Prof. Daniel Bernhofen

The Emergence of a Market Economy in Japan

During his stay Daniel Bernhofen plans to work on a research paper and a complementary book project. The paper and the book are part of a long-term research agenda that links general equilibrium price theory with the economic history of Japan prior to its path of industrialization in the late 1870s.

The paper exploits the 1859 Japanese port openings as a natural experiment to formalize and test Friedrich von Hayek’s (1945) famous thought experiment about the market price system. The formalization combines the comparative statics framework of neoclassical general price theory with Hayek’s view of the market economy as a competitive entrepreneurial discovery process of information in disequilibrium. We consider a non-parametric general equilibrium model where factor owners respond to port-induced price changes under dispersed knowledge and test its predictions with detailed task-level micro data on factor inputs, goods and factor prices and trade flows.

The book provides a historical account of the creation of a market economy in Japan during a period of 200 years of peace and self-imposed economic isolation (1650-1850). The book will explain how the institutional changes at the beginning of the 17th century resulted in the emergence of village entrepreneurs and the integration of Japanese villages into a national market economy.

Daniel Bernhofen is Professor of International Economics in the School of International Service at American University in Washington, DC. Prior to moving to Washington, he was Professor of International Economics at the University of Nottingham. Previously he was an Assistant and Associate Professor of Economics at Clark University. He has held visiting positions at Brandeis University, Tufts University, University of Bordeaux, University of Tokyo and Ritsumeikan University. He is a CESifo Research Network Fellow. He received a PhD in Economics, an MS in mathematics from Syracuse University and a Diplom in Wirtschaftsmathematik from the University of Ulm.