The character of an industry is
restricted by its cost structure.

As a Japanese citizen, I am deeply grateful for the outpouring of warm wishes from people and countries all over the world after the major earthquake that occurred here on March 11, 2011.

The power of God far exceeds the speculation of humans.

Every time I encounter a large disaster, I learn that the arrogance of people lies behind the calamity.

Anyone who denies God, comes to worship himself as a God. Humans have become arrogant. I feel pity and sorrow for the arrogance of people.

Humans must be humble before God.

Money-making is not in and of itself a means to an end. It is necessary to create an economic system after clarifying what is necessary to make people happy.


One day I was watching a TV talk show. In that show, it was reported that deregulation of the oil industry had lead to excessive competition that lessened the profits of gas stations, and consequently, many gas stations had gone out of business, leading in turn to an increase in municipalities without any gas stations. The reporter lamented that many residents had difficulty getting gas for their cars.

In response to that report, one of the commentators asked aloud, “Does deregulation worsen profits?” If deregulation is regarded as a golden rule only through such a humble understanding, immoderately deregulated industries cannot survive.


Deregulation reduces the profits of industries and individual corporations. Reduced profits of individual corporations promotes mechanization, rationalization and intensification. Therefore, it is all right to deregulate industries in which international competitiveness should be fostered through mechanization, rationalization or intensification.

However, we should not overlook the fact that mechanization, rationalization and intensification serve to squeeze out jobs.

Thus, tightening of regulations is effective for industries which do not require mechanization, rationalization or intensification, or for which promoting employment is desired.


In particular, labor-intensive industries such as the distribution industry are the keystone of employment. Unless the market is protected by regulations, it would soon fall apart.


It is a groundless argument that deregulation should be advanced and the principle of competition should be introduced by all means.

The way to increase the national income, i.e., profits, lies in increasing the number of corporations. In this way, the number of available jobs also increases. If distribution is rationalized, employment declines and the income -- the profits -- of the entire society also declines. If middlemen increased, both profits and employment, i.e., income, would also increase.


It is wrong to think that a low price is economical. Such thinking lacks a proper understanding of the utility of cost.

Any price has dual aspects: outlay for consumers, and cost for producers. The producers’ cost is passed on to the consumers’ income in turn. Namely, a price has a double-sided nature called outlay and income.


The basis of competition is an important issue. While some industries compete on price, other industries compete on quality. Depending on the industry, competition may be targeted via service, design, technology, performance, maintenance, speed, taste, policy, social contributions such as conserving the environment or saving energy, safety, confidence or research and development. The criteria for competition are not limited to low cost and price.

Anyway, how cost is assessed is important, and prices should be neutral. If the cost is simply passed on to the price, it is clear that it is advantageous for a corporation to bear only small research and development costs. If the cost for safety or confidence is reduced, the near-term profits increase. Industries that bear a large initial investment and have large fixed expenses tend to get into a price wars seeking near-term profits. The principle that bad money drives out good is at work here.


Cost is always demonized. However, the locomotive power of the economy is cost.

If cost is looked at from the opposite side, it is income and consumption. Income is distribution. That is to way, reducing cost means reducing income and consumption at the same time. Simplistic cost reduction invites biased income and consumption, and this is a problem.


It is wrong to assume that economic rationality simply means pursuing profits. The economy does not simply mean money-making. The distribution of not only products but also income is an important role of the economy.


The character of an industry is restricted by its cost structure.

An industry with a higher ratio of labor cost is a labor-intensive industry. An industry with a higher ratio of depreciation cost is a facility-consolidation industry. An industry with a higher ratio of raw materials cost tends to be affected by the rate of raw materials in the market and currency exchange. The ratio of the fixed cost and the variable cost is the premise for the profit and loss structure for an industry.


If cost is reduced in an industry in a narrow-minded fashion, the utility of cost does not work. The utility of cost means distribution. Namely, in that industry, the social distribution function does not work.

What is important is not the denial of cost itself but the proper distribution of cost.


Pursuing cost reduction alone without recognizing the utility of cost would amount to denying real economics. Then you would be aiming for a means to get profits without paying cost. There are only two ways to obtain profits without paying cost: financing and investment.


To persuade investors, it is easier to shift money to some extent to financial products of which interest can be calculated rather than to take a big chance in a world of business in which profitability cannot be anticipated.


This is one of the causes of the emergence of an economic bubble as well as one of the causes of financial crises. Such an action generates insubstantial cash flow.


Cost does not mean wasteful spending. Cost is a factor constituting the backbone of the economy. If you do not understand this point properly, you might misjudge the nature of the economy. The biggest reason for today’s stagnant economy lies in excessive cost reduction.



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