By Koichi Hamada, Professor Emeritus, Yale University; Professor Emeritus, The University of Tokyo
I was stunned by the news of the demise of Columbia University Professor Takatoshi Ito. He was one of the contributors to Project Syndicate, the international forum that carries opinion pieces by leading economists and public intellectuals.
Upon graduation from college, he was offered a position by the allegedly most prestigious employer in Japan, that is, the Ministry of Finance. However, he chose to become an academic.
I met him for the first time when, unusually for those days in Japan, he came from Hitotsubashi University to present his research ideas to faculty at the University of Tokyo, including Katsuhito Iwai and Masahiro Okuno (Fujiwara). I have even forgotten his specific research topic, but I was strongly impressed by his positive attitude toward research and communication.
He then pursued his Ph.D. at Harvard under Kenneth Arrow. I remember him discussing the esoteric subject of proving the existence of non-perfect competitive equilibrium. Later he co-authored articles with Robert Engle, a Nobel Laureate.
When I was assisting the Koizumi Government, I had discussions with him, sometimes together with Kazuo Ueda, the present BOJ Governor. Takatoshi later became a proponent of the “inflation target” policy against the stagnant Japanese economy, but his belief in a balanced or sound government budget remained firm.
In his personal life, he loved music. His violin playing, which I once heard at the University of Tokyo, was of professional quality, according to his violin teacher, Dr. Ray Iwazumi. When I was caught by clinical depression in New Haven, he came to visit my house to console me and even listened to the children’s songs I had composed. I feel I owe him a lot. In the past ten years, he had been teaching in the United States, partly under my influence, he said. He wanted to stay in New York in order to enjoy more repertoires at the MET.
Scott Bessent jokingly talked about my meeting with George Soros, his former boss, at the Mory’s Club in New Haven. In fact, I remember that Takatoshi introduced me to Soros again. Soros proposed to me that we should adopt Helicopter Money. This was even stronger than Modern Monetary Theory. I could not agree with him: “It would invoke outright inflation.” Even after I embraced the doctrine of “Functional Finance” by Abba Lerner, that a budget deficit should be evaluated by its exact effect on the economy, the “helicopter money” idea was too extreme and dangerous. My reaction was right.
In this perspective, the Balanced Budget doctrine was, in my view, wrong, but in this sense it could be counted as a guard against inflation. In the Zoom meeting prepared by Masako Osako of FUTI, where I met him last, our conversation ended with a disagreement between his balanced-budget argument and my Lerner view. I now feel I could have been more conciliatory.
