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Purpose – This chapter examines whether a small open economy in the presence of a nontraded good produced under a monopolistically competitive market and foreign capital inflow can raise its national welfare by adopting trade liberalization coupled with foreign economic aid.

Methodology/approach – The chapter employs a general equilibrium, comparative static analysis of a small open economy involving two factors and two industries.

Findings – It is shown that an import tariff can raise the welfare of a country or impoverish it, depending on the production and trade structures and preferences of the country, but foreign economic aid is always welfare enhancing. Thus, even when a tariff reduction reduces national welfare, the government still has an incentive to adopt the policy combination of trade liberalization and foreign economic aid.

Originality/value of paper – The results obtained explain a widely recognized fact that economic aid by developed donor countries, trade liberalization and capital market liberalization typically take place simultaneously in developing recipient countries.

Myth is a story of archetypical personas who behave in ways and with motives that we recognize in ourselves. We use myth as a way of reminding ourselves of the relationship between motives, actions, and consequences. Myths can serve either as inspirational or cautionary tales, and sometimes as both. But “myth” can also mean a fabricated story intended to create a false impression, and to achieve storytellers’ ends when they have decided the truth will not suffice. We apply the myth of Cassandra to the millennium-long recorded history of giant tsunamis in Japan. After each of these catastrophes, survivors sought to warn future generations of their recurrences. But, each time, their progeny eventually lost the memory of these lessons, and lost their lives when the next monster wave overwhelmed them. Only when they kept the lessons as living knowledge in everyday life, could they manage to escape from monster tsunamis. In this chapter, we use the myth of Cassandra in conjunction with the myth of Prometheus, the bringer of fire to humankind, as a metaphor for Japan’s growing reliance on nuclear power. Government and utility companies built powerful but inherently dangerous cauldrons in the nation’s disaster-prone landscapes, assuring the public they could control the fire’s fury and defend it against nature’s. As images of atomic bomb victims were still vivid and widely shared in Japan, they had to overcome the public fear of radioactivity by fabricating a “myth of safety.” The nuclear disaster made the public distrust the government and utility companies, which lingers in the process of reconstruction from the disaster. Myths can either reveal hidden truths or mask hidden lies. The Japanese people must now learn to distinguish one from the other.