Market and Governance in the East and the West

- Miura Baien and Adam Smith-Kiichiro Yagi (Kyoto University)

I dreamt again.

In the Province of Kunisaki, Bungo,

You stood alone backed by beautiful red crowds

before the sunset.

Baien Miura.

Your figure lingers on.

Tozaburo Ono （ 1945 ）

1. Baien’s Intellectual Independence 　　

Nourish the inquiry by liberating the spirit from the accustomed presumptions

“Nature (Heaven and Earth) only is the teacher.”

“No distinction of schools in the deep recognition.”

Method of reasoning: “The essential is the reasoning is its direction of forward and backward. ”

From: Answering the inquiry of Mr. Bokkyo Taga (1777) and Deep Words(1775)

2. Monetary ideas in KAGEN (Elements of Value),1773

Contains similar ideas to “Gresham’s Law”and Quantity Theory of Money.

“Gold and silver are respected, while six basic staples are neglected. Their negligence leads to thin national assets.”

“Both commerce and political economy quest for gains. Merchants regard gains as gains. Politicians regard justice as gains. This is the distinction.”

3. Labor Market Analysis in KAGEN Original question: Why wages are high in the year

of rich harvest, while the opposite is the case in the year of poor harvest? Baien answered:

“In the year of good harvest, warehouses in provinces are filled with crops. In the year of poor harvest, they become empty. In the former, as rich provision enables it, people would return to their proper jobs. In the latter, as provision lacks, the sound go to wage works and the weak rely beggaring.”

“Poor people return to their proper job in one year and go to different jobs in another year. Thus, prices are not stabilized but fluctuate.”

LdLs in rich harvest

Ls in poor harvest

Wr

Wp

Ls, Ld

BAIEN’s Labor Market

4. Wealth of Nations (1776), Book I, chap. viii

“In years of plenty, servants frequently leave their masters, and trust their subsistence to what they can make by their own industry. But the same cheapness of provisions, by increasing the fund which is destined for the maintenance of servants, encourages masters, farmers especially, to employ a greater number. .... The demand for servants increases, while the number of those who offer to supply that demand diminishes. The price of labour, therefore frequently rises in cheap years.” (Cannan ed., p.93)

Ld in poor harvest

Ls in rich harvestLs in poor harvest

Wr

Wp

Ls, Ld

Adam Smith’s Labor Market

Ld in rich harvest

5. Difference between Baien and Smith

The labor demand curve is not clear in Baien, while the quantity of “funds for the payment of wages” is the key concept in AS’s analysis. (Recognition of capital as wages fund!)

Labor supply comes from poor farmers in Baien, while it comes from independent workmen in AS.

AS saw the counter-balancing effect of the price of provision on the wages. This is totally missing in Baien.

6. Contrast in policy recommendations

Baien welcomed the return of farmers to their proper jobs, thus would avoid the growth of labor market.

AS anticipated a sound development of labor market where fluctuations of wage becomes more stabile.

In AS’s view, affluence in assets enables masters to invest and thus to improve the productivity of labor.

7. Governance by Institutions and Distrust on Self-interest

“If a politician wish the welfare of the people, he has to rely on the moral of industry, frugality, and honesty. The lack of the moral is the result of the lack of solid institutions. The longevity and wealth of a state and the peaceful world are not realized without is not possible without the respectful institutions.”

“Small men always endeavors to attain selfish gains. The quest guided by self-interest inevitably damage the others. Gains are not true gains.”

8 ． Justice of the Prince and “Justice in the bottom”

“Justice itself has no definite appearance. It exist in the balance of gains and loss, appropriations and deprivations.”

In his Advice to the Clan Lord (1786) Baien stressed the “justice in the bottom”.

“The clan goes to the path to wealth naturally, in so far as the lord educates people effectively and let the farmers and merchants free in economic areas.”

References

Hajime Kawakami (1905) “Ideas on Money in Miura Baien’s Kagen and Motoori Norinaga’s Tamakayura” (1905)

Miura Baien Zenshu (Miura Baien, Completed Works), 2 vols., Kodokan, 1912.

Shunsaku Nishikawa (1979) Political Economy of Edo Period, Nihon Hyoron-sha (in Japanese).

Rosemary Mercer (1991), Deep Words: Miura Baien’s Natural Philosophy, E. J. Brill: Leiden.

Bertram Schefold ed. (2001) Vademecum zu einem japanischen Klassiker des ökonomischen Denkens: Miura Baien KAGEN: Vom Ursprung des Wertes, Verlag Wirtschafts und Finanzen: Düsseldorf.

This presentation is based on my Japanese article “Miura Baien’s KAGEN and Western Economics” (2003) and the commentary article co-authored by Hidetomi Tanaka in Schefold ed., (2001).