Institutional Analysis of Japanese Economy Ⅰ

In the early seventh century, the imperial court introduced the Chinese centralized administrative and land ownership regime, which only proved to fail to provide appropriate incentives to relevant stakeholders. Adjustment of the administration to reality brought about the manorial system.

In medieval times, under the manorial system, land ownership and administrative system were characterized by multiple claimants and stratified authorities on a parcel of farmland. This complicated mechanism better worked to share risk and mitigate incentive problems that had become salient in ancient times. Then, in early modern times, the shogunate and lords came to protect peasants' exclusive property right of parcel farmland the peasant family cultivated, to provide augmented incentives to peasants who now became more resilient against external shocks. The protection of exclusive property right in the early modern times formed the institutional basis of the market economy. At the same time, the shogunate attempted to stabilize the peasant economy by regulating the farmland and agricultural financial markets. The regulation enabled social stability under the shogunate regime.

After the Meiji Restoration, the exclusive property right was reauthorized, and farmland and financial markets regulations were abandoned. Furthermore, the modern judicial system, firm organizations, and modern technologies were introduced from the West. The modernization effort accelerated market expansion and ignited industrialization.

How was the manorial system formed, and how did it mitigate incentive problems then? How was the property right of peasants established and protected in early modern times? Finally, how was Japan industrialized after the Meiji Restoration? In the real world, the first best resource allocation, which is presumed to be realized under perfect competition, cannot be achieved anyway. Given the structure of informational asymmetry and other technological conditions, a better second-best has been sought and has evolved overtimes. The course aims to understand the economic development of Japan from medieval times, through the Tokugawa period and the Meiji Restoration, to the industrial revolution in the late 19th century.