The chapter outlines some ' lessons ' to be learned from the Korean experiences of government-led economic development over the past thirty years by suggesting examining the the policy patterns, defining their characteristics, and suggesting the desirable role of the government in a globalizing world.
Korea's experience suggest that active and protracted governmental intervention in properly allocating resources might achieve some short-term goals, but only at the expense of some long-lasting adverse side-effects.
For example, the distorted relative price system and incentive structure resulting from such interventionist policies has meant that the private sector has been reluctant to economize.
After the government utilized them as credit distribution stations for over three decades, Korean banks paid more attention to the volume of deposits than to their overall profitability.
In other words, Korea banks considered a corporation in terms of how much it borrowed rather its profitability.
it has been argued although government intervention in resource allocation enjoyed some success in the 1960s and 1970s, this is no longer the case because the size and complexity of the Korean economy have already reached a point where the informational superiority of the government over the private sector can no longer be guaranteed.
Finally, this chapter provides a basic framework within which we discuss the optimal role of the government in a general context.
we invoke the oriental philosophy of Taoism ' being natural without coercion ' - and the Hayekian Philosophy of interpreting market competition as a discovery procedure of the optimal solutions to the resource allocation problems.
This chapter concludes that the government's role should be confined to preserving The spontaneity and endogeneity of the market order and cultivating an economic environment conducive to the Proper functioning of the market.
In other words, while the government concentrates on determining exogenous variables for the market order, the determination of endogenous variables should be left to the market.