Norms and Rationality in the Evolution of Economic Systems: A View from Asian Villages

Yujiro Hayami

The Japanese Economic Review, 1998, vol. 49, issue 1, 36-53

Abstract: The evolution of economic systems is viewed as a process in which various informal arrangements are experimented with for improving efficiency under changed economic environments, some of which may survive and become established as new social norms. The process is illustrated by a micro case study of Philippine villages. It reveals the ability of peasants subsisting on small farms to resolve a major disequilibrium between labour's marginal productivity and the wage rate resulting from the intro duction of modern rice technology, by creating, on the basis of their traditional experience, an appropriate institution consistent with their cultural norm. Concurrently, large estate farms were seen to arrive at an inferior outcome because of their inability to utilize the peasant community's norm, thereby demonstrating the existence of multiple equilibria JEL Classification Numbers: D23, O17, P51

Date: 1998
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