"Soft Infrastructure, Trading Costs and Regional Co-operation "

The main purpose of this paper is to clarify some important links between regional co-operation, (soft) infrastructure and trading costs, and to suggest some hypotheses for further investigation. Khan and Weiss(2006) discuss the issue of both hard and soft infrastructure in this context. This paper is a continuation of Khan and Weiss(2006) but in the specific context of soft infrastructure, and particularly governance, including corporate governance. As Khan and Weiss(2006) point out, conceptually such discussions can be seen as a part of the analysis of the 'New Regionalism' The key idea here is co-operation through preferential trade and investment agreements that aim to strengthen structural economic reform, aid economic transformation, attract foreign investment and generally raise the international competitiveness of participating countries. This paper identifies several crucial areas of future research with potentially large value added. The general hypothesis with significant policy implications which can be elaborated and tested is that trade costs are negatively related to the existence of and improvements in soft infrastructure. A related hypothesis is that cross-border cooperation in building and maintaining both hard and soft infrastructure synergistically will lead to a reduction in trade costs. More specifically it will be useful to know the how high are the barriers to trade created by factors like high freight costs, slow port handling, customs delays, lack of competition in the insurance sector, poor corporate governance, unofficial payments and so forth. Some of these factors may be intrinsically difficult to quantify but the potential pay-off from policy-relevant research of this type is enormous. Optimal policies for regional cooperation in soft infrastructure will be difficult if not impossible to formulate in the absence of this type of research.

"Value, Social Capabilities, Alienation:The Right to Revolt"

The labor theory of value in classical political economy, particularly as developed in Marx's Capital, has been the source of a number of interpretations and controversies. The purpose of this paper is to make an analytical distinction between two types of labor theories of value that can illuminate the role of the less well known of the two different theories in understanding the dynamics of capital accumulation and of systemic changes. This qualitative theory of value can be used to explore the significance of value form in both capitalism and the concept and practices of socialism. It can also offer a new way of defending the right to revolt on the part of those who are exploited under both capitalism and socialism.

"China's Energy Dilemma"

PRC's energy dependence is growing and has become a major concern for both economic and national security policymakers in that country. The ambitious goal of modernization of the economy along the lines of the other newly industrialized economies(NIEs) of Asia has succeeded only too well, and it is difficult to reorient economic priorities. If examined rigorously, such an economic strategic assumption can be seen to entail the goal of creating further technological capabilities. In particular, China seems to be firmly committed to the creation of a largely self-sustaining innovation system as part of a knowledge-based economy of the future . Such innovation systems, called positive feedback loop innovation systems or POLIS have been created by advanced countries, and NIEs such as South Korea and Taiwan are proceeding to create these as well. But this will add to its energy burden and further dependence on the US as the power which controls the key sea lanes. Only a strategic reorientation to building a self-sustaining POLIS and appropriate regional cooperation institutions can lead to the way out of the current dilemma for China.

"Digital Transitions: The POLIS Theory and The NIEs"

In the fast developing digital technological revolution even the newly industrialized economies (the NIEs) have found it hard to catch up and maintain the pace required for not falling behind. The developing economies are clearly at a great disadvantage in such a fast paced technological race. Thus there is a digital divide that is growing and through a cumulative causation the gap will widen further unless coordinated action is taken. This paper discusses some of the most important economic issues conceptually and offers some modest policy advice. The basic problem of adoption of a new technology system such as the ICT( information and communications technologies) is explored via the theory of a positive feedback loop innovation system (POLIS) in a nonlinear, path-dependent world where institutional structure and its evolution matter crucially. By investing strategically in physical, intellectual and other forms of human and organizational capital as well as building new institutions of cooperation the NIEs may be able to forge a path not only in the ICT sectors, but also create innovation systems of their own that can be extended to region-wide systems. Under the emerging globally competitive market environment this will be the best way to compete dynamically. However, creating comparative advantage in this way requires capabilities that many NIES in Asia will need to promote. Creative policy interventions with a mix of market promotion, good governance, relative openness, and promotion of sustainable development in an equitable manner are necessary if the NIEs are not to be left far behind. The theoretical approach developed here also allows to evaluate the state of the economy and society ethically by extending and incorporating Amartya Sen's capabilities approach within the POLIS.

"Innovation and Growth: A Schumpeterian Model of Innovation"

Following Schumpeter we assume that innovation in specific firms, or groups of firms, can have economy-wide effects. Models based on this idea can be shown to have multiple equilibria. The idea of a positive feedback loop innovation system or POLIS is formalized by picking an appropriate sequence of equilibria over time. It is shown that POLIS has empirical relevance by applying the formal model to an actual economy. The 1997-98 financial crisis in many Asian countries, most notably South Korea, seemed to have reversed the conventional wisdom regarding the East Asian miracle". This paper applies the concept of a POLIS to the case of Taiwan to show that at least in this case, neither the view that the miracle was a mirage nor the view that the growth was a result of factor accumulation only is correct. Ultimately technological transformation - in particular the creation of a positive feedback loop innovation system is what makes the difference between sustained growth and gradual or sudden decline. Although various problems remain in both the real and the financial sectors, the successes of Taiwan in building the preconditions for an innovation system are worth examining. Upon careful examination of Taiwan's system of innovation within the above Schumpeterian model it is found that Taiwan has a fighting chance of building a POLIS in the near future. An interesting feature of the Taiwan POLIS is the modular organizational architecture of some of the high technology firms in Hsinchu science-based industrial park and other centers.

Development Strategies: Lessons from the Experiences of South Korea, Malaysia, Thailand and Vietnam

This piece synthesizes the development strategies of Korea, Malaysia, Thailand and Vietnam and draws some relevant lessons. Using a complex adaptive systems approach, strategic openness, a set of heterodox macroeconomic policies, creation of institutions for productive investment in both agriculture and industry, avoidance of severe inequalities and political conflict, special initial conditions and willingness to learn from unexpected developments are found to be some of these factors. Although no country can succeed by following mechanically the experience of another country cautious experimentation, rapid feedback and flexible, pragmatic policy-making with a strategic medium to long run perspective, can be helpful. Dynamic learning and flexible institution building are essential components of such a strategic approach to development.development strategy, complex systems, heterodox policies, institution building, dynamic learning

"Governance and Effectiveness of Japanese Aid: Towards Optimality"

In this paper I have tried to pursue two related objectives. First, I have tried to gauge the impact of Japanese aid on South and Southeast Asia. My second objective in this paper is to offer an approach to relate governance and aid-effectveness that could be applied to the aid and macroeconomic time-series data from the region. Using a bounded rationality format presented in a model that allows to progress towards optimality over time invites thinking along the lines of inductive learning to improve both governance and aid-effectiveness. Although Japan comes out ahead of many western donors, particularly, large ones such as the US and UK, there is still much room for improving aid-effectiveness. Both model-based and qualitative interview-based investigations in this paper point to donor and recipient policies that can be geared towards improving democratic governance, openness and grassroots empowerment in order to promote further aid-effectiveness.

"Sustainability and Surplus"

In this paper we present two new concepts for studying sustainability. The first is the idea of an environmentally adjusted surplus(ES). The classical concept of surplus is revised to approximate the total available discretionary income for the society under ordinary (capitalist) growth process.ES is an operationalizable concept. We demonstrate this here via a simplified but illustrative exercise. Work with large data sets employing social and environmental accounting will yield sharper and more accurate results. Our second contribution is the concept of a modified stationary state. Recognition of the economic uncertainty and limits to calculations leads naturally to the idea that both individual and social rationality is bounded. Under the bounded rationality hypothesis MSS is a more appropriate concept for sustainability than the ones currently adhered to. This includes Boulding's definition of steady state as well.It is our hope that with these new concepts at hand the analysis and policy prescriptions regarding a sustainable future can proceed more realistically. Together they also suggest a new research program for environmental and ecological economics.Some components of this program will be identifying and estimating ES sectorally and in aggregate, mapping the transition paths to MSS, and most importantly asking what modifications and changes in our socio-economic and political institutions are necessary to make this transition possible. Since the MSS is to be achieved in the future but choices must be made now, an inter-temporal allocation problem between the present and future generations is involved. We need to ask: "How will the rights of future generations be defined, and how will enforcing those rights influence allocation decisions?" This is one of the most important institutional questions in a global setting as well. In the absence of appropriate international institutions with enforcing authority, nation states will define and enforce these rights in a haphazard manner. In the worst case they will do nothing. In order to avoid such an impasse, we have proposed the somewhat novel concept of a modified stationary state of a sustainable economy. The illusion that ever-higher levels of consumption will yield ever-higher levels of satisfaction provides support at the individual level for a system of indefinite expansion that in the long run is simply not viable. It is not viable because, in a world of finite resources and pollution-absorption capacity, any system that depends on continuing expansion of production or "throughput" cannot be sustained. Ultimately, such a system will have to be a "modified stationary state" which is possible in a world where agents have bounded rationality but also forward looking abilities.

"A Theory of Deep Democracy and Economic Justice in the Age of Postmodernism"

The main purpose of this paper is to offer a somewhat novel theory of deep democracy and economic justice. Part of the novelty consists in considering radical uncertainty and indeterminacy under postmodern conditions. I claim that even under such conditions a plausible theory of deep democracy and economic justice can make sense. The theory of deep democracy presented here makes a distinction between formal aspects of democracy and the deeper structural aspects. In order for democracy to be deep, democratic practices have to become institutionalized in such a way that they become part of normal life ina democratic society. In this sense, ontologically, deep democracy overlaps with Barber's (1984) idea of "strong" democracy. There are, however, epistemological differences as well as differences of emphasis, particularly in the economic spere. I have tried to consider the postmodernist position with regards to democracy and economic justice by paying careful attention to the arguments of leading postmodernists. Barring a nihilism that rules out arguments entirely, such a procedure seems reasonable. Following this procedure, Lyotard's characterization of the discourse on morality and justice as phrase-regimes has been shown to lead to an ethical impasse. His appeal to the Kantian sublime, in this context, would seem to be a category mistake. The aesthetic category of sublime does not fit the requirements of moral judgments even in Kantian terms. Epistemologically, the postmodern dilemma arises from a correct critique of metaphysics and transcendentalism. However, the critique is partial and negative. It is partial in the sense that it does not take the challenge of Kant to develop normativity seriously enough to explore alternatives as Hegel did. It, therefore, pursues entirely the negative critical path leading to thoroughgoing skepticism and nihilism. Derrida's belated attempts to rescue philosophy from a linguistic nihilism may succeed. But it still falls far short of offering a positive account of normativity. A critical overcoming of modernism simply cannot be found in the postmodern turn. I have offered as an alternative to natural law and transcendental norms an account of Hegel's explorations. As Winfield and others have pointed out, this approach is also anti-foundational. However, by following the rational demands of self-determination, it is possible to break out of the vicious circle of skepticism. Instead a progressive structure starting with the minimum structure of freedom as self-determination can be built up. Following this alternative offers a way of exploring deep democracy and economic justice. A concrete set of institutions consistent with the development of self-determination can be seen as necessary for the idea of economic justice to have meaning. In the spheres of production, distribution, exchange, law and contracts among others, the development of appropriate economic institutions allowing this inter-subjective idea of freedom to unfold becomes the thematic development of economic justice. An important problem in this context is the coherence of the concept of the moral subject. By carefully considering poststructuralist psychoanalytical theory of Lacan and others a dynamically oriented approach to the question of the subject becomes possible. Pre-Freudian thinkers such as Hegel or Marx did not see the formation of the individual in all its deeply problematic aspects. However, the "speaking subject," though not innocent (as Helene Cixous wittily put it), is nevertheless capable of agency under specific social and economic conditions. A continuum of subjectivity ending with the fully liberated individual offers various possible levels of moral agency. In an economically and socially unjust setting radical analytic and social interventions will be necessary for these possibilities to materialize. Deep Democrfacy and economic justice, therefore, can be presented as a coherent set of positive requirements. It is part and parcel of the need for rational autonomy in our world. Reasonably enough, even if we choose to call such a world postmodern, a discourse on deep democracy and economic justice is both necessary and possible. It is encouraging to think that such discourses are not just phrase-regimes.

China?s Development Strategy and Energy Security: Growth, Distribution and Regional Cooperation

This paper analyses both global and regional approaches to solving problems of energy security and ecological imbalance by addressing specifically the problems of China?s energy security. China?s growing energy dependence has become a major concern for both economic and national security policymakers in that country. The ambitious goal of modernization of the economy along the lines of the other newly industrialized economies (NIEs) of Asia has succeeded only too well, and it is difficult to reorient economic priorities. If examined rigorously, such an economic strategic assumption can be seen to entail the goal of creating further technological capabilities. In particular, China seems to be firmly committed to the creation of a largely self-sustaining innovation system as part of a knowledge-based economy of the future. Such innovation systems, called positive feedback loop innovation systems or POLIS have been created by advanced countries, and NIEs such as South Korea and Taiwan are proceeding to create these as well. But this will add to its energy burden and further dependence on the US as the power which controls the key sea lanes. Only a strategic reorientation to building a self-sustaining POLIS and appropriate regional cooperation institutions can lead to the way out of the current dilemma for China. Fortunately, such a model of POLIS which is distributionally and ecologically sensitive can be built for China and applied strategically to lead towards a sustainable development trajectory. ...China, development strategy, energy, environment, POLIS, innovation system, regional cooperation