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Critics compare Lee Jae-myung’s 'hotel economics' theory to canceled Ye concert

Published: 21 May. 2025, 20:00 Updated: 21 May. 2025, 20:40

A parody of "hotel economics" circulating on social media. The left references Ye's canceled concert in Seoul while the right takes Cristiano Ronaldo’s no-show in Korea. [SCREEN CAPTURE]

Korean presidential candidate Lee Jae-myung of the Democratic Party has ignited fierce debate with his "hotel economics” theory — a scenario meant to illustrate economic circulation. The concept, initially introduced during a campaign speech, has since become fodder for satire on social media, where users have mocked it by drawing parallels with high-profile “no-show” incidents, such as the cancellations of a performance by Ye, formerly Kanye West.

Despite Lee’s attempt to walk back the theory as merely “an extreme example,” criticism has continued to mount, prompting intervention from his economic advisory group. Economics Professor Ha Joon-kyung of Hanyang University — affiliated with Lee’s “Growth and Integration” think tank — on Wednesday defended the idea via social media, characterizing it as Keynesian multiplier-type analysis.

The Keynesian multiplier, coined by British economist John Maynard Keynes, posits that government spending — such as on infrastructure — triggers successive rounds of income and consumption, ultimately contributing greater value to GDP than that of the original expenditure.

“When the economy is in deep recession, what should we do?” Ha wrote on his Facebook Page, adding that Keynes proposed paying people to dig holes and fill them again — or even hide money in bottles in abandoned mines — just to spark spending and circulation.

Citizens watch the broadcast of the first presidential debate at a waiting room in Seoul Station in Jung District, central Seoul on May 18 where Lee was attacked for his economic policy. [YONHAP]

Ha further defended the controversial “no-show” aspect of the hotel analogy, suggesting it intended to emphasize the circulation of money rather than the injection of new funds. He compared it to policy loans for small businesses, which stimulate consumption even if eventually repaid.

Still, many economists remain unconvinced. Critics argue that the model’s assumptions are overly simplistic and detached from real-world dynamics.

Unrealistic consumption assumptions

At the core of Lee’s model is the assumption that every person who receives 100,000 won spends all of it — implying a marginal propensity to consume of 1. But in reality, experts say, such behavior does not occur.

One economist observed that while the theory highlights the importance of spending to drive demand, it overlooks the reality that stimulus payments often displace rather than increase consumption. Even when distributed as vouchers or local currency, such programs may merely replace planned spending, reducing their intended economic impact.

Yi Yoon-soo, an economist at Sogang University, added that “in heavily indebted households, like those in Korea, new income often goes toward paying down debt, not spending.”

Absence of production

Another major flaw, experts say, is the model’s omission of production, a key component of the Keynesian framework. Ahn Dong-hyun, a professor of economics at Seoul National University, emphasized that “economic growth requires the creation of goods and services. Merely passing money from one person to another does not drive growth unless it is accompanied by increased output.”

He contrasted the hotel analogy with traditional Keynesian stimulus.

“When the government invests in infrastructure, companies hire workers, consumers spend wages and firms ramp up production. That’s how the multiplier works — not through a fictional scenario where money changes hands without production,” he said.

Hidden costs and externalities

Critics also point out the hidden victims in Lee’s hotel scenario — namely, the hotel owner who prepares for a guest that never arrives.

The presidential candidates pose for a photo in the SBS Prism Tower in Mapo District, western Seoul, on May 18. From left: Kim Moon-soo of the People Power Party, Kwon Young-guk of the Korean Democratic Labor Party, Lee Jun-seok of the Reform Party, Lee Jae-myung of the Democratic Party. [JOINT PRESS CORPS]

Heo Joon-young, an economics professor at Sogang University, said that the model fails to account for “opportunity costs and real resource allocation, suggesting that the hotelier’s loss is ignored in the oversimplified narrative.”

Others argue that the theory glosses over distributional effects.

Yi, from Sogang University, warned that “when interpreted as government spending, the model implies that the general public bears the costs through taxation.”

He added that in a country like Korea, where public finance is often debt-financed, such policies risk burdening future generations with uncertain benefits.

Heo added that though the model “could be okay when running a province like Gyeonggi or Seongnam,” which Lee previously governed, “it becomes problematic when scaled to national policy without accounting for systemic trade-offs.”

Ideological divide

While critics denounce the theory as an extreme abstraction, some observers suggest that the debate ultimately reflects deeper ideological divisions over fiscal policy. Lee’s approach echoes Keynesian demand-side economics, advocating for aggressive government spending to offset weak private sector demand.

Lee doubled down on this view on Wednesday, dismissing fears regarding national debt as “ignorant nonsense.”

“There are people saying ignorant things like ‘the national debt has exceeded 1,000 trillion won [$7 billion], so the country must never go into debt,’” said Lee. “Instead, household debt has surged, turning everyone into debtors.”

However, economists express concern that fiscal soundness and the efficiency of public finances must be considered realistically.

BY KIM YEON-JOO [[email protected]]