinary degree of market control, protected from foreign competition, and relative prices were not got right, they were deliberately got wrong. This chapter offers a new paradigm to explain the behavior of the growing economies of late industrializing countries, based on the historical record of deliberately getting prices wrong, and the disciplinary mechanism involved.
Keywords: discipline, economic development, economic growth, government control, industrial expansion, late industrialization, market competition, market control, market power, price control, prices, South Korea
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