In the 1950s and 60s, Alexander Gerschenkron claimed that banks facilitate economic growth among quot;backwardquot; countries. In 1990s and 2000s, many theorists similarly claim that banks promote growth. Banks do so by their superior monitoring and screening capabilities, they reason. Through...

According to modern contract theory, how firms structure their trading patterns and governance structures will depend both on the size of any relationship-specific investments they make, and on the feasibility of detailed contracts. Suppose contracts are hard to draft and enforce, but firm A...

Observers routinely claim that the Japanese government of the high-growth 1960s and 1970s rationed and ultimately directed credit. It barred domestic competitors to banks, insulated the domestic capital market from international competitive pressure, and capped loan interest rates. In the...

Observers of modern transitional economies urge firms there to ignore stock markets. Stock markets simply will not work in such environments, they explain. Firms should instead rely on debt finance, particularly bank debt. Only then will they be able to keep principal-agent (i.e.,...

Observers of the formerly communist transitional economies urge firms there to obtain funds from a relatively few sources. They note the institutional problems the firms face: courts not working, markets not developed, statutes not written. Because these firms cannot rely on the courts to...

Prepared as an introductory chapter to a forthcoming book on the distribution sector in Japan, this essay introduces the basic structure of the industry. We note the way competition drives consumers, sellers, and manufacturers to select distributional arrangements that minimize total costs, and...

In several fields, modern academics trumpet the contingency of social science and the indeterminacy of institutional structures. The Japanese experience during the first half of the 20th century, however, instead tracks what much-derided chauvinists have claimed all along: modern legal...

Most of what we collectively think we know about the Japanese economy is urban legend. In fact: - The keiretsu do not exist, and never did. An entrepreneurial research institute in the 1950s created the rosters to sell to Marxist economists looking for the monopoly capital that their theory told...

Central to so many accounts of post-war Japan, the keiretsu corporate groups have never had economic substance. Conceived by Marxists committed to locating "domination" by "monopoly capital," they found an early audience among western scholars searching for evidence of culture-specific group...