Masao Ogaki

Japan today is supposed to be 'richer' than it was before its period of high economic growth, yet many people seem to find modern society difficult to live in. What is 'richness,' and what kind of social structure is suitable for a society that has achieved advanced economic development and growth?

There are three mechanisms that can be considered to support human activities and drive the world: the market, authority, and the community. It is not that any one of these mechanisms is the best; how the three should be combined likely differs depending on the era and the country's situation. Thinking about the right combination for Japan today may help us move toward a truly prosperous future.

The market is a mechanism that determines prices for buying and selling goods and services, skillfully adjusting supply and demand. There is the phrase 'the invisible hand' to describe this adept coordinating ability. The market is fundamentally free, equal in many respects, and can be said to be democratic. However, this market mechanism also has its 'weaknesses.'

As economic development and growth advance, declining birthrates and aging populations begin not only in Japan but in many other countries. Some elderly people develop dementia, and even without it, cognitive abilities naturally decline with age, making it difficult for them to utilize the market mechanism on their own. Furthermore, as gender equality progresses, the importance of childcare services for children, who also find it difficult to use the market mechanism alone, increases. In an era of advanced economic development with a declining birthrate and an aging population, the number of vulnerable individuals unable to use the market mechanism on their own will increase, making it impossible to rely solely on the market mechanism.

The authority mechanism is a mechanism that can compel cooperation, such as tax payments, through institutions like the police and the judiciary. However, the reality is that in Japan, as well as in other developed countries, vast sums of money are spent on social security and medical expenses. With the acceleration of the declining birthrate and aging population, it is predicted that budgets will become even more enormous in the future. That is why expectations are now placed on the third option: the 'community mechanism.'

For example, in the past, when Japan was not the economic powerhouse it is today, a community mechanism, like that of close-knit neighborhoods, was functional. During the period of high economic growth, the market mechanism grew in importance while the significance of the community mechanism declined. However, as the dangers of isolation increase, I believe we can build a society that is kind to the vulnerable by reactivating the community mechanism. But the community mechanism has its own strengths and weaknesses, so I do not think it is desirable in this day and age to simply return to the old communities of the past. However, I believe it is possible for us to collectively devise a new community mechanism, utilize it skillfully, and build a new framework for that purpose.

The basis of the community mechanism can be thought of as a win-win relationship. Even if there is no initial trust, compassion, or sense of mutual support, the community mechanism begins when cooperation—not a market mechanism transaction—is offered and not refused. For example, even with one's own child, depending on the circumstances, situation, and environment at the time, one may not find every newborn endearing from the bottom of one's heart. However, in the process of raising them, mutual trust and compassion often deepen, and the community mechanism becomes more active.

Based on these ideas, my co-researchers and I are advancing research in 'behavioral economics.' In other words, this is 'the economics that studies human beings.' The foundation of our research consists of experiments and surveys. For example, we conduct combined experimental and survey-based studies on the internet to measure individuals' levels of trust and altruism. In particular, by collecting longitudinal data on individuals, we are investigating how trust and altruism change over time. Through this research, I hope to contribute, even in a small way, to the realization of a truly compassionate society where a new community mechanism actively works for the elderly and children who cannot participate in market competition and are not fully saved by the public safety net.

Keio University has produced many leaders in various fields. What will become important for utilizing the community mechanism is servant leadership, where leaders clarify the community's vision to its members and support each member so they can contribute to the community. In the 'economics of happiness,' which is closely related to behavioral economics, there is research suggesting that the sense of fulfillment from contributing to one's community and society is more important for happiness than material wealth. I pray that all of you will be able to have an impact on many people that increases their sense of fulfillment from contributing to their communities.

(Published December 2021)