Interview of Pr. Fujita

Transcription

1 Interview of Pr. Fujita Beginning of the interview 4 min 06. Frédéric: Thank you Professor Fujita for visiting us and having this little interview with Moez Kilani, maître de conferences in Lille3 and myself, Frédéric Jouneau-Sion, professor in economics in Lille3 university. Fujita: Thank you very much for this opportunity. It s my great pleasure to be here. [04.30] Frédéric: Let s start with your biography. We will try to fix some details about how you ve been trained. So can you tell us about your career, how you came to urban economics and the main cornerstones of your academic life. Fujita: Speaking about my process, how I get involved in economics? It s a little bit unusual. In college, I was trained as a civil engineer but, you know, civil engineering is very broad and ranges from pure engineering, like bridge design, to softer aspects like dealing with transportation systems of cities. I studied transportation facilities and transportation networks in a nationwide perspective. I graduated as a civil engineer in Then, I became a research assistant immediately, not going to the master. My professor Amano got a very big joint project from Ministry of construction, Ministry of transportation and Ministry of railway construction. The three together asked my professor about the impact of a national high-speed highway network (which turns to be the Shinkansen) and what would be the economic impacts for each region and the totally national impact. My professor got that job but he also graduated as a civil engineer (before he became professor). He worked in Japanese Railway Company. So he did not know much about economics. Also I didn t know anything about economics. But he got a big job, so, I was obliged to do the project by myself, while learning macroeconomics, microeconomics and econometrics everything by myself. [08.06] Frédéric: Which books did you use? Fujita: For example, for microeconomics I used Henderson and Quandt. For econometrics I used a Japanese one, and for input/output analysis the book by Morishima. So, I studied by myself. Actually, during my college time, I did read one economics book, Das Kapital! Most people stop at volume one but we, a group of 5 or 6 people, met together every week. At 11

2 12 Recherches Économiques de Louvain Louvain Economic Review 77(2-3), 2011 Document téléchargé depuis - Université catholique de Louvain /04/ h51. De Boeck Supérieur each time we read a part of the book and discussed about it and we continued to the volume 2. We read two volumes! That s the first economics book I read. Then I read myself other books because of the job that my professor got. That s the starting point. During 2 years, I did that job. I divided Japan into 22 regions. That was necessary for the transport network. For regional analysis, I divided Japan into 9 regions. By that time, Japan completed the inter-regional input/output table. It was a large table with 9 regions and 10 sectors. I combined the econometric model with the input/output analysis, and the impact of each particular transport project was calculated over 20 years in the future. So I made a huge econometric model by myself. My professor and I wrote a related paper in Japanese, and it received a prize as the best paper in civil engineering. We also published a related paper in Journal of Regional Science. That lasted two years at Kyoto University after my graduation in Civil Engineering. I studied economics myself but I cannot continue like that because, you know, leaning by myself is a risky way. I should not continue doing so too long. So my professor told me to go to the US where regional science is well developed. But, Japan was very poor at that time. In 1968, the wage rate was very low. For example, the wage of a research assistant in Japan was one tenth of the US equivalent. That ratio is today comparable to the difference between China and Japan. My monthly salary was $75 at that time and it wasn t enough to pay my study in the US. So I had to ask for a scholarship. I applied to two universities. One was Harvard because Leontief was there and I was doing inputoutput analysis. I put in my application the abstract of my research and send it to Professor Leontief. I got a letter from a Harvard professor, telling me we already allocated the available scholarships for this year, but if you come one year later, we ll give you scholarship. So I applied to another place, the department of regional science at the University of Penn, and got a reply from Professor Walter Isard saying we give you scholarship immediately. Thus, in June, 1968, I went to the department of regional science at U-Penn. It was not a standard way of studying economics at U-Penn. At U-Penn, the department of regional science was in the same building with the department of economics. Thus, I took many courses at the department of economics. In this way, I moved more to economics studies. I finished the master courses in 2 years, and in 4 years I got a Ph.D. [14.24] Frédéric: Who were the professors at Penn? Fujita: I took courses both in the regional science department and in economics. In regional science, there were my excellent professors such as Walter

3 Interview of Pr. Fujita 13 Document téléchargé depuis - Université catholique de Louvain /04/ h51. De Boeck Supérieur Isard, Benjamin Stevens and Tony Smith. But there were few pure economists. So, I took also many courses in economics department, in particular by Kahl Shell. He was a big star at that time in growth theory. At the regional science department, Tony Smith was a very young professor and he taught me everything except economics. In particular, he was basically a mathematician so I learned a lot of mathematics from Tony Smith. However, my main concern was always about regional science because as a civil engineer I was not interested in purely abstract economics. I wanted to work on real things like transportation, cities, and location of economic activity. [16.00] Moez: At that time you were aware of Herbert-Stevens model? Fujita: Oh! How do you know that model? I forgot it! (Laugh!) It was a linear programming model of urban land use. [16.30] Moez: It was somehow linked to your approach (the terminology used in your 1989 book). Fujita: Yes, Herbert-Stevens model turned out to be the dual to the monocentric city model developed by William Alonso. In turn, Alonso model was modification from Von Thünen model of monocentric economy. In Herbert- Stevens model, dual variables at the efficient solution were used to compute land prices in the market equilibrium. I may also note that Alonso was the first Ph. D. Student in the regional science department at U-Penn. But, he was a professor at the University of California at Berkery when I went to Penn. Thank you very much for reminding me of this! [18.06] Frédéric: There were other Japanese or Asian students in U-Penn by that time or were you the only one? Fujita: There were always 2 or 3 Japanese students at U-Penn at that time. First, because Professor Isard was very popular. Second, because regional science was a fresh and promising field like geographical economics today. Professor Isard was very ambitious and this field attracted many people. Actually, Professor Tony Smith told me that one of the smartest people in the regional science department was Ikuta, who was a leader of student s movement in Japan before coming to Penn. The students protested against the defense treaty between US and Japan. The movement did not succeed, and Isard picked up Ikuta to Penn. He gave him a scholarship. But just before I went to U-Penn, he died in a fire. When I went to Penn, Kawashima was there, whose daughter later became a princess in Japan. So we always had several Japanese people there because regional science was a kind of a hub where economists, transportation analysts and civil engineers, like me, could come to study. [21.28] Frédéric: Ok, regional science was open to other disciplines?

4 14 Recherches Économiques de Louvain Louvain Economic Review 77(2-3), 2011 Fujita: This has always been the case. Regional science is made of half economics and half geography, civil engineering and others. [21.43] Frédéric: We will now talk a little bit about the relationship you had with other researchers and how you came to get connected with them. For instance people like Jacques-François Thisse or Anthony Venables or Paul Krugman. Fujita: Again because of Professor Isard, I got to know many people. He was a very energetic person, spreading regional science world widely and so he became well-known world-wide. But the only department dedicated to regional science was at U-Penn. So, naturally many people came to visit U-Penn, those interested in regional economics, urban economics or even international economics. Incidentally, U-Penn was also well-known in economics. So for example, I met Jacques-François Thisse in 1983 when he visited U-Penn with André de Palma. Since then, my relationship with André and Jacques developed and we became very good friends. We had many things in common. In particular, we invited Jacques-François Thisse to teach location theory for one semester at U-Penn, which was realized in Jacques brought us more game-theoretic view to location theory. Of course, we knew about game theory, but at that time we were not able to bring this together with our model. Working with Jacques made an excellent combination. In particular, we moved more towards industrial economics issues and we wrote many papers together. He came twice to U-Penn for teaching, and I went many times to Belgium as well as to Paris. Also, by that time, we formed a very good group of urban economists and we met every summer at Queen s University in Canada. We had intensive workshops that were organized by Richard Arnott. Most famous young urban economists were there. I enjoyed these meetings very much. Talking about Paul Krugman, how did I meet him? This is quite a unique story. As you know, he s one of the top world economists and usually these people don t pay attention to regional science. They are usually very critical about our approaches. As is well known, Paul Krugman succeeded in bringing the interests of international economists to increasing returns in his work with Elhanan Helpman. But still the nation was the unit and basically there were no transportation costs. But eventually he realized that he was doing more geography than international economics, considering that people and factors cannot move was a kind of extreme case that you can find with an international border. So, he had in mind a more general framework and he became more interested in geography and regional science. But, in location theory and regional economics, we were doing mostly partial equilibrium analysis. And there were not enough general equilibrium considerations. So, he proposed a kind of general location theory that was reminiscent of 1933 Ohlin s Book on international economics. In that book,

5 Interview of Pr. Fujita 15 there is a famous sentence that I cannot quote exactly, but it goes like international economics cannot be fully understood except in the context of a general location theory in which movements of good and of production factors (including labor, of course) are costly. What he had in mind was a general case unifying international economics in which factors cannot move but goods move costlessly and location theory in which it is almost the opposite. In Ohlin s mind both should be treated in a unified way. That was in However his proposal remained mainly on a conceptual level. In particular he could not adequately explain a very uneven distribution of economic activities, like the core-periphery phenomena. Of course, such unevenness could come from physical constraints, but this is not the only force. Economies of scale play also a major role. At the time of Ohlin in 1933, economists were familiar with constant returns. But then there is no need to locate at a particular place. Choosing production plan proportional to the demand is sufficient to save the transportation costs. To achieve Ohlin s agenda, you need increasing returns. But then you face a problem with perfect competition. So you also have to introduce imperfect competition. Combining costly transportation, economies of scale and imperfect competition in a fully general equilibrium model was necessary to complete Ohlin s "general location theory". Unfortunately he was unable to develop what he had in mind. The Hoteling model of oligopolistic competition was there but it remained on a partial equilibrium framework. In a sense it was like the history of aviation. Around 1500, Leornard da Vinci knew well the basic principles about how to fly in the sky. But, he did not have the light and powerful enough engine to do so. He relied on human muscles and we now know that this could not function. As far as Ohlin, the kind of engine he missed was the Dixit and Stiglitz model of monopolistic competition model which came out much later. Krugman and Helpman soon realized how the Dixit and Stigltiz monopolistic competition model could be used in supplementing the neo-classical approach to international trade. But factors remain immobile and transportation costs play a rather minor role. Of course this was closer to Ohlin s goal, but Krugman was not satisfied because he viewed his analysis with Helpman as a special case of a more general theory. In a sense, borders can be viewed as a special case of a highly discontinuous change in transportation costs. So Paul Krugman started to work on this agenda in the early 1990s. In November 1991 we met in a very bizarre way in Houston. The North American Meetings of Regional Science was taking place in Houston. Many people came, but some unfamiliar figure stroke my attention in the audience. He introduced himself in a such modest way with such a low voice, that I did not fully get his name at first. Of course when I realized who he really was, that created kind of a shock (laugh)! He came to know many people in our group.

6 16 Recherches Économiques de Louvain Louvain Economic Review 77(2-3), 2011 Document téléchargé depuis - Université catholique de Louvain /04/ h51. De Boeck Supérieur Myself, I did not pay enough attention to international economics, but I was interested in location theory at a general level. In particular, I was a bit uneasy about a priori assumption of monocentric center in the Thünen model. I also wanted a more endogenous way to introduce location of activities in urban economics. For me, whether city centre is unique or not should be obtained endogenously. So I was looking for a general urban economic model. I did many papers on this subject from 1970s to 1980s. In particular, I developed Marshallian externalities models of non-monocentric city models together with Ogawa and my other students. Furthermore, I wanted to explain urban agglomeration through pure market mechanism, and focused on the Chamberlain s model of monopolistic competition. I showed that this can be used to explain urban agglomeration as the result of pure market mechanisms. So I was there in Paul Krugman and I realized the similarities of our interests and approaches and discussed about it on that occasion. So we kept in touch. I proposed him to visit Penn to start working and he agreed to come and give a seminar. Of course, I made a lot of publicity for Krugman s seminar, and many colleagues at economic department asked me how I succeeded to make him visit Penn, as they tried many times unsuccessfully. Maybe they felt a little bit jealous for this success of regional science (laugh). Strangely, he came to Philadelphia in April the very same day the then presidential candidate Bill Clinton gave his acceptance speech in Philadelphia. In the taxi from Philadelphia airport to Penn, Krugman showed me a computer simulation model of self-organizing economy, which he developed while he was waiting at Boston airport. Using that model, he gave his lecture for a large audience with a great success. Basic ideas of the new economic geography were already there. By 1995, we developed several papers using the same basic framework, myself with cities, whereas Krugman and Venables worked on international trade side. Venables have introduced a key idea by focusing on intermediate good sector. We all the three of us met in January 1996 in Tokyo and began to discuss about a book in which all these ingredients could be presented in a unified manner. We did not want just to put published papers together but to present the unified framework in a fully comprehensive way. The contents of the book were easy to develop. The real question was how to manage to write a book with Paul Krugman who was always extremely busy. Thus, I asked Helpman who wrote a famous book together with Krugman in He told me that the only way was to confine Krugman in a comfortable office totally disconnected from the rest of the World! No phone, no fax, nothing! Then within a month you ll have the main body of your book about to be completed! I thought that was impossible but we managed to do so in the summer of 1996 at the London School of Economics. We all the three of us were in a comfortable room with a large table and no

7 Interview of Pr. Fujita 17 phone from morning to night, seven days a week, one month long, and finished the basic part of the book. Then, we completed the rest of the book meeting from time to time either in London, Cambridge (Boston) or Tokyo while utilizing the internet. It was a very exciting experience for me. Frédéric: You literally tied him on the chair (...) Document téléchargé depuis - Université catholique de Louvain /04/ h51. De Boeck Supérieur [54.03] Frédéric: So, let s move to the third part. You already answered some of the questions we have. I shall ask you more specifically about the monocentric model and the core-periphery model. Moez: I want to ask you one question which I was obliged to answer myself many times. When you make a presentation about the monocentric model, we naturally tell you that the model is not necessarily very realistic. How then could this model be useful for empirical analysis, for understanding the shapes of cities? Fujita: There is similarity with other economic theories. For example, in international trade theory, two-by-two-by-two models with perfect competition are useful for learning the basic mechanism of international trade. Likewise, the monocentric model is useful to understand basic mechanism of urban land markets. For example, the land price in the city is higher near the centre of the city. And if we look at actual cities, many are roughly monocentric with one major activity centre and more dispersed small centers. So, as a first approximation it is useful. Pedagogically it is very useful to teach first the monocentric model. However, when we move to empirical studies, restricting the view to monocentric model may be too narrow. For example, in Tokyo there are several subcenters and using the monocentric model in empirical analysis may be misleading in that case. Similarly in international trade, the neoclassical theory of comparative advantages is simple and remains useful in order to understand many facts, but when you move to a more detailed analysis, we may need a more general theory When I first studied Alonso model at Penn, I felt immediately unsatisfied, for I thought that a comprehensive model should explain endogenously whether a city is monocentric or not. My student Ogawa and I wrote a model where the urban centers emerged endogenously, which was different from the earlier models in the literature. When I explained the model (it was before publication in the early 1980) at Harvard, the commenter was Alonso. He was not very happy when I said that the monocentric model was theoretically incomplete. Moez: The book you wrote on urban and regional economic theory remains the best synthesis of the papers written during the 70s by top economists in urban economics Fujita: It was published in 1989 but still in the market. And every year I receive small royalties, it s nice! (laugh )

8 18 Recherches Économiques de Louvain Louvain Economic Review 77(2-3), 2011 Frédéric: When I first met Jacques-François Thisse in Louvain La Neuve, he told me OK read this first, and then we ll discuss later. Fujita: The cover design, showing an indifference curve and land rent, was done by my wife Yuko. Moez: There is a further detail. When we start with a simple model, like for example least squares in econometrics or the two sectors economy in micro-economics, we generally need no more than elementary mathematics to conduct the analysis. But with monocentric model, even if it is assumed to reflect simple ideas, a strong mathematical background is required (non linear optimization, control theory,...) Frédéric: If you want to go into a little more details it may become so involving from the mathematical background that you can say little. Maybe the neat thing with monocentric model is that you can go as far as you want and remain pedagogically interesting. If you go closer to reality with nonmonocentric models, things may go out of hands. Especially if you increase the dimension, for example, with two dimensions, sometimes you are practically lost. So we are just on the edge of what is feasible and what is yet useful. There is one thing that is difficult to capture: the dynamic. We can tell stories of how one jumps from one equilibrium to another. This is the old story, you know, of having two equilibria or two sorts of equilibrium and go on to explain to our students or even to our colleagues how something about history can be told... But we all know that s not true in the sense that the model is not intrinsically dynamical. First, do you think this is a major concern? Second, if you think so, do you have an idea of how this could be addressed? Fujita: Yeah more comprehensive dynamic approach. You know, Paul Krugman wrote a paper in 1991 paper where this problem was handled by means of simulations. Yet it was not a complete analysis, and for a long time it was not possible. Given this situation, Jacques-François Thisse introduced a model in which demand is linear, so that explicit computation is feasible. However, linear demand may have another problem from the viewpoint of reality. Again the dynamic is the concern. When we care about the dynamics, it is the expectations that become the major issue. But again I think that since I published the book in 1989, a lot of development has been done, but still not complete. Dynamical analysis became recently a major concern. For example, many Japanese are interested in dynamics, in particular, civil engineers are interested in more complete dynamical analysis of stability, multiple equilibra,.. and so on. Young people can develop more complete models and analysis. In that sense I am not worried, young people can do new things. Moez: May be you consider that simulation/disaggregated models as an issue for the short term?

9 Interview of Pr. Fujita 19 Fujita: Yes, but I don t know how to use computers, you know! In the 1999 book with Krugman and Venable, in Chapter 11 «Evolution of a hierarchical urban system» we did a very simple simulation and showed how a kind of a hierarchical system arises, but it was not the kind of depth rooted things. For that we need to consider many cities together with many sectors. In the University of Kyoto, Professor Mori is doing a lot of complicated computing work (he uses an object oriented programming, which is very complicated tool, from my viewpoint) that helps to conduct very complex simulations. He showed that in our model of Chapter 11, if many sectors are introduced then a beautiful hierarchy of urban system comes out. In that sense, I think simulation is very useful when pure analysis can t be directly conducted. [ ] Frédéric: Perhaps, we shall move to perspectives. We tried with Moez to have ideas about new issues of regional science and special economics that could be interesting. So we would like to know whether you find new issues of interest or of medium concern. Maybe the first one is about climate change and sustainable development. Do you think it would be useful both in developing realistic economics models but also from the political viewpoint to introduce ecological concern? Fujita: With regard to the kind of concerns about the introduction of additional factors into the basic model, many people are doing a lot. For example, in environmental economics, Professor Zhen at Tohoku University is developing a lot of realistic models (environment, air pollution ). He is very strong in mathematical modeling of complex issues. So I don t worry much about generalizing the basic model for practical issues, and young people can do that. [ ] Frédéric: The other things we have in mind are to introduce a kind of social dimension into the description of the city. How does regional science approach could be somehow related or how they can help you to grasp new realities: ethnics aggregation or security concerns. Does regional science have something special to say about this? Fujita: Again there are many people doing interesting things in that field. For example, John Quigley, Robert Helsely, William Strange, Yves Zenou and Edward Glaeser are very much concerned with social issues. In the context of urban models, they are doing good job. Many more people are interested in social issues, and most of them are in the United States. Again I am confident that many good things will be developed in the future. Incidentally, I m very weak when I have to remember names. Frédéric: You have already quoted many... Fujita: So, many new things are being done, especially by young people, because they have to write thesis. Moez: Are you supervising PhD students right now?

10 20 Recherches Économiques de Louvain Louvain Economic Review 77(2-3), 2011 Fujita: Since I retired from Kyoto University, I get a salary from a small private university (Konan U. in Kobe), but I do not teach anymore. I am doing research in urban economics and international economics. At present, I do not have enough time for pure research, but still interested in doing that in the future. Jacques and other people are pushing me to do that, but for now I am academically not active. Actually, as you might know, I am continuing with Marcus Berliant (Washington University) a research project that intends to extend the basic economic model toward a new direction. Most existing economic models are about the production and consumption of ordinary goods and services. However, we might ask, for example, how we get our salary -you and me? We are not producing anything tangible that may be described as a good! We, and other researchers, are basically developing new ideas or new knowledge. People are most of the time interacting with others to develop new ideas and to do innovation. In a broader sense, a large proportion of people in modern society are engaged in creating new knowledge, but there are little basic micro-economic models that treat the creation of new knowledge explicitly. Do you know a micro-economic model that deals with this issue? [ ] Frédéric: There is a large contemporary literature on knowledge economics, but most of it remains on a very abstract and theoretical level. What you describe reminds me of the neo-schumpeterian growth theory in which diffusion of innovation and knowledge can create or destroy goods. [1:20:31] Fujita: There are micro-economic models that assume some form of knowledge creation, but almost completely in a black box. There is, of course, no end in opening black boxes: if we knew everything about knowledge creation then we would not need people for knowledge creation for machines could do it. In practice, we must go step by step in opening black boxes. One thing that has not been treated sufficiently is the diversity in people, not the skin or body, but diversity in knowledge in the creating process. Marcus and I are trying to work on it: Look: your knowledge and my knowledge are not completely overlapping, and that s how in discussing together new ideas come out. Diversity in knowledge contents is essential. For example Jacques-François Thisse has better knowledge in industrial organization and I may have better knowledge in traditional urban economics. Combined together we can write a new paper. That s why diversity between people in terms of knowledge contents is essential. But when I work too long with Jacques, he learns quickly my knowledge and I learn his, and diversity shrinks. Thus, Jacques changes the partner to write other papers, while I also write several papers with others. That way we can keep the diversity of knowledge. My current research agenda is about treating diversity endogenously. How much diversity is desirable to create new

11 Interview of Pr. Fujita 21 Document téléchargé depuis - Université catholique de Louvain /04/ h51. De Boeck Supérieur knowledge of certain type and so on. I am looking for a kind of micro-economics approach to knowledge creation. For instance, in the theory of growth it is assumed that the cost of creating a new patent is inversely proportional to the accumulated number of past ones. But this is totally arbitrary. Also in micro-economics theory there is little aspect of knowledge diversity between people. The differences in knowledge are almost never expressed, despite the fact that diversity is essential. I think we can learn much more from micro-theory about knowledge creation and transfer, and that s why I am interested in this problem. Even in the manufacturing industry only 20% people are doing labor work producing standard goods, and all others are doing broadly defined knowledge creation, including R&D, developing new strategies and business models, and so on. Basically in most developed countries most of those who graduated from college are working towards broader knowledge creation. I think we need a basic theory to describe that. We cannot talk only of knowledge spillovers in a black box. It is interaction among people that leads to knowledge creation, which in turns affects the diversity of people. That s why Berliant and I are explicitly working on a framework where the network automatically comes out. Traditionally in a network, nodes are either connected or not connected, and this would not be enough. People must choose partners sequentially, because they are different and because the differences change with time. I think that a more general theory of network is necessary. Then we ll combine traditional theory of international trade and economic geography with the creation and transfer of knowledge. I think that with this approach we will have a more comprehensive theory. But not much people are doing this. I understand that a new model is difficult to publish, but it is interesting actually to work on a new model. From my viewpoint, the ultimate question in urban economics and regional science is the effects of distance or space on knowledge creation and culture in the long-run. At present, Berliant and I are finalizing a paper in which the story of the Tower of Babel is revisited. The lose of the universal language is often taken as a punishment from God. But multi-language means multi-culture. True, communication is more difficult, but each region develops different culture. God s punishment turns out like a gift. We show that with some parameters, the expulsion from the paradise of effortless communications was indeed a blessing in disguise. Today people have very advanced information facilities. We have Google and a huge amount of information on patents is available. But we can t really learn all the patent contents. So many papers and books are published every year, but the quantity of knowledge you can absorb is quite limited. No transport cost, no barriers seems perfect in a commodity world.

12 22 Recherches Économiques de Louvain Louvain Economic Review 77(2-3), 2011 But in a world in which knowledge creation is a major activity, this may not always be true. There are real differences between the two worlds. The optimal design of space becomes an interesting problem. We know that we can t live without a reasonable distance or space from other people. Friction-less world may not be the optimal. The design of optimal space might be the ultimate goal of regional science. I hope to develop new perspectives like this in spatial economics. That s what I am doing actually and I hope some young people will agree that this is an interesting topic. Document téléchargé depuis - Université catholique de Louvain /04/ h51. De Boeck Supérieur