A History of Economic Science in Japan

Aiko Ikeo

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317747529
• Edition: 1
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

Japanese economists began publishing scientific papers in renowned journals including Econometric a in the 1950s and had made their significant contributions to the sophistication of general equilibrium analysis by intensive use of a variety of mathematical instruments. They had contributed significantly to the transformation of neoclassical economics. This book examines how it became possible for Japanese economists to do so by shedding light on the "professional" discussion of the international gold standard and parity policies in the early twentieth century, the acceptance of "mathematical economics" in the following period, the impact of establishment of the Econometric Society (1930), and the swift distribution of theory-oriented economics journals since 1930.

This book also includes topics on the historical research of the Japanese foundations of modern economics, the transformation of the economics of Keynes into Keynesian economics, Japanese developments in econometrics, and Martin Bronfenbrenner's visit to Japan in the post-WWII period.

This book provides insight into the economic research done by Japanese scholars in the international context. It traces how, during the period 1900-1960, economics was harmonized with economics and a standard economics was re-shaped on the basis of mathematics thanks to economists' appetite for rigor and will help to contribute to existing literature.

1
Introduction

1 Harmonization of economics and mathematics

The project, which has resulted in the publication of this book, started with the limited aim of exploring how the Japanese “mathematical economists” began to publish scientific papers one after another in renowned economics journals like Econometrica in the 1950s. Why could they write scientific papers in economics just a few years after the conclusion of the Pacific Campaign? It is because they read every issue of internationally oriented economics journals from around 1930 on and they published journal articles in Japanese which should have received attention if they had been written in English or German. They were naturally using mathematics when they consider questions of capital interest, imputation, and the estimation of demand curves for rice. In the early 1940s, their independent research was halted when Japan was losing the war. After the ceasefire of August 1945, surviving students and professors returned to schools and soon resumed education and research in the remaining buildings, looking for a brighter future for Japan.

In the late 1940s, a number of economists were working on general equilibrium approach, especially on the rigorous conditions for a competitive economy reaching an equilibrium in every market. Thinking of “equilibrium” sounded like a path leading to a harmonious state rather than “staying in destruction.” They were using various types of mathematics when they made rigorous examinations of stability conditions and economic dynamics by constructing economic models. Some of them started to write scientific papers in English after thinking over these economic questions in Japanese. Their way of thinking economic issues was changed by building a model rather than analyzing economic issues just by referring to economic data. Thanks to the use of mathematics in economics, for those who speak non-European languages like Japanese, the linguistic and cultural differences became less serious in economic analysis. When economics was harmonized with mathematics, the language used in economics began to change and introduced more scientific terminology. In the context of the English-speaking world, E. Roy Weintraub discussed Stabilizing Dynamics: Constructing Economic Knowledge (1991a) and How Economics Became a Mathematical Science (2002). I learned many facts and ideas from his works and got hints on how to write the history of economic science in Japan. Around the time, I completed my doctoral thesis Japanese Economics in the International Context: The Internationalization of Economics in the Twentieth Century (Ikeo 2002a) and decided to make further elaboration of this topic.

This project also needs to cover the history of mathematics, especially relating to tools used in general equilibrium approach such as the systems of ordinary differential equations, the Liapunov theory, and topology, and to clarify at least the differences between their developments in France, the US, Germany and Japan. It is noteworthy that the style of writing a paper in mathematics for journals changed in the 1920s, from a prosaic expression to a formal presentation including a proof process, although its contents are always formal. Some Japanese mathematicians worked as a sideline on the making of the table of average life expectancy for the basis of actuary calculation, the discussion of foreign exchange rates relating to different international monetary standard systems, and the publication of books on mathematics for economists.

In Tokyo, Takashi Negishi gave me oral information most frequently after I started the research project of writing the history of modern economics. He repeatedly tried to persuade me of the importance of Takuma Yasui’s article “Equilibrium analysis and process analysis” (1940a, in Japanese) although he didn’t refer to it in his influential survey article of stability analysis (Negishi 1962). Indeed he strongly persuaded Yasui to include Yasui (1940a) in Yasui’s Collected Writings (three volumes, 1970–1) because it was a very good article for young economists to start to read in their theoretical research. I gradually realized that Yasui (1940a) might be more important for many Japanese economists than Hicks’s Value and Capital (1939). Probably all the Japanese who worked on economic theory read Yasui (1940a, 1970–1) and followed Yasui’s language and style in discussing theoretical issues. When the Japanese started publishing their articles in economics journals outside Japan, they still followed the terms introduced into economics literature first by Yasui, such as tâtonnement (groping) process, in stability analysis.

It is also noteworthy that Yasui (1940a) included a survey of the literature discussing the so-called cobweb theorem. I imagine that every economist must have an experience of drawing a decreasing demand curve and increasing supply curve on paper and then describing an adjustment process of the decisions of production made at the observed, lagged market price and the actual market prices determined when their products were supplied to the market. Depending on the relationship of slopes, there are three cases that the adjustment process would converge to the equilibrium determined by the intersection of the two curves, to diverge from it, or to oscillate around it. Yasui (1940a) referred to Schultz (1930), J. Tinbergen (1930), and U. Ricci (1930), all of which were written in German, for the first diagramed explanation of hog cycle. N. Kaldor (1934) named it the cobweb theorem. P. Samuelson and Yasui launched out on stability analysis of general competitive economy. We wonder why Mary Morgan didn’t mention this diagramed discussion in her The World in the Model: How Economists Work and Think (2012). It might be because Hicks (1939) did not include this type of discussion.

I got hints for my research on the history of monetary economics in Japan first from my participation in A. W. Coats’s project, which produced the volume The Post-1945 Internationalization of Economics (1996). Coats decided to pay attention to the role of international economic institutions such as the International Monetary Fund and the World Bank for the project. Participants like J. J. Polak and B. A. de Vries maintained that economic and financial conferences held in the 1920s were important for the internationalization of economics prior to the establishment of Bretton-Woods institutions. Richard Webb of the World Bank suggested I include Saburo Okita, who had participated in many international conferences by representing Japan, in my contribution. I took note of it. Retuning to Japan, I found that Ginko Tsushinroku, the Journal of the Bankers’ Association which was started in December 1885, carried the information of such conferences reported by Japanese participants. And mathematician Rikitaro Fujisawa occasionally gave a talk on the issues of exchange rates and international monetary systems.

Martin Bronfenbrenner was a referee to read my paper on Japan’s case for Coats’s 1995 conference and gave comments for me to include Japanese economic research activities in the 1930s. Therefore, he suggested that the internationalization of economics started in the 1930s, namely prior to 1945. Later I learned that he was a graduate student at the University of Chicago and he wrote his thesis under Henry Schultz’s supervision in the 1930s. But hearing his comments on my conference paper, some historians of economics, including American and Japanese, were surprised to say that Bronfenbrenner had not mentioned his own activities in Japan in the period immediately after September 1945.

I was unable to see Bronfenbrenner at Coats’s 1995 conference held at Duke University because he didn’t show up. In September 1996, however, I had a chance to talk to Bronfenbrenner at Duke. I made a short list of queries and sent it to E. Roy Weintraub by email just before my departure from Tokyo. Bronfen-brenner responded easily to my queries. Then he wondered if that was all. Thirteen years later, in March 2009, receiving his wife Teruko’s permission, I read his unpublished autobiography (Bronfenbrenner 1997) in the manuscript library of Duke University and I thought that he had written the part of his experiences in Japan for my research. It was impossible for me to conceive a query to retrieve what was written in his unpublished autobiography from his memory about his experiences in Japan. I doubt if he read G. C. Allen’s autobiography Appointment in Japan (1983). Allen stayed in Nagoya in the early 1920s and visited Japan several times. Both autobiographies tell us that their experiences in Japan were invaluable, especially before 1952, when Japan came back to the international community after the end of the Occupation period. Based on this consideration, I feel it necessary to include a chapter on Bronfenbrenner in this book to discuss his role in Japan effectively.

I joined Philip Mirowski’s project “Marginalism at the Margins” and wrote a paper on how neoclassical economics, marginal analysis and general equilibrium theory were discussed in Japan. Several mathematicians, not physicists, were interested in mathematical economics and gave advice for economists to use mathematics successfully in their analysis. Some Japanese economists began to examine mathematics for physics after reading Paul Samuelson’s series of papers on dynamics and stability analysis. In the 1940s, mathematician Masazo Sono gave lectures to the students in economics, including Michio Morishima, at Kyoto University, and mathematicians at Tohoku University answered questions asked by Takuma Yasui. I needed to revise my contribution by attaching emphasis to the importance of Ichiro Nakayama’s Pure Economics (1933), which was the first textbook in Japanese on microeconomics and general equilibrium theory by integrating Schumpeter (1908, 1912), Cournot (1838), Schultz (1927), Gossen (1854) and Walras (1874–7) with efficient use of his mathematical ability. He often used the type of mathematical analysis developed by Henry Schultz. I thank Takuma Yasui for pointing it out in his postcard to me of 1994, and I confirmed it recently by using JSTOR (www.jstor.org). It would not have been possible for me to finalize this research without e-databases. We have to emphasize that there were histories on “mathematical economics” in the world especially prior to around 1930 although their histories shared more parts than any other fields of economics.

2 Harmonization of Western and Eastern cultures

I became a member of the Society for the History of Japanese Economic Thought (SHJET) around 1991. I learned many facts and ideas cultivated by Japanese thinkers in the early modern period, especially the time of National Seclusion, by attending its nationwide and local meetings. According to The Encyclopedia of Japan (Kodansha International), “National Seclusion” was:

Policy (1639–1854) adopted by the Tokugawa shogunate (1603–1867) in an effort to legitimize and strengthen its authority, both domestically and in East Asia. The main elements of the policy were the exclusion of Roman Catholic missionaries and traders, the proscription of Christianity in Japan, and the prohibition of foreign travel by Japanese. The seclusion was not total, because Dutch, Chinese, and Koreans were permitted access to Japan. Moreover, designated officials and traders from the domains of Satsuma [now Kagoshima Prefecture] and Tsushima [now part of Nagasaki Prefecture] were allowed to go to the Ryukyus and to Korea, respectively. The Korean trade in Japan, however, was confined to Tsushima, and the only Japanese port open to the Dutch and Chinese was Nagasaki.

(Accessed via the e-database Knowledge Japan Plus on September 4, 2013)

During the period, it is not surprising that only a very limited knowledge of and information about Western culture was brought to Japan by the Dutch East Indies. Although there were few cultural or intellectual exchanges with foreigners in the Tokugawa era, Japan had many thinkers, some of whom we list in Chapter 8. Many members of the SHJET maintain that Japanese economic thinkers always looked at the economic data and the record of domestic trading, fees and tax. They doubt if scholars could analyze an economy without using data or a list of numbers. After the end of National Seclusion and the opening of the door to the rest of the world, the new government had to look at the budgetary data all the time.

I joined the International Ninomiya Sontoku Association (INSA) around 2006 because I was interested in how Sontoku Ninomiya was discussed by contemporary international scholars, and I had referred to Sage Ninomiya’s Evening Talks (Fukuzumi 1884–7) in my contribution to Money and Affluence (1988), edited by the Research Center for Savings and Economy. My Chapter 2 “Savings in Japan, a history from an economic theoretical perspective” managed to connect Chapter 1 on the lives and activities in early modern Japan and Chapters 3–8 on modern Japan by shedding light on Ninomiya’s teachings. We learned that Ninomiya’s teachings were more than morality and virtues, and included the rational thinking leading to the establishment of economic science and management science in the modern period. Actually a few members of INSA and a professor of Kokugakuin University, where I taught from 1985 to 2000, suggested I look up Tameyuki Amano because Amano was one of those responsible for diffusing early modern Japanese thought a few years after he had studied political economy in English at Tokyo University. A number of Japanese scholars, especially professors of Waseda University, were doing research under the slogans of “Harmonization of Western and Eastern Cultures” and “Practical Use of Knowledge.”

I knew that Amano played an important part in establishing the Department of Commerce at university level for the purposes of promoting international and domestic trade and establishing modern economic institutions like the international payment system after the end of isolationist policy. He happened to be the first chair for the School of Commerce at Waseda University, where I have been teaching from 2000 on. He was forgotten for many years mainly because his house (built in April 1922) and his valuable documents were burned down by the fire caused by the Great Kanto earthquakes of September 1, 1923. I started to work on Amano in March 2011 because I could learn important points for consideration from one of the speakers, Masanori Yokoyama, in the talk session on Amano held in the city of Karatsu, Saga Prefecture, on March 19. Amano spent his youth in Karatsu and received English lessons from Korekiyo Takahashi. I gave my first paper on Amano to the 2011 SHJET meeting which was held in the city of Saga, Saga Prefecture, on June 4–5.

My participation in the project on the history of econometrics, organized by Marcel Boumans, Arian Dupont-Kieffer and Duo Qin, was also very useful for me to really become involved in the history of econometrics. I confirmed that the establishment of the Econometric Society (1930) was the landmark event in the history of econometrics, and that economists doing econometrics in the world share an increasing part of their history after 1930. Harro Maas and Mary S. Morgan’s edited volume Observing the Economy: Historical Perspectives (2012) gave me many suggestions of how I could write the history of economic science in Japan before 1930. Judy L. Klein and Mary S. Morgan’s edited volume The Age of Economic Measurement (2001) also suggested to me that I should think over the Japanese tradition of economic measurement. This kind of tradition was found in the economic magazine, Toyo Keizai Shinpo, for which Amano frequently wrote editorials; and Tanzan Ishibashi, who began to study economics by reading Amano’s writings, established its English edition, The Oriental Economist, in 1934 (see Ishibashi 1942). The Americans related to the Occupation, including Martin Bronfenbrenner and Jerome Cohen (Carl Shoup’s Tax Reform Mission member), who regarded it as an important source of information about Japan’s politics and economy.

A number of economists were engaged in empirical studies by using Japanese economic data and made comparative studies with American and European cases. The results of Japanese empirical studies encouraged the Japanese economists to develop theoretical research by reading and interpreting Western economic literature. It is noteworthy, however, that the quality of Japanese economic data was undermined by the chaotic situation caused by losing position in World War II. By using mathematics and Japanese economic data, Japanese economists managed to overcome the “linguistic barrier” in writing scientific papers.

3 Overview

This book has two parts and ten chapters. In Part I, we will start to discuss indispensable elements for the internationalization of economics in Japan. We cannot overemphasize the conscious formation of the international community of economists, which was witnessed by Japanese economists in the early 1930s, as well as the importance of the international discussion of monetary economics and policy, which ran in parallel with economic globalization. Then we will show a Japanese discussion of neoclassical economics, which was called “mathematical economics” at the time, the research of stability analysis, and the question of the existence of general equilibrium in a general competitive economy. Part II carries a variation of themes. We will consider the Japanese discussion of John Maynard Keynes during the time when Keynes was actively contributing to monetary economics and economic theories, and eventually show how the economics of Keynes shifted to Keynesian economics after the establishment of the international forum of economists on the evidence of the literature written by Japanese economists. Then we will discuss a history of Japanese developments in econometrics; shed light on Tameyuki Amano’s macroeconomics and the teachings of Sontoku Ninomiya; and Martin Bronfenbrenner’s activities and discussion of the reconstruction of Japan’s economy in the period immediately after the conclusion of World War II. In each chapter we will clarify the international context and explain the historical background and domestic argument when they are necessary to understand Japanese contributions to economics.

Chapter 2 looks at the formation of the international community of economists based on the experience of Japanese economists. Around 1930, the internationally oriented economists were eager to form an international community. They desired to make their works more easily and quickly available to other economists. Moreover, the migration of economists westward from Central Europe to North America fostered the exchange of economic ideas and the creation of new insights. After World War II, the local journals of economics, which were first written in their own native languages, tended to adopt English and became more open to all economists as well as adopting a referee system....