It is our hope that the estimation and compilation of GDP times series for the wider Asian region will give an accurate representation of real economic conditions and trends. Further, through the intellectual exercise of interpreting these economic movements, we want to establish an effective framework of reference for the present and the future. This is the very vision behind the Asian Long Term Historical Statistics Project.

There are skeptics who question whether such a vision could be realized at all. It is the belief of the author, however, that the large significance attached to the issue justifies our endeavor to tackle the challenge, albeit with certain qualifications. Below, I will illustrate some interesting themes that come out of the process of estimating GDP series.

Insofar as GDP is an aggregate concept of market value, its estimation is based on the premise that markets exist and function efficiently. Nevertheless, markets as a form of an institution are themselves time and place dependent. How can we evaluate this issue? For example, how do we appraise farm products for domestic consumption, and for goods and services produced within the household? How far should we pursue the depth and breadth of the market? This certainly relates to the historical development of the market and the degree of its pervasiveness. But it also finds a strong connection with the issues studied within the discipline of comparative economic system (capitalism, socialism and etc.)

Market characteristics are co-dependent with the state of competition in the goods and services traded. In addition to the degree of competition, the following factors are worthy of consideration:

a. freedom of market entry and exit (the number of traders and the existence of their mutual interference);

b. the range and depth of information available related to the transactions (the degree of its penetration and transparency);

c. the extent of mutual trust among traders (in Smithian term "sympathy"), and

d. motivation (protection of the profits secured from the market, and the mode of distribution).

Items a and b center on the reduction of transaction costs. In the case of item c, while in some cases social trust takes precedence over contracts (e.g., Japan), there are other contrasting scenarios where instantaneous settlements in spot transactions are more desirable (e.g., China). Item d holds the crucial bond that maintains the dynamics of a society. It is achieved through means such as public taxation and social security, generational transfers (distribution of wealth, as well as the fairness thereof), etc.

Information revolution has also brought changes to certain aspects of the market system. With changes in the economics of networks, traditional economies of scale are no longer the chief consideration in a modern society. Such changes are confronting Asia of the 1990s.

The foregoing issues are mainly concerned with productive activities (or flow), but, as presented in item d, conditions in asset markets are important. Specifically, this relates to the forms of wealth (stock) accumulation, as well as the protection of the rights to that stock. These issues have a direct bearing on the motivation to reproduce and expand. The importance of property rights to economic development has been well stressed by North. But in actuality, equally significant is the guarantee of the rights to use (including leasing or rental rights). Here, the experience of early modern Egypt is suggestive, where land was entrusted to the mosques with full lease rights.

Wealth need not necessarily be tangibles. Value acquired through accumulation could also include education, reputation, honor, social respect or trust, and performance record. Therefore, these do not have a one to one correspondence to "things." Whether or not stock are tangibles depends upon (and only upon) if they are transferable and inheritable.

Modern economic growth can thus be viewed as a process where the locus of attention switched from the stock of "money" to the stock of "things" and their movement (capital formation). Note that the difference between Mercantilism and Laissez-faire in economic history really boils down to whether emphasis is placed on stock as currency or stock as commodities and assets. It is not simply that Mercantilism is old-fashioned and the Laissez-faire represents the new. In other words, modern economics is not separated from Mercantilistic concepts.

Financial development, whether the capital is generated within or without, is a necessary but not a sufficient condition for economic development (or industrialization).

The late Prof. Kazushi Ohkawa, the founder of Japanese long-term macroeconomic statistics, held that long-term (and therefore ultimate) economic development was the quantitative growth of "things" (both stock and flow), placing no special emphasis on financial development. In this sense, Ohkawa economics is in pursuit of the sufficient condition for development.

But the long-term consists of short-terms. Although the economics of sufficient conditions takes the issue head-on by giving a straightforward projection of the growth records, it was not, shall we say, "sufficient."

For example, the presence and expansion of overseas markets as a target for exports were a crucial factor for the industrialization of Japan (although the converse assertion that exports grew precisely because of economic growth certainly cannot be ignored). Yet the nature of the international financial system was an extremely important factor as Japan was blessed with a system of fixed exchange rate during most part of the period. Immediately after the opening of the country for trade, Japan started with a bimetallic standard of gold and silver (but in practice, the silver standard) and then switched to gold standard (with yen depreciating periodically between this period). After the Second World War, under the Pax Americana gold exchange standard, Japan enjoyed a continuous and stable system of cheap yen (in contrast to England and France that repeatedly devalued their currencies). This could be a negative factor for a country reliant on imports of raw materials, but a huge plus for export-dependent industrialization.

In any event, the connection between industrialization and international economic environment could be found in the following: 1) the location and expansion of overseas market, and 2). the structure of the international financial system, or international financial settlements. Regarding the second point, the currency system of the Tokugawa era may have prepared Japan to better respond to the opening of the country. Specifically the Tokugawa Japanese currency system operated on a base where the currency was detached from its physical value and impervious to the fluctuations in the ratio between gold and silver.

Modern nation state is essentially an artificial construct and is not necessarily based on ethnicity, culture, or language. From this viewpoint, the founding and growth of the United States of America is a grand, and for most part, successful experiment (an experiment in the sense of establishing a state inclusive of complex ethnic and cultural background).

Despite arguments that this framework is now out of date, it is unlikely to crumble as easily (albeit mutating to a certain extent). Accordingly, we should assume that the basic unit of GDP will continue to be the nation state. Furthermore, the above-noted financial (currency) system itself is intimately connected with the nation state framework. After all, an integrated currency system would not function properly in the absence of a mechanism for close coordination and cooperation, the establishment of which would entail corresponding changes in the nation state framework.

The above noted are a multitude of non-economic factors. They should deserve our careful consideration (although such considerations should go beyond the simplistic term "cultural" and reach a higher degree of concreteness and specificity). The relevant studies should include, for example, the role of the family community as a substitute for social security measures, social phenomena as a consequence of the emergence of a service economy, historical analysis of changes in market structures and functions, and shifts in the boundaries between public and private. These issues, whether one likes them or not, must be confronted in attempting international comparison of GDP time series. And this is a major challenge for our project.

Hitotsubashi University, Institute of Economic Research

Acknowledgment: In preparing this manuscript, I benefited from discussions with Osamu Saito. The author alone, however, must remain responsible for the content presented. the English virsion.