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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Stitch who wrote (484)	1/6/1998 11:50:00 AM
From: Esvida	Read Replies (3) \| Respond to of 9980

Stitch, Thanks for your generous thought. Growing up back home in Vietnam I dreamed to be a civil engineer first or an economist second. I ended up being neither and now acting out as an economist wannabe. I switched from civil engineering to computer because when I got here the US construction was in a big downturn. I did not pursue economics because I came to a conclusion that it was more of an art than a science no matter how much mathematics was pretended to be its foundation and as an artist one had to be endowed at birth and not something one could force upon oneself with efforts. The thought I have which relates to industrial policy is really a simple observation on my part, but I still have real difficulty trying to layout a background reasoning before offering it. I spent no less than 2 hours last night working on it, but I still found it not cohesive enough. I am going to make that observation now without any reasoning. I will try again to finish what I wrote and if it can be made a little more decent, I'll send it to you via email. For about a decade or more, more than a few US economists complained about the short term nature of the US market. They squeaked loudly that focusing on too near terms did not allow the economy and its many operating companies enough leeways to achieve optimal allocations of resources. Their proofs centered on the success of Japan in dominating several industries (cars, consuming electronics, etc.) at the time. They also attributed Japan's success to its industrial policies as set by MITI. Apparently, other Asian countries also became convinced and adopted this practice. As someone pointed out a while back, when all of these industrial pocilies converge to a few industries, we have a serious situation of oversupplies. My contention is this. Focusing short term is the only way to go as a way to achieve optimal resource allocations. In computer science, we have a method called 'greedy algorithm', which is used to make choices which are best given incomplete parameters for any optimization problem. People using this algorithm accept that they cannot determine the most optimal solution in advance and therefore they opt for an aggregate of many good little choices, which they hope in the end will approximate the most optimal one they want but don't know how to get it outright. In my mind, I see the short term focus of the US market as a manifestation of this 'greedy algorithm' in the marketplace to solve the resource allocation optimization. We will see in another decade or so whether Asian countries will break free of industrial policies. I'm not saying that employing 'greedy algorithm' is a sufficient condition to have economic success. One thing I learned from reading the text of Doc Greenspan's most recent speech is that optimal resouce allocation is the ultimate driver for economic success. How to achieve it involves many things not the least of which is a central banker's responsibility to achieve price stability (no inflation, no deflation) so that resouce allocation decisions are not affected by anticipation of either inflation or deflation. (We already mentioned another requirement, which is a clean economic environment where as little allocation as possible should be made with graft and corruption.) -Al