The Peace of God

Scholars have argued that the politically fractured landscape of medieval Western Europe was foundational to the evolution of constitutionalism and rule of law. In making this argument, Salter and Young (2019) have recently emphasized that the constellation of political property rights in the High Middle Ages was polycentric and hierarchical; holders of those rights were residual claimants to the returns on their governance and sovereign. The latter characteristics—residual claimancy and sovereignty—imply a clear delineation of jurisdictional boundaries and their integrity. However, historians’ description of the “feudal anarchy” that followed the tenth-century disintegration of the Carolingian Empire does not suggest clearly delineated and stable boundaries. In this paper, I highlight the role of the Peace of God movement in the 11th and 12th centuries in delineating and stabilizing the structure of political property rights. In terms of historical political economy, the Peace of God movement provides an important link between the early medieval era and the constitutional arrangements of the High Middle Ages.

Rethinking the Concept of Equity in Accounting: Origin and Attribution of Business Profit

In this paper I reconsider the concept of equity in corporate accounting from the perspective of the origin and attribution of business profit. In both Financial Accounting Standards Board’s (FASB’s) and International Accounting Standards Board’s (IASB’s) Conceptual Frameworks, shareholders’ equity is synonymous with a firm’s net assets. However, it is not the sole definition of equity. We may regard equity as the interest in the corporate capital itself. From this viewpoint, shareholders’ equity consists of retained earnings attributable to shareholders’ as well as invested capital provided by them. We should note that, under the current corporate accounting system, shareholders are assumed to be the sole residual claimants. However, the existence of implicit contracts in corporate activities implies other residual claimants in addition to shareholders. If shareholders are not the sole residual claimants, it is necessary to revisit the proprietary theory under which equity is identical to shareholders’ equity. In this paper I reconsider the significance of the entity theory, which emphasizes an entity as an organization comprising various stakeholders and attributes business profit above shareholders’ expectations to an entity itself. The ownership interest cannot generate the excess profit by itself. Without firm-specific investments by employees and/or entrepreneurial activities by managers, the excess profit would never emerge. We should critically examine the foundation of the current corporate accounting in order to design a more equitable and efficient corporate accounting in which business profit is attributable not only to shareholders but also to other stakeholders who contribute to its generation.

Purifying Japan's Banks: Issues and Implications

We use a simple real options framework and empirical data to establish that although Japanese banks hold borrowers' shares, their interest is more along the lines of a contractual claimant than a residual claimant of corporations. We then explain why the Japanese model of corporate governance was useful during the “catching-up” growth of that country's postwar reconstruction decades but became problematic subsequently. The interests of shareholders, creditors, workers, and managers are more readily aligned because such growth entails investment in knowntechnology physical-capital-intensive projects with highly predictable cash flows. Once firms are on the technological frontier, “keeping-up” growth requires risk taking and a tolerance for “creative destruction.” This is better accommodated by entrusting corporate governance to firms' true residual claimants, their shareholders.

Trends in Crop Production, 1978–86

The economic and institutional framework against which trends in crop production under the government of Deng Xiaoping must be considered, is vastly different from that which existed throughout the Mao era. In a word, Deng replaced a system of planned production and supply by one in which market demand became the main determinant of the level and structure of agricultural production. Under Mao Zedong, maximizing the physical output of key agricultural products was the basis of agricultural policy. Centrally identified priorities – based on “national need” – were reflected in targets for the output, sown area and yield per hectare of individual items. These mandatory targets were to be fulfilled by the collective farms (the production teams of the communes) which were the basic organizational units of Chinese agriculture. Similarly, the disposal of farm output was determined by the central plan. For production teams, therefore, decision-making was relatively simple and followed the sequence of production, harvesting and procurement, all according to plans laid down by the government. Cost accounting was rudimentary. It was not, in any case, geared to the promotion of “economic efficiency.” If production costs rose-for example, as a result of an increase in the multiple cropping index directed by the government – the peasants bore the burden, as they were the residual claimants in the distribution of income by the production teams.