This collection of papers stems from a recent World Bank project focused upon the contentious issue of whether government has played any positive role in the success of the so-called "high-performing" Asian economies. It goes beyond the influential World Bank volume The East Asian Miracle to chart a middle ground that recognizes diversity among the different East Asian economies, as well as the evolutionary nature of government intervention.

Published as part of the "Urban Dynamics of East Asia" Research Project.

Just like many other crises, the Korean currency crisis came suddenly. In mid-November 1997, headlines in the Korean press consisted mostly of presidential election stories. At that time the presidential race was very close; the Grand National Party candidate, Lee HoiChang, was making a dramatic comeback, while the National Congress for New Politics candidate, Kim Dae-jung, was making his best effort to maintain his narrow lead. Thus, when President Kim Young Sam announced on November 19 his decision to fire key economic policy-makers on the grounds of mismanaging the economy, most Koreans were surprised at the news and questioned the president’s motivation. Two days later they were completely shocked to learn that the Korean government was asking the International Monetary Fund (IMF) for emergency standby loans because the Korean foreign reserve level was very low at $7.3 billion and most foreign financial institutions were unwilling to roll over their short-term loans to Korea.

Published as part of the "America's Alliances with Japan and Korea in a Changing Northeast Asia" Research Project.

Alliances are organizations between or among independent entities that concert to produce “collective goods” for the mutual benefit of alliance members. The statement applies whether the alliances are between or among countries, corporations, universities, research centers, or other institutions. Of course, the nature of the collective goods, as well as the membership in the collectivity, differs across these cases. That the goods (or benefits) are“collective” means that their availability to one alliance member (or their production by any member) implies their availability to the other members of the alliance.

Because the beneficiaries of collective goods cannot readily be excluded from access to
them, the so-called “free rider” problem arises. As a result, “Let George do it” becomes the
prevalent incentive structure. The more George does, the less is the burden (i.e., “cost”) on
other alliance members, while the benefits are collectively available to all members.

Several corollaries follow with respect to the formation, functioning, and prospects of
alliances in general, and those in Northeast Asia in particular:

First, while the benefits of an alliance are available to all its members, their respective
valuations of these collective benefits may differ. It is also worth noting that non-alliance members—for example, China—may appraise the putative alliance products as representing
not benefits, but “dis-benefits” (threats or risks) for themselves.

Second, devising an appropriate formula for sharing the costs of producing the collective
alliance benefits is complicated by the aforementioned differences in valuations among
alliance members, as well as differences in their capacity and willingness to pay.

This paper addresses the general question of the collective burdens (costs) and benefits of
the U.S. alliances with Japan and Korea, as well as the respective capacities and willingness
of the alliance members to bear these burdens. The economics of these issues are inextricably linked with their politics, and so crisscrossing between these two domains occurs frequently in the paper.

The paper is divided into five sections. Section 2 addresses the economic capacities of the
alliance members to bear alliance costs. Section 3 deals with the costs—both economic and
non-economic—of each of the alliances. Section 4 assesses the security and other benefits of the alliances. Section 5 considers the politically dominated “willingness” of the alliance
members to bear alliance burdens. And Section 6 provides a concluding assessment of the
balance between the burdens and benefits of the two alliances, the interdependencies
between the two alliances, and ways of enhancing the alliances while mitigating the
drawbacks associated with what we refer to as the “China–Japan conundrum.”

Published as part of the "America's Alliances with Japan and Korea in a Changing Northeast Asia" Research Project.

Reprint from NBR Analysis volume 7, number 4.

Reprint from Journal of Far Eastern Business originally printed Autumn, 1994.

Part of the Walter H. Shorenstein Distinguished Lecture Series

Just as numerous scholars have delved into the interplay between markets and institutions in an attempt to explain the postwar economic miracle, this paper examines the relationship between markets and institutions in Tokugawa Japan in an attempt to better explain the phenomenon of economic development at that time. In particular, this paper focuses on the Tokugawa era institution of the sankin kotai, or alternate attendance system, and argues that conventional explanations attributing the unusual economic development of this period to the unilateral coercive government power of this institution are problematic. The author argues that the alternate attendance system must instead be understood as a rational institution which promoted mutual compliance ex post and allowed for credible commitments ex ante through its harmonization of interests. The resulting peace dividend generated the positive externalities requisite for the development of a market economy.