Assessing Structural Unemployment
Republicans Burning Down the Policy Village

Back to Disagreeing with Scott Sumner...

Scott Sumner:

TheMoneyIllusion » On or about December 1978, the world’s ideology changed: We all know about dates that historians consider turning points in history; 1914, 1789, etc.  I’d like to add 1978 to the list.  Maybe it’s just because I was a young adult in 1978.  Things seem very important when we are young.  (Do NOT ever talk to a baby-boomer about 60s pop music.)It seems like almost everything that crosses my desk reminds me of 1978.... This quotation from Joan Robinson did not seem insane in 1977. From the Economist:

Before the last Korean war in 1950, the North was home to most of the country’s heavy industry. As late as 1975, its income per head still exceeded the South’s, according to Eui-Gak Hwang of Korea University in Seoul. “Obviously, sooner or later the country must be reunited,” wrote Joan Robinson, a Cambridge economist, in 1977, “by absorbing the South into socialism.”

Within about 5 years a comment like that would have seemed far-fetched, and today it would seem completely loony.  I’m not saying I necessarily would have agreed with her in 1977, but North and South Korea were about equally developed at that time.  North Vietnam had just taking over the South.  No communist country had ever gone non-communist.  And even non-communist countries seemed to be getting more statist every day...

Let me just say that I remember reading that in 1977--and it sounded loony to me back then.

Really existing socialism (a) killed an awful lot of people, (b) erased the possibility of an awful lot of freedoms for an awful lot of people, and (c) could not attain the economic allocative efficiency of the market economies.

There was in 1977 an argument that really-existing socialist economies would wind up with higher levels of measured GDP per capita--precisely because they starved their people of good things they could invest more, create a more capital intensive economy, and that capital intensity would offset allocative efficiency. I remember being taught in Ec 10 by Rick Ericson in 1978 that that argument was a very weak one.

And North Korea added to the defects of really existing socialism those of theocracy and of absolutist heriditary monarchy.

So Scott is wrong: the idea that the absorption of South Korea by North Korea would be a good thing was loony in 1977--albeit not as loony as it was to be by 1982.