Relation between Total Factor Productivity and Utility

Abstract

First, we identified the issues facing Japan’s forestry industry by analyzing statistical data. Japan’s forestry industry was in crisis. Despite the large increase in capital stock in forestry over the past 40 years, the production value had declined substantially, which deviated from economic common sense. Next, we used the total factor productivity measurement theory developed by the authors to measure the impact of technical progress on changes in the production value of Japan’s forestry products. The results revealed virtually no evidence that technical progress contributed to any increase in production. In addition, to investigate the causes for the decline in the production value, we measured the cardinal utility of domestic forestry by combining the theory developed by the authors with the system-wide approach of the economist H. Theil. This demonstrated that domestic wood (timber) had a poor reputation. This persistently poor reputation was considered to be the reason for the continuing low incentives for increasing production. Finally, we used economic theory to find a unique method to explain ways to increase forestry production in Japan by improving the reputation of domestic wood.