Panasonic’s Latest Product – A Whole Town

Launched On Thurs on a former Panasonics Factory

Panasonic

Since the Great East Japan Earthquake, there has been utilizing the photovoltaic power generation systems and storage batteries and increasing demand for the building of disaster-resistant, safe, peaceful and eco-friendly towns. The goals of the Fujisawa Sustainable Smart Town is to create a sustainable town where making the most of the blessings of nature and promoting local production for local consumption. Moreover, we aim to realize a safe, peaceful life for residents by linking and using electricity and information networks. We need to create practical measures to achieve these goals.

Asia Nikkei

 The company on Thursday officially unveiled The Fujisawa Sustainable Smart Town, in Kanagawa Prefecture, just southwest of Tokyo. The development is to be one of Japan’s biggest smart city projects with detached homes. Panasonic hopes the pilot project will give it a blueprint for future business growth around the world.

“Today marks the birthday of our company’s founder, Konosuke Matsushita,” Panasonic Executive Officer Masahiro Ido said. “We have been developing this town to last for 100 years. We will apply this business model all around the globe.”

     The town has been going up on a piece of land formerly occupied by a factory that used to make refrigerators and other things for the home. To be completed in 2018, the development is to include 600 houses and 400 condominium units as well as commercial and communal facilities. Roughly 3,000 people are expected to call the place home.

The property is about 2km from East Japan Railway’s Fujisawa Station. “The first-stage releases sold quickly,” Tomohiko Miyahara, president of Fujisawa SST Management, said.

Detached homes start from around 50 million yen ($419,360) and go for more than 60 million yen. Buyers have already snapped up 120 units.

Fujisawa SST’s biggest selling point is its environmental friendliness. A goal is to bring down the community’s carbon dioxide emissions to 70% below what its 1990 levels would have been. All homes are equipped with solar panels and storage batteries. The equipment not only makes it possible for residents to sell surplus power and generate extra income but also to provide emergency backup power in case of a natural disaster.

The town will also have a network of surveillance cameras installed in street lamps using light-emitting diodes.

Most of the appliances, equipment and materials are supplied by the Panasonic group. The project is forecast to generate a total of 40 billion yen in sales over the first 30 years, when revenue from health management support and other services are included.

This seems like an insignificant amount for a company with more than 7.7 trillion yen in group sales. But the business model of “selling the entire town” is a highly attractive prospect for a company whose myriad products are facing an onslaught of competition.

“This is a new business model that combines the total power of the Panasonic group,” Ido said.

The company is also looking to build whole towns abroad, particularly in the parts of Asia with rip-roaring economies.

“In oversees markets, we want to heighten our presence as a home builder,” President Kazuhiro Tsuga said.

For that reason, Executive Vice President Yoshihiko Yamada, in charge of Panasonic’s overseas business strategy, visited Indonesia in mid-November and met with developers.

The new business model is only a sliver of what Panasonic hopes it becomes as the company approaches its centennial, in fiscal 2018, when it wants to ring up annual sales of at least 10 trillion yen.

 

 

Loanable Funds – The History of a Bad idea

Loanable Funds – the idea that financial ‘intermediaries’ such as banks take ‘savings’ of currency and then lend to borrowers is an outdated concept of modern money creation.  But how did it originate?  It seems to have been outdated even in the 18th Century when Adam Smith wrote given the wave of banking innovation that had swept from Italy across France, the Netherlands and Scotland.

Adam Smith took many of his ideas from Turgot and the Physiocrats, including his concept of capital accumulation, savings and investment.  We need to put aside any conception of Tugot’s views from Bohm-Bawerk – who tended to charicature most thinkers who might have anticipated him, and misrepresented Turgot’s theory as a narrow productivity -‘fructification’ theory, and go back to the source material.

Turgot’s view of interest was a considerable step forward from earlier thinkers such as Hume.  Hume correctly deduced that the rate of profits and rate of interest must be the same but assumed the causation went of profits to interest – neglecting how interest enters into price and hence profits.  The focus was on demand (derived from factor returns) for goods translating into a demand for money given a fixed quantity of specie. Turgot expanded the analysis to include supply of loans to advance capital.

‘The price of money is regulated like the price of all other merchandice – by the balance of money at the market with demand for it’ (1793:51)

Note the generality and modernity of this statement.  Supply and demand for money, not supply and demand for loanable funds.  Turgots mistake was his narrow focus on what could supply that money.

At the time Turgot wrote the money market in France had contracted to a loanable funds market supplied through notaries.  The Mississipi Bubble had led to a collapse in credit based on fractional reserve lending, money creation at the stroke of a pen.

Therefore Turgot developed a conception of savings of what we would now term loanable funds for investment purposes.

Schumpeter, and endogenous money theorist, criticised this

 ‘The theory was swallowed hook line and sinker, it was if John Law had never existed’. (1954:325)

John Law of course developing theories of fractional reserve lending leading to endogenous money creation.

Schumpeter was slightly unfair.  Turgot’s theory rested on the supply and demand of money, then he set out a mechanism for money (loanable funds) accurate to the circumstances in France of when he was writing only.

As modern historian Antoin Murphey writes Turgot’s theory was stuck in an 18th Century time warp and reflected his own prejudices against finance capital and in favour of prudence, prejudices carried forward by Adam Smith.

Overall though Turgots ideas were very advanced and even included the first rudimentary characterization of markets in dynamic equilibrium –

‘like two liquors of unequal gravity – that communicate with each other through a reversed siphon’ 1793:58

The irony is that most of the problems of modern economics can be traced to two errors in interpreting Turgot.

-Firstly adopting his specific (loanable funds) rather than his more general model of interest.

-Secondly adopting a model of static equilibrium rather than one of prices being regulated by pressure of flows from stocks

Further Reading

Adam Smith – Wealth of Nations

Turgot – Reflextions

Schumpeter- History of Economic Analysis

The Genesis of Macroeconomics – Antoin Murphy

John Law – Oevres Complete du John Law

Hume – Treatey on Money

Bohm Bawerk – Capital and Interest