Nobel Prize-winning economist urges policy flexibility for socio-economic challenges
Michael Kremer, the 2019 Nobel Laureate in Economics and a University of Chicago professor, speaks during a press conference at annual meeting of the Asian Development Bank (ADB) in Incheon's Songdo International Business District, Tuesday. Korea Times photo by Choi Won-suk
By Yi Whan-woo
INCHEON ― Korea should be flexible with its public policy to better cope with low birthrates, gender disparity in the labor force and other social and economic problems that can work as “weak links” against the country's economy in the post-pandemic era, a Nobel Prize-winning economist said.
Speaking at a press conference at the annual meeting of the Asian Development Bank (ADB) in Incheon's Songdo International Business District, Tuesday, Michael Kremer's comment referenced O-ring theory, an economic development model he formulated in 1993.
The theory derives its name from the deadly explosion of the U.S. space shuttle Challenger in January 1986 due to a single failure of an O-ring, a component that was not afforded due significance and thus overlooked.
The theory says that even the smallest components of a complex production process must perform properly for successful production.
“The Korean economy has developed so fast and it now faces different situations,” Kremer said, adding, “It is important to maintain flexibility in institutions.”
The 2019 Nobel Laureate in Economics and a University of Chicago professor, Kremer sees immigration as a possible way for Korea to overcome economic challenges.
“Immigration can play an important role from an economic point of view,” he said, although it can cause disputes in terms of political and cultural issues.
The professor also sees immigration as a possible tool to reduce economic disparity between the two Koreas.
Citing cases in economics, he said standards of living in the impoverished areas “improved dramatically” when those in the areas were able to move freely to richer regions.
In relation to Korea as a cultural powerhouse, he described the country's exports of cultural products as worthy of study by economists.
Earlier in the day, Kremer joined a keynote session at Korea Seminar Day and talked about how Korea can serve as an example for developing countries in the post-pandemic era.
Korea Seminar Day was a one-day event organized by the Korean government to explore Korea's rapid industrialization and the path to recovery for Asia's economies after struggling through the COVID-19 pandemic.
Regarding education in Korea, he said “It makes sense to invest in human capital” considering it resulted in qualitative production in the country.
He suggested that developing countries could consider the O-ring theory to find opportunities in the era of accelerated digital transformation.