Japan’s Modern Economy

September 11, 2007Economics 272

Models of growth

• Extensive growth– Expansion of margins

• Constant returns to scale; quantitative not qualitative

• Intensive growth– Higher output per inputs

• Labor productivity – Y/L: Y is GDP, L is pop or LF

• Total factor productivity – Relative to inputs of labor and capital

Why growth?

• Solow capital intensive– Hits diminishing returns, cf. old USSR

• Smithian growth– Specialization and trade

• Leads to higher productivity• “Division of labor is limited by the extent of the market”

• Schumpeter technology-led growth– “Modern” growth

• Historically all fought against Malthus!

Dfn “Modern” = ?

• Smithian “division of labor”– Non-farming population, esp urbanization– Commercial agriculture– Within monetary economy– Transportation / extent of market– Public order

Government role

• Government taxation paid for urbanization– Created a huge (cash) market– Edo was world’s largest city from by 1700

• the Edo “bakufu” fostered navigation– port and lighthouse development– maps etc. all by around 1720

• formal financial markets promoted– rice futures market in Osaka by 1720– transferring money in place of in-kind taxes– insurance markets (esp. casualty)– local (rural) finance by 1800s

Market-oriented economy

• especially intense development in several regions– cash-crop farms around Osaka (farmers bought food!)– large urban consumer market

• commercial elite for whom political advancement was foreclosed (cf. English Dissenters)

• education spread.– ukiyoe were for mass-market (wedding presents…)– lots of agricultural handbooks - 200+ titles in print

Specialization by the “kuni”(export products)

• Silk, cotton, salt, lumber, paper, fish

• Some regions largely industrial

• Seasonal “proto-industry” often accompanied by regional migration

• Both men & women active in wage labor outside the home

Standard of Living• transformation of consumption

– various rough fibers replaced by cotton; silk worn by more than just elite

– new (and better foods). peppers, sweet potatoes / taro, corn, etc.– new and better housing: tatami mats off the ground– vast increases in protein-laden soybean-related consumption (miso,

soy sauce)• Education

– Literate society, perhaps more so than England!– Vast outpouring of books, circulated through lending libraries– Even nascent “western” studies, esp. in 1800s

Mid-16th Century Han(“countries”)

Shipping Routes after 1720

Loom (karabikibata)c. 1770

Agriculture Outgrows Population

50.00

46.00

42.00

38.00

34.00

30.00

26.00

22.00

18.00

14.00

10.001600 1650 1700 1720 1730 1750 1800 1850 1872

Tokugawa Population & Agriculture

Population (millions) Arable Land (100,000 í¨) Agricultural Output

Osaka as an Entrepot (1714)Principal non-Rice Imports / Exports

Imports ExportsMarine products 20.2% Oil & beeswax 36.4%Agricultural items 19.5 Clothing & textiles 25.2Clothing & textiles 15.4 Misc tools 7.5Oilseed 12.9 Misc exports 7.3Mining products 7.5 Processed food 6.1Fertilizer 6.4 Accessories & decorations5.8Wood products 5.9 Lacquerware & pottery 4.6Misc Imports 4.1 Seedcake (fertilizer) 3.4Tea & tobacco 2.8 Furniture 0.5Tatami 2.0 Weapons 0.5Kyoto crafts 0.9 Arts & crafts 0.4%Total (Ag value) 286,561 kan Total 95,800 kan

Growth of a National MarketRice Price Movements Converged in the 17th Century

Structure of National Output

– 1874 –

• shortly after “opening” to the West

• before significant structural change from– new technologies

– convergence of domestic & international prices