Tribute to Marcus Berliant: A pivotal matchmaker of general equilibrium and spatial economics

• Published date: 01 March 2020
• Date: 01 March 2020
• Author: Ping Wang,Masahisa Fujita
• DOI: http://doi.org/10.1111/ijet.12240

Int J Econ Theory. 2020;16:6–26.wileyonlinelibrary.com/journal/ijet6

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© 2019 IAET

Received: 22 February 2019

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Accepted: 17 April 2019

DOI: 10.1111/ijet.12240

ORIGINAL ARTICLE

Tribute to Marcus Berliant: A pivotal

matchmaker of general equilibrium and

spatial economics

Masahisa Fujita

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Ping Wang

2,3

1

Institute of Economic Research, Kyoto

University, Kyoto, Japan

2

Department of Economics, Washington

University, St. Louis, Missouri

3

National Bureau of Economic Research

(NBER), Cambridge, Massachusetts

Correspondence

Institute of Economic Research, Kyoto

University, Sakyo‐ku, Yoshida‐Honmachi,

Kyoto 606‐8501, Japan.

Email: fujita@kier.kyoto-u.ac.jp

Abstract

We review fundamental contributions by Marcus

Berliant, with a view to a way forward. We focus on

two themes to which he has contributed significantly:

general equilibrium theory with land and location and

general equilibrium analysis of spatial agglomeration.

KEYWORDS

general equilibrium, land, local public goods, location theory, spatial

agglomeration, spatial economics, urban economics

JEL CLASSIFICATION

D50; D60; H41; O41; R13

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INTRODUCTION

As is well known, Marcus Berliant has made fundamental contributions to urban economics

and spatial economics over the four decades of his academic career to date. As old friends and

collaborators of Marcus, we are pleased to have this opportunity to write about Marcus's work

and its impact. From the viewpoint of colleagues in urban economics and spatial economics,

Marcus has been unique as a master of modern general equilibrium theory.

In 1982, under the supervision of Professor Gérard Debreu at the University of California,

Berkeley, Marcus completed his PhD dissertation, “A General Equilibrium Model of an Economy

with Land”. Then he started his academic career as a general equilibrium theorist mainly in th e

fields of urban economics, spatial economics, and public economics. Since then, as a researcher in

these fields, he makes an invaluable contribution to their further development by not only offering

frank critiques on existing models but also creating new original approaches.

As will be explainedlater, in Berliant et al. (2006b) and Berliant and Fujita (2008) we described

the knowledge exchange and creation process as a selective match and a square dance.Inthis

respect, we (Fujita and Wang) are very lucky to have been able to participate in matching and

dancing with Marcus. We are indeed not alone –during his square dancing, Marcus has been

rotating with many partners, including another guest editor of this issue (Peng) as well as several

of his 38 PhD advisees.

In the remainder of this tribute, we focus on the two themes, land in general equilibrium and

spatial agglomeration in general equilibrium, and highlight with a view to a way forward what

Marcus has achieved through his matching and square dancing over the past four decades.

Because of the mathematical complexity of the former theme, we will provide some necessary

mathematical illustrations. Throughout the tribute, we will leave out further details but refer

the reader to the original papers as specified in various footnotes.

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LAND IN GENERAL EQUILIBRIUM

Marcus has worked tirelessly in developing a sounder mathematical basis for microeconomics

with land. In this section we highlight his fundamental contribution to general equilibrium

theory with land and location.

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Land and economic theory

Land is everywhere, providing the foundation for our existence. In addition, the spatial extent of

land is accompanied by the dual concept of location in human activity. Together, land and

location are essential ingredients for individual life as well as for national economies. Yet, it is

rare to find an economics text in which land and location, or space, are studied as an important

subject –if they are even mentioned.

The reason for such neglect of land and location in mainstream economics is not entirely

clear. In the following discussion, however, we concur with Marcus's observation that the set of

unique characteristics of land makes it difficult, conceptually as well as mathematically, to

incorporate land into the traditional framework of general equilibrium theory. To understand

the unique characteristics of land and the causes of such difficulties, we refer to Table 1, which

categorizes the possible types of general equilibrium framework or model in terms of the

number of agents and the number of commodities.

Starting with the classic Arrow–Debreu economy in the north‐west block, let us recall that in

their seminal article Arrow and Debreu (1954) defined each commodity by its physical

characteristics as well as by the location (and date) at which it is available. Hence, once we have

thus indexed commodities properly, land becomes just another good in the Arrow–Debreu

economy. As emphasized by Hildenbrand (1974, pp. 83–84), however, the introduction of the

location (and date) of availability in defining a commodity has its drawbacks, which arise when

examining the assumptions that are needed to demonstrate the existence of an equilibrium. In

particular, Schweizer et al. (1976) point out that the convexity of preferences makes little sense,

as it implies that consumers would desire to own land that is spread out rather than

concentrated.

As is well known, one useful way to attack such problems is to use the convexifying effect of

large numbers of agents when there are a finite number of commodities. That is, moving to the

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The reader is also referred to review articles by us, Berliant and Wang (2019), in the Oxford Research Encyclopedia of Economics and Finance.

FUJITA AND WANG

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