is hope that some exogenous shock, or just pure luck, will raise productivity. we would have to admit that there is an element of truth in this explanation if we look at the history of prosperous cities, as highlighted by enrico moretti, an expert in urban economics. 9 janet l. yellen, “ recent developments and the outlook for the economy, ” remarks at the city club of cleveland, july 10, 2015. paul krugman, “ the myth of asia ’ s miracle, ” foreign affairs, vol. 73, november / december, pp. 62 – 78, 1994. enrico moretti, the new geography of jobs, mariner books, 2013. bis central bankers ’ speeches for instance, the reason why seattle, washington, became a high - tech industry hub depended to a large extent on the fact that the founders of microsoft had grown up there and wanted to relocate their company to a place familiar to them. similar stories can be found for other u. s. high - tech cities. if these cases provide a complete explanation of productivity growth, all we can do is wait and hope for a genius like bill gates or steve jobs to be born by chance in our country. fortunately, however, economic literature is much more hopeful in this respect : productivity is largely endogenous. iv. how to raise productivity in the economic literature, there is a long list of factors that are thought to have a positive impact on productivity growth. i do not intend to go through all of them but, instead, i would like to focus on three things that i think are of particular importance. the first is human capital. measuring human capital is a difficult task, but one of the simplest indicators often used is the number of school years. in chart 7, the greater the number of years spent in school, the darker the green in which the country is colored. in asia, there are a number of dark green areas, such as japan, korea, malaysia and sri lanka. as you would expect, hong kong and singapore also belong to this group, although it is not shown clearly on this map. one may get the impression that asia as a whole is not as green as north america or europe, and is more or less similar to south america. this would seem to indicate that there remains significant potential for further accumulation of human capital in the region. at the same time, there are some interesting figures relating to u. s. universities, which are generally acknowledged as providing the

highest standard of education, attracting talented people from all over the world. if you look at the data for u. s. university students by their country of origin, you can see that students from asian countries dominate, as shown in chart 8. those students returning to their home countries will no doubt have a profound impact on the human capital there. it is well known that bangalore, the it hub of india, benefited from returnees from silicon valley. moretti ’ s study shows that innovative, highly skilled workers contribute not only directly to the higher quality of human capital, but they also have a positive effect on the skills of those around them – a sort of positive externality. 10 it is also encouraging to see that an increasing number of asian universities have become recognized as top - tier at a global level. according to some recent university rankings, more than ten universities in asia are among the best 100. 11 remember that the success of bangalore also lies in the fact that local it firms were able to recruit many highly skilled graduates from nearby universities. against these backdrops, asian has made larger contributions to the development of science. for instance, the share of asian born nobel prize winners in scientific fields doubled to more than 10 percent after the turn of the millennium. 12 these truly top academic scholars have influenced the development of human capital in their own countries in various forms as exemplified by professor sen himself in front of us. the second key to higher productivity is a market - friendly business environment. for example, a critical precondition for market functioning such as property rights protection, or the rule of law more generally, is an indispensable ingredient for an innovative environment, which in turn is the basis for productivity growth. i firmly believe, as many economists do, that enrico moretti, the new geography of jobs, mariner books, 2013. see, for instance, times higher education world university rankings. nobel prizes in the areas of physics, chemistry, physiology or medicine, and economic sciences. bis central bankers ’ speeches healthy competition and appropriate incentives are essential for a well - functioning market mechanism, through which sustainable and robust economic growth is made possible. on this score, deregulation is to be strongly encouraged as well. i think that asian economies are making steady progress in this regard, although i also believe that much more needs to be done. while the importance of market mechanisms cannot be exaggerated, it does not mean that we can turn a blind eye to income inequality. as a matter of