The Rubber Ruler Problem

A Dialogue on Gangnam, Currencies, and the Measurement of Bubbles Seoul Inside · B. Sun · May 2026

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Student: Every serious analyst has called Gangnam a bubble for thirty years. The numbers seem to support them. Eunma Apartment in Daechi-dong sold for ₩18 million when it opened in 1980. Today the same unit trades at roughly ₩2.1 billion. That’s more than 100 times. How is that not a bubble?

Professor: It’s a reasonable place to start. But before we discuss whether Gangnam is a bubble, I want to ask you something simpler. What are you using to measure it?

Student: The price. In won.

Professor: And what happened to the won over that same period?

Student: It weakened. Korea had high inflation — everyone knows that.

Professor: Let’s be precise. According to World Bank CPI data, ₩100 in 1966 had the same purchasing power as approximately ₩4,076 today. Roughly 40 times. Korean consumer prices rose about 40-fold over sixty years. Now — Eunma went up 100 times in won terms. Subtract the currency debasement, and you’re looking at something closer to 2.5 times in real purchasing power terms. Still significant. But rather different from “100 times,” wouldn’t you say?

Student: Okay. So inflation explains a lot of it. But the won still weakened dramatically against the dollar. Everyone says the won is a weak currency. If we convert to dollars, doesn’t the bubble argument collapse even further?

Professor: That’s exactly the right question. And this is where it gets interesting. The won-dollar exchange rate in the early 1980s was approximately ₩800 to the dollar. Today it sits around ₩1,500. That’s roughly 1.8 times over forty-plus years.

Student: Wait. Korean consumer prices rose 40 times. But the exchange rate only moved 1.8 times?

Professor: Correct.

Student: That doesn’t make sense. If the won lost 40 times its domestic purchasing power but only 1.8 times against the dollar... then the dollar must have also lost enormous purchasing power over the same period.

Professor: According to the U.S. Bureau of Labor Statistics, $1 in 1980 is equivalent to approximately $4.04 today. The dollar lost roughly 75% of its purchasing power between 1980 and 2026.

Student: So both currencies were doing a bungee jump simultaneously.

Professor: At different speeds, yes. Korea’s won fell roughly 40-fold in domestic purchasing power. The dollar fell roughly 4-fold. The ratio between them — the exchange rate — moved only 1.8 times, because both were declining together. The Japanese yen tells a similar story. In 1980, the yen traded at around ¥240 to the dollar. Today it’s approximately ¥155. The yen has actually strengthened against the dollar over four decades, despite Japan experiencing its own severe inflation and the “lost decade.” The euro, introduced in 1999 at $1.18, trades today at around $1.08 — essentially flat over twenty-five years, while both the U.S. and eurozone experienced significant inflation throughout.

Student: So all the major currencies were losing purchasing power — just at somewhat different speeds. And because they were all falling together, the exchange rates looked relatively stable.

Professor: You’re describing what some economists call “coordinated debasement.” When every major currency in the global system loses purchasing power simultaneously, there is no external reference point from which to observe it clearly. You cannot see the water rising if you are standing in the water.

Student: Which means the “ruler” we used to measure the Gangnam bubble — whether won or dollar — was itself shrinking the entire time.

Professor: Precisely. Now return to Eunma. In 1980, ₩18 million. Today, ₩2.1 billion. In dollar terms at 1980 exchange rates: approximately $22,500. At today’s exchange rate, approximately $1.4 million. That’s a 62-fold increase in dollar terms — not 100-fold. Adjust for U.S. dollar inflation over the same period, and you arrive at something closer to 15 times in real 1980 dollars.

Student: Fifteen times over forty-five years. Still significant. But not “100 times.”

Professor: And not obviously a bubble, if you consider what else happened to Korea over that period. In 1980, Korea’s GDP per capita was approximately $1,700. Today it exceeds $35,000. That’s roughly a 20-fold increase in dollar-denominated income per person. An apartment in the center of a country that grew its per-capita income 20-fold, appreciated 15-fold in real terms. The question is no longer “why did it go up so much?” The question becomes: “given what happened to this country, why didn’t it go up more?”

Student: So the bubble wasn’t Gangnam. The bubble was the measurement.

Professor: That is one way to put it. For thirty years, analysts measured a rapidly developing country’s core urban real estate using a ruler that was itself shrinking — in won, in dollars, in every major currency simultaneously. The debate was never really about Gangnam. It was about what happens when the instrument of measurement is the very thing that’s broken.

Student: A broken clock is right twice a day. But a ruler that shrinks every year—

Professor: Is never right. Not even once.