Although most economists maintain a mistrust of a government's goals when it intervenes in an economy, many continue to trust its actual ability. They retain, in other words, a faith in state competence. For this faith, they adduce no evidence. Sharing little skepticism about the government's...

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.,...

Economists and legal scholars routinely posit an implicit contract between Japanese firms and their principal lender (called their "main bank"). Under this arrangement, the bank implicitly agrees to rescue the firm (through financial and managerial help) when times turn bad. Out of court, it...