A new and interesting debate on the role of the government in economic development has also emerged following the rapid growth of the East Asian economies. This debate focuses on somewhat different concerns from the earlier calculation debate, assessing whether or not the government in an underdeveloped capitalistic market economy can improve upon the market outcome of resource mobilization and resource allocation. This is why the debate is ultimately reduced to measuring the importance of market failure (or absent market institutions) versus government failure (or the government’s inability to assume the role of markets or to introduce market institutions).
In observing the remarkable success of economic development in East Asian countries such as Japan,Korea,and Taiwan over the past 30 years or so adherents of the neoclassical theory emphasize one important lesson that can be learned from the East Asian experiences. This is the importance of getting the basics right. They argue that the government should provide a stable macroeconomic environment and a reliable legal framework in order to create an enveironment favorable to the free play of market forces. According to this critique, minimum intervention with the lowest degree of relative price distortion is a virtue. They see that Asian economies benefited the most from a government strategy that followed the lead of the market, rather than trying to actively direct it.