Starting a business is not a profitable activity: Hamilton [2000] documents that median entrepreneurial earnings after ten years of business are 35% less than the predicted alternative wage on a paid-job of the same duration. In addition, because the bulk of their wealth is invested in their own business, entrepreneurs bear a substantial amount of risk that only large private benefits can explain: Moskowitz and Vissing-Jorgensen [2003] estimate that entrepreneurs must enjoy non pecuniary benefits as high as 5 to 20% of their investment every year. These ”private benefits of control”, as the literature calls them, may correspond to pure hedonic flows: social status, the fun of running a firm or the independence that comes with it. However, in this case, one would be left with the puzzling fact that these benefits amount on average to some 150% of the entrepreneur’s annual income.
An alternative interpretation of these findings is that private benefits are pies in the sky: Entrepreneurs do not start new businesses because it is profitable, but because they wrongly believe it is. Many studies show that entrepreneurs typically overestimate the chances that their project will be successful. In their survey, Cooper, Woo and Dunkelberg [1988] find that 68% of entrepreneurs thought their own business would do better than their others’ (see also Pinfold [2000]). Experimental evidence suggests that people’s optimism about their own ability relative to their competitors’ leads to excess entry in a game of entrepreneurship (Camerer and Lovallo [1999]).
It has already been more than a year since the financial crisis which erupted in Thailand developed into the financial collapse in Asia. It has continued to deepen and broaden more than anyone anticipated. Its contagion has now spread to Latin America and Russia and is currently making the global capitalist system come apart at the seams. Also, the financial collapse in Asia was followed by an economic and social collapse. The Asian countries are struggling to escape from the miseries of declining income, rising unemployment, and increasing poverty.
Recently there have been many researches on the causes and the economic impact of the Asian crisis, but its social impacts have been relatively neglected. To fill this discrepancy, this paper assesses the severity of the Asian crisis and its social consequences. For decades, Asian countries have enjoyed high growth, low unemployment rates, equal income distribution, and low crime rates. Therefore, compared with other crisis-hit countries, social impacts of the crisis such as rising unemployment and income inequality have been felt more painfully in Asia and has lead to disastrous social consequences. To make matters worse, most Asian countries have not yet developed a meaningful social safety net. This paper documents the social impact of the crisis in the most affected Asian countries including Indonesia, Korea and Thailand, and tries to draw policy implications.
The past five years have witnessed a dramatic increase in managed futures products whose managers (commodity trading advisors) trade primarily in futures and options markets and which are available to the retail public as well as hedge funds whose managers invest in both cash and futures markets simultaneously and which are structured primarily for pool investment and not for public sale. Despite this growth, funds invested in managed futures and hedge fund products are estimated to be less than 1% of the over 3 trillion dollar mutual fund industry.
