Seeking a New Infrastructure Investment Strategy

  In the Nikkei newspaper, University of Tokyo professor Noriyuki Yanagawa wrote an article titled, “With IT Development, Investment will also Change.” This is a very important point.

　His argument is as follows.

1. IT such as the Internet, applications, social networking, etc., is already becoming the base of an energized sharing economy and block chain. Google and Amazon, etc., have developed open source AI and related services.

2. These new technologies are infrastructure that stimulates investment. New types of infrastructure like this are important, and IT and AI are the engines that produce the new infrastructure, the infrastructure of infrastructure.

3. Private sector companies are responsible for the new infrastructure, and have the characteristic of encouraging change and development. The strategy is to increase investment in superior new infrastructure, and thus increase the number of businesses that use it.

　This theory could lead to the reform of public economics. Infrastructure such as roads, airports, water, electric power, etc., which are public assets, have not been run as businesses, but as a fulfillment of the “public” role of national and local governments, charitable corporations, etc. Tax revenues and fees for usage covered the costs.

　The new infrastructure is provided by purely private companies at no charge. By using economies of scale, they receive revenues from derived business, as well as from big data such as customer information.

　As a supporter of this, Professor Yanagawa has higher expectations for large corporations than for venture companies. I also believe that, rather than depending on venture companies because it’s a new field in Japan, it is more realistic to treat it as infrastructure with large-scale investment from large companies.

　However, one problem is that both IT- and AI-related infrastructure cross national borders, and as restrictions can’t be imposed on foreign investment, powerful global companies tend to dominate. Another point is that national power can’t compete. This is another reason why the concept of public economics as being based on measures put into operation by sovereign nations must be reconsidered.

　On the other hand, “the failure of the markets” as described in public economics is another topic for discussion here. The issue is how to overcome greatly reduced investment in infrastructure. Professor Yanagawa also mentioned that the decline in capital investment due to infrastructure utilization will lower the total economic demand. I want him to analyze this as part of the study of economics.

　Reaching across industries is one of the characteristics of the new infrastructure. This is because new rules different from conventional sector-specific business laws are required.

　In order to maximize the welfare of these new infrastructures, the recommended policy is to promote investment and broaden the benefits of utilization.

　The government must break down the vertical divide, and decide on measures for the easing of regulations and rules for the promotion of utilization. Tax measures to promote investment in and use of the new infrastructure will also be effective.

　On the other hand, targeting measures to cultivate certain fields through subsidies are likely to fail. Rather, it seems better to encourage private investment by making the government itself a leader of demand.

　For this reason, a comprehensive strategy is required. The government offices of IT and Intellectual Property are in charge of hardware/software strategy, and Professor Yanagawa and I participate, but we really want a different strategy theory to encourage new infrastructure investment.