Changing from Struggle for Existence Pricing to the Fair Competition Pricing of Intrinsic Value

Journal of International Cultural Policy Ch anging from Struggle for Existence Pricing to the Fair Competition Pricing of Intrinsic Value

No.3 August, 2012 (publishing schedule)

By Toshiyuki Muraoka June 21, 2012

Research Note [Research Note]Changing from Struggle for Existence Pricing to the Fair Competition Pricing of In- trinsic Value By Toshiyuki Muraoka 1. Introduction It was impossible to do business with a life-culture products, when the price was decided based on only the use and utility values of the product. That pricing method depended on custom and the per- ception of industry suddenly started collapsing. In real market business, the kind of value included in the product and how it is decided should be clearly elucidated. This is indispensable in order to pro- mote stable business management and the mass shipment of life-culture type product. This research note is based on 30 years or so of personally accumulated interviews of people in both the management and labor (control and distribution) sectors. This author repeated such interviews and information collection in the agriculture, forestry, fisheries, manufacturing construction, circulation, and service industries and experienced both success and failure. This indicated to this author that some kind of hypotheses and theories exist, but they could not be demonstrated nor conclusion reached by the mere analyzes of the statistics and information gathered to date. Nevertheless, the economy continues to fail due to the use-value and utility-value theory rep- resented by the expression “cheaper is better”. In this paper, the author will propose a new approach to this situation.

2. " Use-Value Theory" is the Cause of the Present Recession. The cause of the current "so-called recession" is not a reaction to conventional excess capacity. In the world today, there is an excess of unused capital and brain power. Because consumption is not increasing done in Japan’s ‘scrap and build economy’, Japan is economic slump continues. The expansion of individual consumption will be considered here. Today’s consumers do not buy more things even if produces offered goods as they did in the past. If producer reduces price, there is no increase in the exchange-value, even if there is a temporary increase in sales. Rather, the exchange-value of the leftover goods decreases sharply until they are fi- nally discarded. Even if there were to be an increase in the purchasing power of consumers due to for wage and welfare increases, only a savings increase would not be accompanied by purchasing increase unless connected to individual consumption. The desire to “work hard to buy something one really wants” has becomes a rarity these days. Young people buy much less and raise fewer children in Japan these days. The tendency to not buy in a hurry what one needs and invest in savings instead has strength- ened. This phenomenon is generally understood to be savings for an unsure future. Refusal to pay national pension premiums and/or for welfare annuities in our inefficient unsafe society are not nec-

2 essarily connected. Under such circumstances, the young often obtain a credit card and take out a loan to buy what they think they “just cannot live without”.1 Furthermore, even if private producer’s financial assets increase by saving, because financial insti- tutions cannot attract investment even if sales increase, they puts off approving loans because of highly unprofitable risk. Even if there is the prospect of sales increase due to consumer’s welfare (wage) improvement, management innovation and product technology of individual companies and investment by the financial institution are not connected organically. The main point here is how to scientifically add "high value-added products and high-level ser- vices" that match the needs of the present to the intrinsic value of the products. This can be done by encouraging "management innovation and product technology " of individual companies. Using this method, appropriate stable pricing can be done, and the ability to measure achievemen- t-expansion and profit-increase rises. By recognizing that both the capacity for labor and the work force itself result in a product’s values (unlike the conventional labor theory of value). It is thought that can maintain rewards, such as fair and appropriate wages. Cost devaluation and the moving of companies overseas are popular, recent, management methods but they invite a gradual decline in economic power and the labor capability of the individual company and worker, while substantial selling out is not avoided. It is necessary for medium and small-sized businesses to recognize the seriousness of present economic conditions. In other words, things, such as earthquakes, tsunamis, nuclear power plant acci- dents, dollar crises, the strong yen and the EU economic crisis cause further attacks on the economic conditions after the Lehman shock and make economic upheaval possible.

1 Figure : Change in the possession and use ratio of the credit cards of the Japanese students (In May, 2006, UFJNICOS company's investigation). The pink line shows the utilization rate of the credit card, and the blue line shows the possession rate.

3 There is pressure on the management of individual companies for bold reform and for a new economic order as an adapted strategy. A company which is going to push forward a new product based on conventional experience will face the contradiction of the old business model which has col- lapsed. In other words, disposal of non-collection account, receivable higher cost and the malfunc- tion of company organization will occur. Pessimistic management policies are dangerous for medium and small-sized businesses in fund-raising. On the other hand, the creation of new products and industrial structure have contributed to mod- ern consumption2. "There are some examples in which life-culture type products" have added suc- cessfully to their intrinsic value in several small towns containing small factories with just a few em- ployees3. However, such success is transient and local, and many other examples have not resulted in profit. Of course, it is essential to scientifically and theoretically create individual companies that permanently make a profit. Up until now, theory has been weak on how to add intrinsic-value to use-value. That is why even the concept " Abstinence makes life go better !” in individual consumption and life satisfaction dis- agree. This theoretical weakness has contributed to the view that intrinsic value might not concretely contribute to the economy nor to growth in individual consumption.

3. The Characteristics Products which Continue to Sell. Products which continue to sell for a lone time have one or more of the following characteristics : 1 have a low price 2 are functional and rational 3 are unique or original 4 are related to health and/or play ① and ② are dominant in industrial- culture type products, while ③ and ④ are in products that will become dominant life-culture type products. The characteristics of life-culture type products are related to the expansion of human relations through product acquisition and use. ③ and ④ are in products that improve communication and mutual understanding between human beings, and contribute to longer life and good health. Salespeople who were or are successful in the sale of such products always use words about hu-

2 Irodori Co. Ltd., Kamikatsu-cho, Tokushima. This company provides the leaves from trees found in the valley as ornaments for dishes. It has contribute to the spread of Japanese food culture around the world. 3 Noda Kakuseisha Mfg. Co., Ltd. This company produced musical instruments at the time of establishment as a business. It produced good sounding whistles. Their sound quality is famous in the performance, and their sound quality is recognized by use in world soccer games, used by the Paris Police and by the Los Angeles Police too. This whistle is manufactured by four people over generations at a small factory in a small town. However, interestingly it is neither used nor bought by Japanese government offices.

4 man relations. For example, when a salesperson sells beef for steaks, he/she uses words that suggest to the buyer the sound of the meat sizzling on an iron plate rather than conveying the nutritional value of the meat. When a salesperson sells a car, he/she uses words and cultural images to remind the (male) buyer of its use to "go out with a girl" and/or to "enjoy a trip with the family” more than the function of the car. In other words, a life-culture type product is different from an industrial-culture type one, such as that bought from a lunch supply and distribution company. Take having a hamburger as an example. An industrial-culture type, product is developed for sale, can be seen in many stores today(such as McDonald's) and is totally privatized. A life-culture type, product keeps the regional character of the food and taste alive (”Produced Lo- cally, Consumed Locally”). It is a hamburger which the customer chooses for its contents only and the joy of cooking it. It has many things in common with the current concepts “Produced Seasonally, Consumed Seasonally”, and ”Produced Locally, Consumed Locally”. A sensitivity-culture type, product will bring in the product’s appearance and taste, and will create an atmosphere through out the food shop. This is done by the storekeeper using his/her special cre- ativity upon hearing what images customers have towards hamburgers. It goes without saying that to develop a life-culture type product or to develop it into an industry is important and to do this based on law and logic. Because it is hard to predict and have knowledge of results be forehand, originality is necessary for the working craftsman.

4. To Add Intrinsic Value to Life-culture type Products A life-culture type product is defined as one sold or traded as a product contributing to cultural life. Cultural life is thought to go beyond just maintaining life and health. It shows what has been accumulated from the past how to pursue subjective well-being and form a design for the future. A life-culture type product embodies the purchase, use, preservation and consumption process related to it. It will be based on individual difference and variety, and it will give the impression that the person receiving and consuming it is at the same time realizing what he/she hopes for in the future. This is the important thing that an industrial-culture type product does not have here. The industrial-culture type product may deny the subjective well-being of the consumer, his/her desires, impressions and hopes while economic growth is given priority. In life-culture type products, form is important and must be clearly seen. It promotes development by changing. For example, in Germany, when a product is becoming an industry and natural energy is used to generate electricity at medium and small-sized business scale, it is called “a life-culture type product”. Intrinsic value is defined here as the power a product has to cause actions such as, the desire for

5 something, feeling about something, and hope for something when bought, and preserved by consumers. The Sources and the Properties of Intrinsic Value. ① The sources : A) the ability of labor(workers) bred from childhood to become experts the local culture. This alone will not result in the embodiment nor the commodification of the value. The effect of giving value to the ability of labor was inarticulate in the conventional labor theory of value or denied by the labor theory of value. B) the ability of the work force trained through rigorous practice. This ability is com- bined with ability of labor in the foregoing paragraph and results in embodiment and commodification. C) the ability for innovation and systemization organically networked in an area and local industry. This is seen in phenomenon such as, brand characteristics and the re- liance of consumers on a company. ② The amount of intrinsic value is determined based on the culture that a buyer recognizes. How- ever, its circulation is, in principle, the impression of a one-time exposure and of a desired future. ③ The pricing of intrinsic value is done by the market-price decision method and is the equilibri- um point of consumers and suppliers.

Here is a specific example. The usefulness of a diamond is low from the demand side as decora- tion and attitude of the industrial cutter. In fact, the gross weight of the exchange value of the diamond will be small if it does not circulate in the jewelry market and/or if it becomes old. As for emeralds and the rubies, only in Europe do they fetch a high price. Because the production of natural blue sapphires decreased sharply after about 1970, it is the artificial blue sapphire (coloring the col- orless sapphire blue by heat-treating it in a frying pan) that is now be supplied in large quantities. As a result, the price of its exchange value has not greatly changed. The actual situation is that the price of the jewelry as a life-culture type product reflects its intrinsic value that comes with different recognitions of the culture of the jewelry..

5. Deciding the Price of a Life-culture type Product The method of the pricing industrial-culture type products is by accumulation of the company’s total costs plus a gross margin of those total costs. In an industrial-culture type product, it is essential to secure a monopolistic position in order to keep the price stable, have a plan to weaken competing companies, and to strictly prohibit marketing at a bargain price just make a sale. In contrast, it is thought that the exchange of a life-culture type product is carried out by using a market-price decision method. The material of the half-finished good does not go through a process

6 obtained by complete devotion to financial value. To undertake sale and exchange, the goal is to de- termine the intrinsic value accumulated in the local industry and in the local area, as well as the use- value resulting from the manufacturing process. In addition, the desires of life, impressions and hopes for the future are brought about by the buyer’s continuing to use the product after acquisition. This is also added to an object’s sale and exchange. In this way, deciding the price of a life-culture type product will be divided among both sides, the producer and the consumer.

6. Conclusion It is important to have people in the management department of various companies to have an idea of and an orderly way to add intrinsic value to use-value. An episode in Osaka city where this author lives is introduced to conclude. Hamo fish and Somen noodles from an indispensable dish for the Tenjin festival (on July 25) held to celebrate the passing of the rainy season in Osaka. This dish contributes to communication during this special event. In Kyoto city, approximately 40 km northeast of Osaka city, summer Hamo is also indispensable, but its popularity is nothing like that in Osaka. In the first place, the fish called Hamo has many small bones and is not a special fish there. Nevertheless, demand and price increase only in Osaka just by being there and its name being intimately related to the Tenjin festival. Hamo is an inexpensive fish which goes up the river naturally in summer, and Somen noodles are a summer food easy to preserve even in the heat. Because the intrinsic value is added to the place where it is produced and has an easy-to-use value, its product-value rises. "Hamo and Somen" are ideas that came from the soil for lifestyle of Osaka’s common people. Those foods are especially prepared by fish craftsmen to be products which "Osakans are dying to eat". If cold draft beer and cold sake added, most Osakans associate them, with the desires of life, impressions and hopes for the future. “Produced Seasonally, Consumed Seasonally”, and ”Produced Locally, Consumed Locally” are intrinsic values in themselves.