Masahiko Aoki has been engaged with Stanford University for over four decades. He has witnessed the roots of Silicon Valley grow and seen the many successes of students who formerly passed through his classroom. Selected academic papers written over his 40-year academic career have recently been published.

Aoki is the Henri and Tomoye Takahashi professor emeritus of Japanese Studies in the department of economics and a senior fellow at the Stanford Institute for Economic Policy Research (SIEPR) and the Freeman Spogli Institute for International Studies (FSI), in residence at Shorenstein APARC.

You have been at Stanford since 1967 in different capacities – what has changed since then? Can you share some memories with us? 

I first came to Stanford as an assistant professor in 1967. Campus and the surrounding environment were different then – there were series of apricot orchards along El Camino to the south and my office was located in a wooden building – the old president’s house where the engineering buildings stand today. Changes at the university and in Silicon Valley have been fascinating to witness. I was away from Stanford in the 1970s, but when I came back in the 1980s, I had over 200 students at a time in my classes. This was because of widespread interest in Japan’s economic performance, which was then challenging American industries. Now students are inclined to be more interested in the rise of China. I share the same interest.

What has been most interesting for me is collaboration with graduate students and faculty to develop institutional studies. In the 1990s, I worked with Paul Milgrom, Avner Greif and Marcel Fafchamps among others, to initiate the field of comparative institutional analysis in the economics department. Greif and Fafchamps now have appointments in FSI like myself. Our research worked to understand why and how institutions matter to economic performance. However, my interests have expanded since then. I aim to understand relations between economic and demographic variables as well as institutional complementarities between economic institutions, social norms and political governance. As for my former students, many of them can now be found in important academic, government and private sector roles across the world.

What particular “lens” do you use to conduct your research?

Some influential economists understand that the nature of polity determines economic performance. They say this correlation is obvious if we compare the exploitative political regime like North Korea with that of a democratic political regime like South Korea. But this “lens” is a bit too simplistic for me. Why do ‘bad’ political regimes persist in some countries?  The relationship between political governance and economic performance is more complex than “the former simply causes the latter.”

To understand the relationship between political governance and the economy, I use game-theoretic concepts. While I am not a game theorist, I still believe that human interaction – whether economic, political or social – is a kind of game. People form beliefs based on how others play societal games. One of the important insights derived from these ideas is that political governance and economic institutions actually co-evolve. Furthermore, we need to look at the historical context to understand the present.

How have you applied these theories to the cases of Japan and the United States?

One of my major research interests has been the comparison of corporate governance across countries. Financial economists view the corporation as the property of stockholders. But we can also view the corporation as a system of distributed cognition. That is, the corporation is a group of people who have different cognitive roles and capabilities. Individuals can be organized to achieve economic value using physical assets as tools for respective cognitions.

By looking at corporations in this reversed way, we can identify different types of organizational architecture and their comparative advantages. In short, my research has found that managers’ cognitive assets are prioritized in U.S. corporate model, while workers’ entrepreneurial cognitive assets are prioritized in Silicon Valley’s model. In contrast, Japan favors a model where manager and workers’ cognitive assets are more interdependent.

You emphasize the connection between economics and demographics. What can be done about Japan and greater Asia’s rising demography problems?

Human capital is very valuable, but cultivating human capital is quite costly. Due to this constraint, the total fertility rate of women has declined as the economy develops. Scholars call this phenomenon the demographic transition. In addition, as economies further develop, people live longer and the working age population in the total population declines. Japan, Singapore and Taiwan are experiencing this phenomenon. Korea will follow this trend soon and at an even faster rate than Japan. Even if China modifies the one-child policy, the demographic dilemma cannot be escaped. And even for California, which is typically considered to be the youngest state in the U.S., a study predicts it will become the oldest state around year 2030.

So, what can be done to cope with this phenomenon? One option to raise the retirement age. Over two decades ago, Japan started this policy and has seen noted, positive effects. Another option is to increase and secure participation of women in the workforce. Across Asia, total populations are still rising due to immigration. Japan should consider liberalizing immigration. It is interesting to note that in the past 1,500 years Japan’s cultural development benefitted greatly from migration and assimilation of people, such as monks, political refugees and artists from Korea and China. 

With the recent execution of Abenomics, what performance can we expect to see from Japan’s economy in year 2014?

Abenomics has only been assessed in terms of short-term effects on the economy. Instead, my view is that Japan is now in the process of longer-term institutional change. Lifetime employment was the core of Japan’s overall institutional arrangement until some twenty years ago. The main banking system and government-industry relationship complemented and mutually reinforced lifetime employment. Though, with the demographic transition, the Japanese government has found it increasingly difficult to sustain. However, Japan’s institutional arrangements are normally very resilient. I think institutional transformation fitting this new demographic phenomena will require the duration of one generation. Institutions cannot be changed overnight by a revolution or government decree.

Of course, Abe could accelerate institutional adaptation by expanding the roles and opportunities for women and young people and creating more open foreign policy. This policy agenda may be related to the so-called “third arrow” of Abenomics, a period of structural reform following monetary easing and fiscal stimulus. But what Abe can do and has the willingness to do has yet to be fully seen. Thus, if we believe that Japan started the process of institutional change in the early 1990s and requires one generation to attain visible outcomes, the next several years are crucial. Tokyo has been chosen as the host city for the 2020 summer Olympics. I hope this event will act as Japan’s opportunity to display its changes to the international audience. 

The Faculty Spotlight Q&A series highlights a different faculty member at Shorenstein APARC each month giving a personal look at his or her teaching approaches and outlook on related topics and upcoming activities.

Warning against the “dangers of excessive hubris,” former U.S. Ambassador Stephen W. Bosworth emphasized the intricacies and complexity of creating American foreign policy and called for the government to exercise greater restraint and better understand the countries it engages with.

The veteran diplomat and visiting lecturer at Stanford’s Freeman Spogli Institute for International Studies called for the United States to exercise greater self-restraint and better understand the history and current circumstances of countries it engages with. 

“The making of U.S. policy is inherently a very, very difficult enterprise,” said Bosworth, positioned at Stanford for winter quarter.

“The issues tend to be complex, and they frequently pose moral as well as political choices,” he said. “I found that perfection is usually the enemy of the good in the making of foreign policy and is, for the most part, unattainable.”

Foreign policy can be ambiguous and difficult at times; it is a process that can be compared to gardening because “you have to keep tending to it regularly,” Bosworth said, referencing former Secretary of State George Shultz’s well-known analogy.

Bosworth, who served for five decades in the U.S. government and for 12 years as dean of Tuft’s Fletcher School of Law and Diplomacy, delivered these thoughts in the first of three public seminars this quarter. He is the Frank E. and Arthur W. Payne Distinguished Lecturer in residence at FSI’s Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC).

He cautioned against America’s tendency to revert to military power when crisis occurs. “I believe that when at all possible, we need to choose diplomacy over force,” Bosworth asserted, “although it is sometimes true that diplomacy backed by potential force can be more effective.” 

Citing Afghanistan, Iraq and Southwest Asia, Bosworth noted these among other examples as situations of excessive power projected by the American foreign policy arm. In some cases, pride may have gotten the better of policymakers who sometimes “want to be seen as doers and solvers.”

Bosworth pointed out that the nature of our actions speaks loudly – both at home and abroad – thus sensitivity and sincerity are important in any international exchange.

Since the Vietnam War, American values and the push for democracy are not always well received by other countries. And there’s often good reason for that, he said.

“It is awkward for the U.S. to campaign for more democracy elsewhere when our own model seems to have increasing difficulty in producing reasonable solutions for our own problems,” he said.

Democracy is “not a cure-all” for every nation and this is reflected in the amended model adopted by countries such as Singapore, Indonesia and Burma. However, Bosworth said he remains confident that the American democratic system “will prevail and eventually work better than it seems to be working now.”

Bosworth will explore the challenges of maturing democracies in Japan and South Korea and negotiations and management of relations with North Korea in his two other Payne lectures. The Payne Lectureship brings prominent speakers to campus for their global reputation as visionary leaders, a practical grasp of a given field, and the capacity to articulate important perspectives on today’s global challenges.

Bosworth entered the Foreign Service in 1961, a difficult yet “exciting time to join the government,” he said.

“At the age of 21, I was the youngest person entering my class,” he said, “and of the 38 people, there were only two women…and were zero persons of color and only a handful who were not products of an Ivy League education.” The State Department of then is very different compared to the one that exists today; this signals positive, necessary change in the diplomatic corps.

Bosworth, having served three tours as a U.S. ambassador in South Korea (from 1997 to 2001); the Philippines (from 1984 to 1987); and Tunisia (from 1979 to 1981) and twice received the State Department’s Distinguished Service Award (in 1976 and 1986), has a long established career.

He brings great wisdom on foreign affairs given his extensive engagement as a practitioner and a writer, said former colleague and Shorenstein APARC distinguished fellow Michael H. Armacost.

“To say that Steve has had an extraordinarily distinguished career in the Foreign Service doesn't quite capture the range of his accomplishments, I can’t think of very many Foreign Service officers in this or any other generation that have left a footprint on big issues in three consecutive decades,” Armacost acknowledged. 

During his time at Stanford, Bosworth will hold seminars and mentor students who may be interested in pursuing a career in the Foreign Service, in addition to the two upcoming public talks.

A student seeking this very advice posed a question in the discussion portion following Bosworth’s talk.

Speaking to anyone considering a Foreign Service career, Bosworth said one must “think about it hard, and think again.” He said public service is a privilege, not so much a sacrifice as the typical notion holds. “It can be a great career as long as you have the right perspective on it,” he ended.

Microblogs, Youtube, and mobile communications. These are a few of the digital platforms changing how we connect, and subsequently, reshaping global societies. 

Confluence of technology and pervasive desire for information has in effect created widespread adoption. There is no doubt the Information Technology (IT) revolution is in full swing.

Comparing case studies across Asia and the United States, the fifth and final Stanford Kyoto Trans-Asian Dialogue (DISCONTINUED) considered opportunities and challenges posed by digital media. Experts and top-level administrators from Stanford and universities across Asia, as well as policymakers, journalists, and business professionals, met in Kyoto on Sept. 12-13, 2013.

Relevant questions asked included: What shifts have occurred in traditional versus digital media for how people get information, and how does this differ across countries? What is the potential for digital media in civil society and democratization? Is it a force for positive change or a source of instability?

In the presentations and discussion sessions, participants raised a number of key, policy-relevant points, which are highlighted in the Dialogue’s final report. These include:

Digital media does not, on its own, automatically revolutionize politics or foster greater democratization. While the Internet and digital media can play an instrumental role, particularly where traditional media is highly controlled by the government, participants cautioned against overemphasizing the hype. One conception is that the Internet can instead be viewed as a catalyst or powerful multiplier, but only if a casual chain of latent interest exists. That being said, greater exposure of youth to digital media, particularly in areas of tight media control, can open new areas of awareness.

The upending of traditional media business models has not been replaced by viable digital media business models. As media organizations struggle with their business models, the quality of reporting is threatened. For traditional organizations, maintaining public trust can be challenging, particularly during wars after disasters, while in areas with previously tightly controlled press, digital media may be perceived as more authentic. On the one hand, policy-driven agenda setting may be easier in some issue areas, but digital media may amplify interest in controversial issues, particularly with history issues in Asia.

As Cloud Computing platforms provided by a small group of mostly U.S. companies is increasingly the underlying platform for digital media—as well as our digital lives in general—issues of information security and privacy are at the forefront of much of the public’s mind. Revelations by former U.S. contractor Edward Snowden about the extent of the US government’s espionage activities raise concerns among journalists concerned with issues such as free speech of the press, media independence from government, and protection of sources. 

Previous Dialogues have brought together a diverse range of scholars and thought leaders from Japan, South Korea, China, Vietnam, Thailand, Indonesia, Singapore, India, Australia and the United States. Participants have explored issues such as the global environmental and economic impacts of energy usage in Asia and the United States; the question of building an East Asian regional organization; and addressing higher education policy and the dramatic demographic shift across Asia.

The annual Stanford Kyoto Trans-Asian Dialogue was made possible through the generosity of the City of Kyoto, the Freeman Spogli Institute for International Studies at Stanford University, and Yumi and Yasunori Kaneko.

Is Myanmar ready to lead ASEAN? What are the most critical challenges (both internal and external) that Myanmar will face as the ASEAN chair in 2014?

It is conventional to think of Myanmar as being "tested" by the need to prepare in 2014 for the declaration of the existence of an ASEAN Community by the end of 2015. And that of course is a plausible focus for anyone who would reply to the given questions. But it might also be interesting to think beyond ASEAN's schedule and ask what "black swans" could be swimming, e.g. in the South China Sea. Beijing has stated that its declaration of an Air Defense Identification Zone (ADIZ) over contested parts of the East China Sea could be repeated for other airspaces, including presumably the huge block of air above the South China Sea.

So far ASEAN has managed to keep a low (and divided) profile on the imbroglio over who owns what in the South China Sea. Myanmar, if it is chairing ASEAN when China announces its South China Sea ADIZ, will face pressure from inside ASEAN to do more than merely reassert faith in the delayed segue from a Declaration of Conduct to a Code of Conduct.

Various scenarios are of course possible, including a decision in Beijing not to pivot southward, at least not until the anger over its eastward ADIZ has subsided. But one should not assume that the success of Myanmar-in-the-chair in 2014 will be a function solely of its ability to help welcome a "white swan," i.e. to oversee preparations for celebrating the inauguration of a regional community to which no one really objects.

This commentary was originally carried by the S. Rajaratnam School of International Studies at Nanyang Technological University (Singapore) in their bulletin, Multilateral Matters, Issue 10, January 2014.

In 2013 Cornell University Press published a book by a former NUS-Stanford Lee Kong Chian Distinguished Fellow on Southeast Asia.  She is Angie Ngoc Trần, a professor of political economy at California State University-Monterey Bay.  She worked on the manuscript during her fellowship period at Stanford in 2008.  The book is entitled Ties that Bind:  Cultural Identity, Class, and Law in Vietnam's Labor Resistance.  For further information on the book, see the publisher’s website:  http://www.cornellpress.cornell.edu/book/?GCOI=80140100177390.

In 2012 the University of Minnesota Press published a book whose draft contents were presented and discussed at a lively workshop on “Understanding Student Activism in Pacific Asia” held in Singapore in September 2009.  The workshop, hosted by the National University of Singapore, received financial support from the NUS-Stanford Lee Kong Chian Initiative on Southeast Asia.  The volume, edited by Meredith L. Weiss and Edward Aspinall, is entitled Student Activism in Asia:  Between Protest and Powerlessness.  The analytic overview that is its introductory chapter was written by the editors jointly with Mark R. Thompson, a professor of politics and director of the Southeast Asia Research Centre at the City University of Hong Kong.   Prof. Thompson was an NUS-Stanford Lee Kong Chian Distinguished Fellow on Southeast Asia at Stanford in 2009.  In 2013 he was elected president of the Asian Political and International Studies Association for 2013-14.  More information on Student Activism in Asia is available at the publisher’s website: http://www.upress.umn.edu/book-division/books/student-activism-in-asia.