Japan's Economic Dilemma: The Institutional Origins of Prosperity and Stagnation. By Bai Gao. Cambridge: Cambridge University Press, 2001. 328p. $54.95 cloth, $19.95 paper

The once-formidable Japanese economy has fallen upon hard times. After posting a roughly double-digit rate of real annual growth from the mid-1950s to the early 1970s, and generally outperforming the economies of other advanced industrial democracies during the 1970s and 1980s, the Japanese economy suffered a prolonged period of stagnation throughout most of the 1990s. Given this dramatic reversal, Bai Gao sets about the ambitious task not only of explaining why the Japanese economy has soured, but of providing a broad institutional framework that underscores the common factors behind the high growth period, the bubble economy of the 1980s, and the collapse of the bubble in the 1990s. To achieve this task, Gao applies what he terms “the logic of reverse reasoning†; he takes the rise and collapse of the bubble economy as the “starting point fortheoretical reasoning,†examining the institutional mechanisms that purportedly produced it. He then works backward in time to reexamine how these institutional mechanisms operated during the high-growth era, and to identify the “environmental changes†that account for the reasons these institutional mechanisms produced such varied outcomes over time (pp. 6–7).