This volume presents historical, contemporary, and theoretical perspectives on the role of local communities and social norms in the economic development process. Using historical evidence combined with recent developments in institutional economics involving game theory and contracts, it establishes that communities can enhance the development of a market economy under certain circumstances -- and sheds light on what those circumstances are.

Marxist social scientists have argued that the relationship between social and technical change is one of mutual interaction; innovation in the modes of production affects social organization, and social organization, in turn, has an impact on the development of novel modes of production. This consideration is of fundamental importance for the construction of any economic development policy. However, analyses of this critical relationship have been elaborated within a conceptual framework which most social scientists and policy makers who work within the (...) framework of neoclassical economic thought find difficult to understand. When marxists argue that technical innovations are the product of a class conflict, non-marxist social scientists are left wondering about what the exact meaning of such a statement. Because marxists have been unable to communicate their message, their important insights into the relation between social and technical change have not been incorporated in contemporary development policy; this situation has often resulted in great social costs. In the past fifteen years, however, Yujiro Hayami and Vernon Ruttan have attempted to analyze the critical interaction of social and technical change using neo-classical economic concepts. I argue that their approach can be utilized to express marxist insights in a language accessible to non-marxist social scientists. The careful and critical adoption of this approach could provide the grounds for a more fruitful dialogue about the interaction of social and technical change, and aid the construction of a new development policy. (shrink)

In 1997, the Japanese Diet revised the Bank of Japan law thereby granting the central bank greater independence in monetary policy making. The revision was an attempt by Japan's political class to weaken the authority of the powerful Ministry of Finance over the central bank and augment its own influence. The Bank of Japan, however, gained more autonomy than politicians ever intended, leading to frequent confrontations between the government and the central bank over monetary policy. This paper explores the new (...) strategic relationship that emerged between the Bank of Japan and government and the nature of monetary policy implemented in the post-reform period. We demonstrate that several factors contributed to the Bank's unexpected ability to enhance its independence: the astute leadership of the first post-reform governor Hayami Masaru; the Bank's ability to turn politicization of monetary policy to its advantage; and its pursuit of a strategy achieved by augmenting its own research capacity. On a theoretical level, our findings show that the passage of a new legal framework only marks the completion of one stage of institutional change and the start of the next; post-enactment politics have as much importance as pre-enactment politics in shaping outcomes. In the post-enactment phase, various factors, including the state of the economy and informal institutions or processes, matter greatly and may shift the direction of institutional change away from the intended path. (shrink)