Economic Pathology; A Research into its General Principle and Clinical Cases
By: Choe, Yongshik
Research Professor, The Institute for Industrial Policy Studies
It is essential and urgent to establish the economic pathology in economics, which would make it possible for the managers of a firm and the officers of the government in charge to diagnose correctly economic diseases including some economic crises that affect gravely the performances of a firm and the national economy, and for them to respond well the economic challenges confronted. To establish the economic pathology, it is also necessary and essential to identify the principles about the outbreak and developing process of financial crisis because almost all the economic diseases happen and develop through this crisis.
Fortunately, there are some excellent achievements for the financial crisis in economics academia. Among them, [Manias, Panics, and Crashes; A History of Financial Crises, 1978] of Kidleberger is so prominent and important that it has been cited by more than ten thousand times in other researches, and that it shows clearly the general developing process of financial crisis such as the sequences of manias, panics and crashes. Regretfully, however, this book does not mention the inevitable reason why each of manias, panics and crashes happens consecutively. So, it is hardly possible to foretell an economic disease in advance with these sequences of manias, panics, and crashes.
When the inevitable causes and principles which lead them to happen one by one are found and developed enough, it would be possible to foretell the outbreak of financial crisis in advance. This book reveals their inevitable causes and principles which cause and develop the financial crisis as follows; manias happen due to the time-shift of demand from the future, crashes happen due to the hollowing-out of demand, crashes happen due to the operating of credit destruction principle, and economic hardships thereby caused appear due to the working of dysfunctions of the economy.