Social Design Engineering Series

SDES-2018-6

Is an intergenerational retrospective viewpoint effective
in forming policy preferences for financial sustainability
in local and national economies? A deliberative experimental approach

Yoshinori Nakagawa
School of Economics and Management, Kochi University of Technology
Research Institute for Future Design, Kochi University of Technology

Koji Kotani
Research Institute for Future Design, Kochi University of Technology
School of Economics and Management, Kochi University of Technology

Real Arai
Research Institute for Future Design, Kochi University of Technology
School of Economics and Management, Kochi University of Technology

Masanobu Nagano
Regional Research Institute, Kochi University of Technology

Tatsuyoshi Saijo
Research Institute for Humanity and Nature
School of Economics and Management, Kochi University of Technology
Research Institute for Future Design, Kochi University of Technology

21th September, 2018

School of Economics and Management
Research Institute for Future Design
Kochi University of Technology
KUT-SDE working papers are preliminary research documents published by the School of Economics and Management jointly with the ResearchCenter for Social Design Engineering at Kochi University of Technology. To facilitate prompt distribution, they have not been formally reviewed
and edited. They are circulated in order to stimulate discussion and critical comment and may be revised. The views and interpretations expressedin these papers are those of the author(s). It is expected that most working papers will be published in some other form.

Is an intergenerational retrospective viewpoint effective informing policy preferences for financial sustainability in local andnational economies? A deliberative experimental approach

Yoshinori NAKAGAWA1,2*
Real ARAI1,2
Koji KOTANI1,2
Masanobu NAGANO3
Tatsuyoshi SAIJO1,2,4

1: School of Economics and Management, Kochi University of Technology, Japan.
2: Future Design Research Institute, Kochi University of Technology, Japan.
3: Regional Research Institute, Kochi University of Technology, Japan.
4: Research Institute for Humanity and Nature, Japan.
*Corresponding Author. Email address: nakagawa.yoshinori@kochi-tech.ac.jp1Abstract
Several previous studies have suggested potential benefits of intergenerational retrospective
viewpoints to both promote individuals’ policy preferences and resolve intergenerationalsustainability issues. This study extends this line of research by conducting a deliberation experimenton the challenging issue of determining financial policy at the municipal and national levels, andassessing the versatility of this process. A total of 353 participants were allocated into retrospective
and non-retrospective treatment groups. In each group, participants were asked to read thecase-method material created for the study and each individual expressed his or her most preferred
options, both before and after experiencing deliberation among a group of four participants. By
doing so, the relationships between the roles of the retrospective treatment, individual
psychological/behavioral characteristics, and deliberation were clarified. The results confirm that a
retrospective assessment influences individuals’ policy preferences at the municipal level but not at
the national level. Specifically, with regard to the former, it was found that, for those who are strongin generativity and critical thinking, the retrospective treatment was effective in changing theirpolicy preferences towards more sustainable choices. For those who are average with respect tothese traits, the retrospective treatment was effective when coupled with deliberation. For those whoare below average in terms of these characteristics, the retrospective treatment was ineffective evenwhen coupled with deliberation. Overall, deliberation and retrospective treatment complemented
each other as way to induce more subjects to choose sustainable options. We also discuss
implications for the practice of stakeholder workshops such as scenario development, where thedifficulty and importance of participants’ disengagement from the present has been recognized(Vergragt and Quist 2011).

Key words: Future design, intergenerational retrospective viewpoint, financial sustainability, fiscal
sustainability, generativity, critical thinking disposition, and deliberation.

2

1. Introduction
Human societies face various intergenerational issues that threaten their sustainability,
including environmental degradation, global climate change, and increasing government debt,
among others. These problems occur as the current generation tends to choose actions or policies
that are to their current benefit without fully considering future generations’ needs, despite the factthat they incur what may be irreversible costs for future generations (e.g., Kamijo et al. 2017;
Shahrier et al. 2017). Against this backdrop, social scientists, psychologists and neuroscientists claim
certain devices, institutions, or mechanisms that allow people to realistically imagine future events
may influence how human beings think, possibly affecting their current decisions or strategies (see,e.g., Corcoran, Weakland, & Wals, 2017; Gonzalez-Ricoy & Gosseries, 2017; Szpunara, Spreng, &Schactera, 2014). Furthermore, scholars and practitioners of “future studies” approaches havesuccessfully used backcasting and scenario planning regarding sustainability issues to consider
strategies oriented toward the future (Kok et al. 2014; Neuvonen et al, 2014; Peterson et al. 2003;
Street, 1997). More recently, a new variant of the “future studies” approach called “future design”
has been proposed and used for planning by municipal governments (Hara et al. 2017) 1.
What these studies have in common, is that they intend to advance prospective engagementof stakeholders for sustainable decision making in the present society. In such literature, there is aline of research that attempts to account for the interests of future generations by, paradoxically,
utilizing retrospective assessment. The idea of retrospective assessment is “to ask people to think
about the bequests of previous generations” in terms of indifference, regret, and gratitude, as ameans of “understanding how our stewardship, or lack of it, might be perceived by those in the
future” (Anderson, Teisl, & Noblet, 2012). This idea was proposed by drawing upon retrospective
technology assessment (Tarr, 1976), historical analysis (Pesch & Garber, 2001), and backcasting(Robinson et al. 2011). Noblet, Anderson, and Teisl (2015) were the first to use this idea in an
1
Future design can be regarded as a variant of backcasting, although they have different theoretical underpinnings.
The originality of future design lies in allowing people to create visions of the future as an imaginary future
generation, rather than as the present one. It is expected that this helps them not only to disengage with the present(Vergragt and Quist, 2011) but also to willingly impose burdens on the present generation if they are necessary tobring about their visions of the future.

3

empirical study, confirming that retrospective assessment undeniably affected citizens’ policy
preferences regarding issues of land conservation and energy. Nakagawa et al. (2018) extended thisline of research by developing what they called “retrospective treatment” that included the task ofsending requests to a previous society, based on the reading of a newspaper article from that time,
and tested this approach for forest management policy. They found that this treatment did indeed
affect people’s preferences, despite the fact that the newspaper article’s content was irrelevant to theforest policy issue, suggesting that this treatment could be applied to multiple policy issues.
(Hereafter, “retrospective treatment” is used generally to refer to interventions that aim to motivate
people to adopt sustainable policy preferences by means of helping them to embrace retrospective
viewpoints, encompassing the specific treatment methods of Noblet, Anderson, and Teisl (2015) andNakagawa et al. (2018).)
In spite of these contributions, there remains room for further research based on at least two
reasons. First, as Anderson et al. (2012) suggest, social psychology literature identifies cognitive
barriers that may limit the effectiveness of retrospective treatment, such as bounded rationality (i.e.,
an individual’s limited cognitive ability leads them to use heuristics in their decision-making). Thisis problematic, as it may lead to various biases, including the status quo bias (i.e., overestimation of
the current status) (De Dreu & Steinel, 2006; Frey and Stutzer, 2007; Zwick et al. 1999) and the
optimism bias (i.e., belief that they are at a lower risk of experiencing a negative event in the futurecompared to others) (e.g., Gigerenzer, 2004; Tor, 2002). Although Anderson et al. (2012) express the
expectation that retrospective treatment would be helpful in overcoming these barriers, it may be thatsome people can benefit more from retrospective treatment in attempting to overcome these
cognitive barriers than others. Thus, it is important to identify individual psychological andbehavioral characteristics that moderate the effect of retrospective treatment on one’s policy
preferences. No earlier studies appear to have addressed this question.
Second, apart from retrospective treatment, deliberation is known to influence citizens’
policy preferences (Barabas, 2004; Boulianne, Loptson & Kahane, 2018; Gastil, 2000; Gastil, Black& Moscovits, 2008; Lindeman, 2002; Mackie, 2006; Smets & Isernia, 2014; Taylor-Gooby, Chung4

& Leruth, 2018; Zimmermann, Heuer & Mau, 2016). Some authors ascribe this to the opportunitythat deliberation provides to “encounter different perspectives” (Barabas, 2004: 687) or to “weighevidence and argument from various points of view” (Lindeman, 2002: 199). Insofar as retrospective
treatment is an attempt to help citizens adopt a new perspective, its affinity for deliberation is
obvious: it is probable that citizens who are more successful in adopting the retrospective viewpoint
are able to help other citizens to empathize with the perspective through deliberations. However, it is
not well understood how retrospective treatment benefits from deliberation with regard to citizens
determining their policy preferences.
The present study thus aims to investigate how the influence of the retrospective treatment
developed by Nakagawa et al. (2018) on individuals’ sustainable policy preferences depends on theirindividual behavioral/psychological characteristics and on the presence/absence of deliberation. The
issue of national and local governments’ financial sustainability 2 , perhaps one of the mostchallenging areas for the effect of retrospective treatment to be recognized, was chosen for the study.
Original case-method materials were created, including an overview of the financial aspects of boththe national and a local government in Japan, and a set of four policy directions. The deliberative
experiments were conducted for retrospective and non-retrospective treatment groups, whereparticipants chose their favorite policy alternatives, and the research questions shown below wereanswered. By doing so, the present study contributes to the understanding of the interdependent rolesof deliberation, psychological/behavioral characteristics, and retrospective treatment in individuals’
attitude formation on a sustainable policy issue.

1) Does retrospective treatment alone (rather than in combination with deliberation) influence
citizens’ financial policy preferences? If yes, then what psychological/behavioral characteristics
2

In public economics, the term “fiscal sustainability” is more frequently used than “financial
sustainability”. In spite of this, the present study consistently adopts the term “financial sustainability” forthe following reason. The focus of the present study is not restricted to the ability of governments tosustain their current spending, taxation and other policies in the long run. The fiscal sustainability of
public sectors is partly supported by the sustainable tax revenue brought about by the profitability ofprivate sectors in the long run, which is also the focus of the present study.

5are seen in those citizens who are influenced the most?
2) Does retrospective treatment in combination with deliberation, influence citizens’ financial
policy preferences? If the answer is yes, what psychological/behavioral characteristics are seenin citizens who are influenced the most?

The issue of governments’ financial sustainability in both national and local economies is
extremely challenging and therefore appropriate for testing the versatility and limitations of theretrospective treatment. In fact, considering the interdependency of the national and local economies,
as well as the interdependency of the financial systems of national and local governments throughthe former’s allocation of tax receipts to the latter, individuals required to express their policy
preferences at these two levels need to understand this hierarchy and form their own preferences sothat the preferences at these levels are internally consistent. It might even be that these individuals
will have to be aware of the possibility that sustainable policy options at the local level may work
against financial sustainability at the national level. These characteristics make the task of forming
individual policy preferences cognitively more demanding, and thus less competent individuals may
face greater difficulty in using retrospective treatment for forming preferences.
The structure of this paper is as follows. In section 2, the conceptual framework is developed
and hypotheses are derived. Section 3 describes the design details of the deliberative experiment.
The results of the statistical analyses of the data collected in the experiment, whose objective is totest the derived hypotheses, are shown in section 4. Section 5 is devoted to discussions.

2. Conceptual Framework and Hypotheses

Given the cognitively demanding nature of the issue adopted for study, it is likely that thosehighly disposed toward critical thinking (detailed below) and therefore accustomed to logicalthinking are better at using the experience of retrospective treatment in forming policy preferences.
6

Also, regarding preferences about sustainability, generativity (detailed below) is expected to play a
crucial role in preference formation. Below, we provide more detailed explanations on why thesetwo dispositions are chosen as relevant psychological/behavioral characteristics.
Our conceptual framework regarding the outcomes and effect of retrospective treatment issummarized in Figure 1, which posits that retrospective treatment (A) affects successful adoption of
the retrospective viewpoint in forming individuals’ policy preferences (D), and that this relationshipis moderated by a willingness to adopt a new perspective (B), as measured by critical thinking, and awillingness to attach meaning to one’s life in connection with future generations (C), as measured bygenerativity. Furthermore, although not depicted in Fig.1, it is also posited that the roles of (A) and(B) as moderators are affected by whether or not the retrospective treatment (A) is coupled withdeliberation among individuals.
This framework was established on the basis of three independent theoretical frameworks.
First, with regard to (B), Garrison (1991) clarified the act of thinking, which is considered to be aprocess that allows for a purposeful detachment from facts and a contemplation of ideas(connections between facts) and abstract concepts. He then added a critical nuance to this definitionof thinking. Although he himself did not give an explicit definition of the concept, Nakagawa (2015)
argued that critical thinking may be understood, according to Garrison (1991), as a form of
open-minded thinking that aims to gain insight into how to improve things, with a focus on criticism
and testing of the acquired insight. Thus, those strongly disposed toward critical thinking areexpected to be more successful in putting aside their a priori perspectives and to open mindedly
asses the applicability of the retrospective viewpoint in understanding the complex issue of financial
sustainability as described in section 1. In this sense, the relationship between (A) and (D) is
moderated by (B). To measure one’s predisposition toward critical thinking, our study adopts a scale
developed by Hirayama and Kusumi (2004) consisting of 13 items shown in Table 1 3.
(Figure 1 inserted about here.)3

The original items are in Japanese. They were translated into English by this study’s authors.

7Second, with regard to (C), generativity is a concept introduced by Erik Erikson (1950) andrefers to concern for establishing and guiding the next generation. After several decades McAdams
and de St. Aubin (1992) demonstrated that generativity is a configuration of six psychosocialfeatures constellated around the personal and cultural goal of providing for future generations (i.e.,
cultural demand, inner desire 4 , concern for the next generation, belief in the human species,
commitment 5, and action). Furthermore, they posited that the subjective meaning of these elements
for an individual is determined by the narrative he creates for himself about providing for the next
generation. This theoretical framework suggests an affinity between generativity and the adoption ofa retrospective viewpoint. In fact, those who have strong generativity are those who attach meaning
to their lives, which they place in the context of a long time period that includes the future. Thus,
they appreciate future generations as the audience of their life stories. Keeping in mind that theobjective of retrospective treatment is to “generate gratitude or indifference and minimize regrets
from the future” (Anderson et al. 2012, p.4), it is reasonable to assume that the relationship between(A) and (D) is moderated by (C). To measure generativity, the present study adopts the Generative
Behavior Checklist (McAdams and Aubin 1992) with 40 items and 10 filler items. This scale has
been confirmed to have moderate to high correlations with other measures of generativity(McAdams and de St. Aubin 1992, 1995; McAdams et al. 1993).
Finally, with regard to deliberation, as summarized by Smets and Isernia (2014), while there
is a theoretical framework positing that attitude change takes place throughout deliberations because
it makes people more aware of where they stand ideologically on a given issue, there is also a theory
called the deliberative model, which assumes that participants in deliberation processes are exposed
to various perspectives and are transformed to be “more tolerant toward other perspectives” (Smets
and Isenia 2014, p.394). According to this theory, the moderating effects of (B) and (C) arestrengthened when individuals are endowed with the opportunity to deliberate. In other words, given
45

The need to be needed.
Goals, and decisions to act.

8the opportunity, it is hypothesized that those with either high or moderate levels of (B) and (C) canbe influenced by retrospective treatment (A). On the basis of this conceptual framework, wehypothesize the following:

H1: When deliberation is not incorporated, retrospective treatment requires high critical thinking
abilities and generativity scores to influence individuals’ policy preferences.
H2: When deliberation is incorporated, retrospective treatment does not require so high criticalthinking abilities and generativity scores as it does in H1, to influence individuals’ policy
preferences

It should be noted that it was considered unfeasible to strictly test these two hypotheses in asingle study. To test these two hypotheses, we need to prepare both retrospective treatment andnon-retrospective treatment groups. Furthermore, if we aim to test H1 and H2 sequentially, we needto ask those in the retrospective treatment group to express their preferences from the standpoint of
the present generation for H1 (we call this task 1), to discuss in groups the options from thestandpoint of the future generation (we call this task 2), and finally to express preferences from thestandpoint of the present generation for H2 (we call this task 3). This sequence is problematic
because the experience of participating in task 1 from the standpoint of the present generation may
make it difficult to engage in tasks 2 and 3, which requires participants to deliberate or express
individual preferences from the standpoint of the future generation. Thus, in the present study, H1
was replaced with H1’, which is the necessary condition of H1.

H1’: When deliberation is not incorporated, the retrospective treatment, along with the request to
express policy preferences from the standpoint of future generations, requires high criticalthinking abilities and generativity scores to influence the expressed preferences.

Accordingly, hypothesis H2 was replaced with the following.
9

H2’: When deliberation is incorporated, retrospective treatment does not require so high criticalthinking abilities and generativity scores as it does in H1’, to influence individuals’ policy
preferences

3. Methods and Materials

The experiments were implemented in Kochi Prefecture, Japan, where local residents wereinvited to participate as subjects. As of 2018, Kochi prefecture has a population of 701,000, and canbe considered a typical Japanese prefecture, located far from major cities such as Tokyo, Osaka, andKyoto, and struggling with various socio-economic problems such as population decline (10%reduction in the last 10 years) and low regional economic growth. Its fiscal structure is weak;
approximately 60% of the prefecture government’s revenue is subsidized by Japan’s national
government, the second highest percentage in the country. It is thus likely that the prefecture would
be adversely affected if a fiscal crisis or financial weakening of Japan’s national government
occurred.

3.1. Experimental procedure
We adopt the procedure used in Nakagawa et al. (2018), as summarized in Figure 2.
Participants were randomly allocated to either retrospective or non-retrospective treatment groups.
Participants in both the retrospective and non-retrospective treatment groups (i) read thecase-method material (as detailed in the next subsection), (ii) make an initial choice of a mostfavorable option as individuals, (iii) deliberate in groups 6 on the most favorable option, and (iv)make their final choice of the most favorable option individually.
6

Participants in the retrospective treatment group were randomly allocated into groups of four to choose the mostfavorable option as groups throughout deliberations.

10However, there are several important differences in our procedures. First, prior to step (i),only those in the retrospective treatment group were charged with two different tasks: to read a
newspaper article published 30 years ago and to discuss in groups (of four participants each) therequests they would like to send to that past society. For details on the newspaper article, see
Appendix A2 of Nakagawa et al. (2018) 7. Second, in the retrospective treatment, participants wererequested to choose the most favorable option from the standpoint of the future generation living 30
years from today in steps (ii) and (iii), and from the standpoint of the people living now in step (iv).
In the non-retrospective treatment, all preferences were from the standpoint of people living now.
(Figure 2 inserted about here.)

3.2. The case method material
The material developed for the present study, as presented in Appendix A1 8, consists of twoparts. In the first half, a story of an imaginary Japanese family is described to show participants (i)the fiscal condition of the Japanese government 9, (ii) the fiscal condition of the Kochi prefectural
government, and (iii) how the revenue of a rural prefectural government such as Kochi’s is highly
dependent on subsidies from the national government. With regard to step (ii), to better understandthe risks and benefits of the status quo and of proactive policies, participants are given thecontrasting cases of Güssing City in Austria (known to be a substantially successful case of regional
revitalization, where, due to achieving self-sufficiency in energy, local tax revenue increased
threefold between 1990 and 2006 10 ) and Yubari City in Japan (a case where the municipal
government defaulted on its debt, in 2007).

7

This newspaper article was chosen to stimulate participants’ feelings of regret about decisions of the past society.
The core idea of the list of policy options was provided by the fourth author (M.N.). The case-method material was
created by the second author (R.A.) to be consistent with the list of options.
9Japan has more public debt than the other country in the world, and many people suggest that Japan must
immediately adopt a plan to attain fiscal sustainability. The IMF (2013) reports on the Japanese government’s severe
fiscal situation and suggests increasing the consumption tax rate to achieve fiscal sustainability. A number of studies
investigate a sustainable fiscal policy and its effects on the Japanese economy (e.g., Hansen and Imrohoroglu, 2016;
Imorohoroglu et al. 2017; Arai and Ueda, 2013).
10This information is based on the interview survey by the fourth (M.A.) and first (Y.N.) authors at the municipalityof Güssing in September 2009.
811

In the second half of the material, four policy options (i.e., two national-level and two
prefectural level fiscal policies) were presented as follows:

Option 1: Nationally less sustainable, locally less sustainable
The national government continues to subsidize prefectures to secure financial equality among
them 11, while Kochi Prefecture continues to subsidize the entire area to secure equal levels of public
service.
Option 2: Nationally more sustainable, locally less sustainable
The national government reduces subsidies to prefectures to avoid a national fiscal crisis 12, allowing
inequality, while Kochi Prefecture continues to subsidize the area to ensure equal, local public
service levels.
Option 3: Nationally less sustainable, locally more sustainable
The national government continues to subsidize prefectures to secure financial equality among them,while Kochi Prefecture subsidizes limited areas for revitalization, allowing inequality.
Option 4: Nationally more sustainable, locally more sustainable
The national government reduces subsidies to prefectures to avoid a fiscal crisis 13 , allowing
inequality, while Kochi Prefecture subsidizes limited areas for revitalization, allowing inequality.

Note that Option 1 is closest to the status quo. In Options 2 and 3, the national government
reduces subsidies to prefectures to attain financial sustainability for itself. In Options 3 and 4, Kochi
Prefecture concentrates its financial resources within the limited number of cities that are likely to
successfully revitalize, to attain financial sustainability. Although the hope is that Options 3 and 4
are sustainable, sustainability is not guaranteed because concentrating fiscal resources in fewer areas

11

As of 2018, in Japan, the national government subsidizes all prefectures except for the Tokyo metropolitan
government.
12
Cutting subsidies would be replaced by a large-scale transfer of tax revenue sources to the prefectures. This
would transfer the financial risks to the prefectures as well.
13
Cutting subsidies from the national government would be replaced by a large-scale transfer of tax revenue to theprefectures, thus transferring financial risks to them.

12may not lead to revitalization and would result in increased adversity for residents in areas that wereviewed as a lower priority by the municipality.

4. Results

Summary statistics are presented in Table 2. Approximately 50% of subjects are 40-59 years
old, while the percent of subjects younger than 40 and older than 60 are 30% and 20%, respectively.
Half of the subjects are female. Therefore, we believe the group of subjects is balanced with respect
to age and gender. Almost one-third of the subjects are married. Approximately 60% have apermanent job and half are university graduates.
(Table 2 inserted about here.)

Table 3 displays the distributions of the most favored policies as chosen by the subjects pertreatment for their initial and final choices. Both in the initial and final choice phases, significant
differences between the distributions of non-retrospective and retrospective treatment groups wereidentified (p = 0.010 and 0.000, respectively.) In contrast, no significant differences between the
distributions of the initial and final choice phases were identified, in both retrospective andnon-retrospective treatment. However, it should be noted that 32 of the 133 non-retrospective
treatment group participants (24.1%) changed their opinions in the final choice phase, and 85 of the
220 retrospective treatment group participants (38.6%) also did so, although these numbers are notshown in the table.
Two points should be noted regarding these results. First, the retrospective treatment had asignificant effect on the aggregate policy preferences of the participants, both at the initial and final
choice phases. This is consistent with Noblet, Anderson, and Teisl (2015) and Nakagawa et al.
(2018). However, upon further examination of the details, we note a small discrepancy with
Nakagawa et al. (2018). While they found that the retrospective treatment affected individuals’ forest
13

policy preferences only when the treatment was coupled with deliberation (i.e., at the final choicephase), the present study found that the retrospective treatment affected aggregate financial policy
preferences even when it was not coupled with deliberation (i.e., at the initial choice phase). It might
be that the general public, including our research participants, perceive the connection between
intergenerational equity or intergenerational sustainability and financial policy more strongly thanwith regard to forestry policy, and that the retrospective treatment alone was sufficient for someparticipants to change their financial policy preferences.
Second, contrary to Nakagawa et al. (2018), in both the retrospective and non-retrospective
treatment groups, deliberation did not influence participants’ aggregate policy preferences. Taken
together with the first point, retrospective treatment seems to have a larger potential to shift
individuals’ aggregate policy preferences than deliberation, at least with respect to the issue
addressed in this study. Smets and Isernia (2014) observed that whether individuals’ policy
preferences are changed by deliberation depends on the policy issue to be deliberated, and it might
be that financial sustainability is an example of an issue where deliberations are less likely tofacilitate preference changes, although this cannot be determined by the present study.
(Table 3 inserted about here.)

To test the hypotheses presented in section 2, we ran logistic regressions. Table 4 summarizes
the logistic regression analysis, where the dependent variable is set based on each individual’s
preference for a locally less sustainable option (Option 1 or 2), y = 0, or a locally more sustainableoption (Option 3 or 4), y = 1.
Considering the moderate level of correlation between generativity and critical thinking
disposition (r = 0.296; p < 0.01), these two variables were not independently included in the model.
Instead, the entire sample was divided into three subgroups, and corresponding dummy variables
were defined. The numbers of participants in the three subgroups were 90, 147, and 116,

14

respectively 14.

Subgroup 1: (Generativity score < Median) & (Critical thinking disposition score < Median)
Subgroup 2: Either (Generativity score ≥ Median) or (Critical thinking disposition score ≥Median)Subgroup 3: (Generativity score ≥ Median) & (Critical thinking disposition score ≥ Median)
The analysis reveals that in the initial choice phase (the choice before deliberation), theinteraction of retrospective treatment 15 with “being in subgroup 2” and “being in subgroup 3” were
the only significant predictors (p < 0.10 and p < 0.01, respectively). The odds ratios of thesevariables were 2.57 and 6.06, roughly suggesting that compared with those in the non-retrospective
treatment group, those in the retrospective treatment subgroups 2 and 3 were 2.57 and 6.06 times
more likely to choose a sustainable option, respectively. In contrast, those in the retrospective
treatment subgroup 1 did not differ with respect to the likelihood of choosing a sustainable option
compared with those in the non-retrospective treatment group.
In the final choice phase (choice after the deliberation), the analysis again revealed that theinteractions of the retrospective treatment with “being in subgroup 2” and “being in subgroup 3”
were significant predictors (p < 0.01 and p < 0.01, respectively). The odds ratios of these variables
were 4.02 and 6.07, respectively.
By carefully comparing the results for the initial and final choice phases, the roles ofgenerativity, critical thinking disposition, and deliberation in the retrospective treatment becomes
evident. First, for those high in both critical thinking and generativity, belonging to the retrospective
treatment group enhances the likelihood of choosing sustainable options by 6.06 times (before
deliberation) and 6.07 times (after deliberation). For these people, the retrospective treatment alone
has a great effect, and deliberation does not enhance the effect any further. Second, for those high in
14

Subgroup 2 could have been further divided into two groups, but this strategy was not adopted, taking into accountthe relatively small sample size (i.e., n = 353).
15
This dummy variable took a value of 1 when an individual was allocated to the retrospective treatment group, and0 otherwise.

15

either critical thinking or generativity, belonging to the retrospective treatment group enhances thelikelihood of choosing sustainable options by 2.57 times (before deliberation) and 4.02 times (after
deliberation). This suggests that the retrospective treatment alone has a moderate effect on policy
preferences, but the effect is magnified and statistically more significant (from p < 0.10 to p < 0.01)
if the treatment is accompanied by deliberation. Finally, for those low in both critical thinking andgenerativity, the retrospective treatment had no effect, regardless of whether it was accompanied bydeliberation. To summarize, critical thinking and generativity represent the abilities to accept
retrospective treatment in forming policy preferences, and deliberation can compensate for theseabilities, as long as the critical thinking and/or generativity abilities are not too low. This discussion
validates the two hypotheses H1’ and H2’ presented in section 2.
With regard to sociodemographic variables, at both the initial and final choice phases, marital
status was consistently a significantly negative predictor of choosing sustainable options (p < 0.10
and p < 0.01, respectively). Considering the moderate level of negative correlation between marital
status and age (r = -0.458, p < 0.01), the results suggest younger individuals tend to choosesustainable options, which is consistent with earlier studies that found older people express increased
support for welfare policies (e.g., Blekesaune and Quadagno, 2003; Blekesaune 2007; Peterson et al.
2010), assuming financial sustainability and welfare for the aging in society are incompatible.
Furthermore, considering the risks of failure inherent in the (hopefully) sustainable options 3 and 4,
our result seems consistent with the studies in corporate finance that found older CEOs are lesslikely to adopt risk-taking behaviors (e.g., Chen & Zheng, 2014; Serfling, 2013).
(Table 4 inserted about here.)

Table 5 summarizes the logistic regression analysis results where the dependent variable, y, isdetermined based on whether individuals preferred a nationally less sustainable option (Option 1 or
3), y = 0, or a nationally more sustainable option (Option 2 or 4), y = 1.
Unlike the case at the prefectural level shown in Table 4, the retrospective treatment was
found to have no significant effects on individuals’ policy preferences, both at the initial and the final
16

choice phases, regardless of the scale scores of generativity and critical thinking abilities. The
possible reasons for this result will be discussed later.
Regarding the sociodemographic variables, at the initial choice phase there were no
significant predictors. At the final choice phase, being aged 60 or older was the only significant
predictor (p < 0.10). Its odds ratio is less than 1.0 (i.e., 0.45) suggesting those aged 60 or older areless likely to choose sustainable options than those aged 39 or younger. Again, this result is
consistent with earlier studies that found older people expressed more support for welfare policies(e.g., Blekesaune and Quadagno, 2003; Blekesaune 2007; Peterson et al. 2010).
(Table 5 inserted about here.)

5. Discussion
This study conducted a deliberative experiment on the national and prefectural financial
policy issue in Japan, to investigate whether retrospective treatment influences the formation ofindividuals’ sustainable policy preferences. Special attention was paid to understanding therelationship among the roles of the treatment itself, psychological/behavioral characteristics, anddeliberation. Regarding policy preferences at the prefectural level, as the theories predicted, criticalthinking and generativity were found to facilitate individuals’ acceptance of the retrospective
treatment and led them to prefer sustainable options, where deliberation was found to compensate
for somewhat lower critical thinking abilities and/or generativity, unless these are simply too low.
This suggests that retrospective treatment can be effective even if applied to a more cognitively
demanding policy issue than the one dealt with by the previous study (Nakagawa et al. 2018).
In contrast, at the national level, the retrospective treatment had no effect, regardless of thelevels of the two dispositions. This result could be understood with reference to the well-known
theory proposed by Mancur Olson (1965), who posited that due to the free-rider problem, individuals
tend to contribute lower levels of action (e.g., money, effort, time) the larger the group to which
belong to (Esteban & Ray, 2001). It might be that at the smaller scale (i.e., at the prefectural level),17

individuals are more motivated to contribute to the sustainability of their government at their own
expense than at the larger scale (e.g., at the national level). This shows the limitation of ourretrospective treatment. It would be useful to update the retrospective treatment so that individuals
can be sympathetic to future generations in geographic areas to which they are not directly linked.
With this said, it remains surprising that the retrospective treatment had such a significant
impact on individuals in forming sustainable financial policy preferences at the prefectural level 16, inspite of the inherent potential financial threat. Although it is beyond the scope of this study toprovide a complete analysis on the basis of the empirical data, one possibility might be found in thereference to the literature on sustainable communities, i.e., “communities who promote or seek topromote sustainability in sectors such as water, food, transport, waste and energy” (Rae and Bradley,2012; p.6499), including Güssing in Austria. It is conceivable that those who successfully adopted
the retrospective viewpoint chose sustainable options, in spite of the obvious potential financial
threat, with the expectation that the decision would be appreciated by future generations forproviding them with the opportunity to enjoy community ownership, not only in the narrow sense oflegal ownership of the projects that promote sustainability, but also in its broader, more subjective
meaning of the “sense of ownership” (Warren and McFadyen, 2010; Rae and Bradley, 2012;
Bolinger, 2001). In other words, while the status quo options may well cause inaction regret 17, thehopefully sustainable options, with risk of failure, may well cause action regret in the future. The
sense of autonomy and the sense of community ownership might be a reward available only to those
who intentionally accept the possibility of action regret.

This study has important implications for the practice of stakeholder workshops such as
scenario development, where the difficulty and importance of participants’ disengagement from thepresent has been recognized in the previous literature (Vergragt and Quist 2011). Considering the16

Remember Table 3, which says that while only 13.5% of the non-retrospective treatment group participantspreferred sustainable options at the final choice phase, the percentage was as high as 36.3% in the retrospective
treatment group.
17
Action (inaction) regret refers to the emotion experienced when people look back on bad decisions to act (not toact) (e.g. Bonnefon & Zhang, 2008; Zeelenberg et al., 2000).

18

ability of those with stronger generativity and critical thinking dispositions to acquire the perspectiveof future generations (and thus to disengage from the present perspective), as well as thedeliberation’s function of providing people with the opportunity to be exposed to perspectives
different from the ones they originally possessed, it would be meaningful to organize deliberationgroups in such a way that the groups are inhomogeneous with respect to these dispositions, thereby
taking the full advantage of deliberations.
Finally, the present study has an important limitation. For a practical reason, we took theapproach of testing H1’, rather than directly testing H1. In the future it would be useful to test thelatter. In other words, it is important to test whether the retrospective treatment itself (not combinedwith deliberation) has an effect on individuals’ policy preferences, in a more general situation than
one in which they are requested to express preferences from the standpoint of the future generation.

Acknowledgment
We are grateful to the financial supports from the Japan Society for the Promotion of Science as the
Grant-in-Aid for Scientific Research A (24243028 and 17H00980), the Grant-in-Aid for Scientific
Research B (16H03621), Grant-in-Aid for Challenging Exploratory Research (16K13354 and
16K13362), Research Institute for Humanity and Nature (Project Number 40410000) and Kochi
University of Technology

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24

Table 1: Critical thinking disposition scale items (Hirayama and Kusumi, 2004)
No

Item

1

I am good at thinking about complex problems in an orderly fashion.

2

I am good at collecting my thoughts.

3

I am confident in thinking about things precisely.

4

I am good at making persuasive arguments.

5

I am confused when thinking about complex problems*6

I am the one to make decisions because my peers believe I can make fair judgments.

7

I can concentrate on grappling with problems.

8

I can continue working on a difficult problem which is not straight forward.

9

I can think about things coherently.

10 My shortcoming is that I am easily distracted*
11 When I think about a solution. I cannot afford to think about other alternatives*
12 I can inquire into things carefully.
13 I am constructive in proposing alternatives.
Note. *: Reverse item. Items were rated from
1 = ‘‘Strongly disagree’’ to 5 = ‘‘Strongly agree.’’ The theoretical range is 13–65.

25

Table 2: Sample Characteristics

Age
≦39
40-59
≧60
GenderMale
FemaleMarital Status
Yes
No
Employment Status
Permanent Job
Other
Education
Univ. Graduate or above
Other
Generativiy Scale
Critical Thinking Disposition ScaleGroup Allocation
Treatment Group
Control Group

n

%

103
173
77

29.2
49.0
21.8

178
175

50.4
49.6

117
236

33.1
66.9

202
151

57.2
42.8

166
187

47.0
53.0

220
133

26

62.3
37.7

M

SD

24.9
40.7

11.3
7.2

Table 3: Participants’ favorite options
Non-retrospective treatment
Option1

2

3

p value1

Retrospecitve treatment

4

Total

1

2

3

4

Total

Initial Choice
n

90

27

14

2

133

118

43

51

8

220

%

67.7

20.3

10.5

1.5

100.0

53.6

19.5

23.2

3.6

100.0

84

31

16

2

133

102

38

70

10

220

63.2

23.3

12.0

1.5

100.0

46.4

17.3

31.8

4.5

100.0

0.010

Final Choicen%p value

2

0.197

0.616

Notes.
Option 1 = Less sustainable at the national level and less sustainable at the prefectural level(≒Maintenance of Status Quo)
Option 2 = More sustainable at the national level and less sustainable at the prefectural level
Option 3 = Less sustainable at the national level and more sustainable at the prefectural level
Option 4 = More sustainable at the national level and more sustainable at the prefectural level
1: Chi square test of independence between frequency distributions of control and treatment groups.
2: Chi square test of independence between frequency distributions of initial and final choices.

27

0.000

Table 4: Logistic regression analysis result on policy preference at the prefectural level (n = 353)
Option 1 or 2 (y = 0) vs. Option 3 or 4 (y = 1)1
Preference Before the Discussion
Independent VariableAge≦39 (Ref.)
1)
40-59
≧60
2)
Gender3)
Male
Female (Ref.)
Marital Status
4)
Yes
No (Ref.)
Employment Status
5)
Permanent Job
Other (Ref.)
Education
6)
Univ. Graduate or above
Other (Ref.)
Generativigy and Critical Thinking
7)(Gen. = Low) & (C.T. = Low) (Ref.)
8)
Either (Gen. = High) or (C.T. = High)
9)(Gen. = High) & (C.T. = High)
10) Retrospective Treatment ×7)11) Retrospective Treatment ×8)12) Retrospective Treatment ×9)

s.e.

OR

95% CI

1.02 0.51 — 2.01
0.86 0.36 — 2.10

-0.10
0.32
-0.79 † 0.43

0.91
0.45

0.49 — 1.69
0.20 — 1.05

0.28

0.88 0.51 — 1.51

0.25

0.26

1.28

0.77 — 2.11

-0.23

0.32

0.80 0.42 — 1.51

-0.35

0.30

0.70

0.39 — 1.27

0.46

0.30

1.58 0.88 — 2.84

0.29

0.27

1.34

0.79 — 2.28

0.28

0.27

1.32 0.77 — 2.27

0.13

0.25

1.14

0.69 — 1.88

0.76
0.41
1.12
2.57
6.06

-0.80
0.63
-0.97
0.63
0.65
0.50
1.39 ** 0.53
1.80 ** 0.54

0.45
0.38
1.91
4.02
6.07

0.13 — 1.53
0.11 — 1.30
0.71 — 5.12
1.43 — 11.28
2.10 — 17.52

Coeff.

s.e.

OR

0.02
-0.15

0.35
0.45

-0.13

-0.28
0.63
-0.90
0.69
0.11
0.58
0.94 † 0.50
1.80 ** 0.59

95% CI

Preference After the Discussion

0.22 — 2.61
0.10 — 1.58
0.36 — 3.50
0.96 — 6.87
1.92 — 19.15

Notes. 1: Options 3 and 4 are sustainable at the prefectural level. †: p <0.10. *: p <0.05. **: p <0.01.

28

Coeff.

Table 5: Logistic regression analysis result on policy preference at the national level (n = 353)
Option 1 or 3 (y = 0) vs. Option 2 or 4 (y = 1)1
Preference Before the Discussion
Independent VariableAge≦39 (Ref.)
1)
40-59
≧60
2)
Gender3)
Male
Female (Ref.)
Marital Status
Yes
4)
No (Ref.)
Employment Status
5)
Permanent Job
Other (Ref.)
Education
6)
Univ. Graduate or above
Other (Ref.)
Generativigy and Critical Thinking
7)(Gen. = Low) & (C.T. = Low) (Ref.)
8)
Either (Gen. = High) or (C.T. = High)
9)(Gen. = High) & (C.T. = High)
10) Retrospective Treatment ×7)11) Retrospective Treatment ×8)12) Retrospective Treatment ×9)

Preference After the Discussion

Coeff.

s.e.

OR

95% CI

Coeff.

s.e.

OR

95% CI

-0.41
0.36

0.34
0.41

0.67
1.44

0.34 — 1.30
0.65 — 3.18

-0.43
-0.45

0.33
0.42

0.65
0.64

0.34 — 1.25
0.28 — 1.45

0.35

0.27

1.42

0.84 — 2.39

-0.04

0.26

0.96

0.58 — 1.62

-0.54 † 0.32

0.58

0.31 — 1.10

-0.71 * 0.33

0.49

0.26 — 0.94

0.43

0.29

1.54

0.87 — 2.73

-0.13

0.28

0.88

0.51 — 1.52

0.03

0.26

1.03

0.61 — 1.73

0.21

0.26

1.24

0.74 — 2.06

0.22
0.41
0.47
0.01
0.04

0.56
0.55
0.54
0.45
0.45

1.25
1.50
1.59
1.01
1.04

0.42 — 3.77
0.51 — 4.40
0.55 — 4.58
0.42 — 2.43
0.43 — 2.50

0.35
0.61
0.08
-0.16
-0.43

0.55
0.53
0.55
0.43
0.43

1.42
1.85
1.08
0.85
0.65

0.48 — 4.15
0.65 — 5.22
0.37 — 3.15
0.36 — 1.99
0.28 — 1.52

Notes. 1: Options 2 and 4 are sustainable ones at the national level. †: p <0.10. *: p <0.05. **: p <0.01.

29

Figure 1: Conceptual framework on the realization of the effect of retrospective treatment.

(A) Retrospective
treatment(B) Willingness to adopt
a new perspective(Critical thinking
disposition)(C) Willingness to attacha meaning to one’s life
in connection with
future generations(Generativity)(D) Successful adoptionof the retrospective
viewpoint in forming
policy preferences

LegendP
PR

Q : P causes Q

Q : R moderates the association between P and Q

30

Figure 2: Experimental procedure.

Retrospective Treatment

Non-retrospective
TreatmentIntergenerational Retrospective Treatment

Reading an article from a newspaper
published 30 years ago
Group discussion about possible
request to the society 30 years ago
Reading the case-method material

Reading the case-method material
Initial Choice

Individually choosing the mostfavorable option from a standpoint of
the people living today

Individually choosing the mostfavorable option from a standpoint of
the people living 30 years from today

Group discussion on the mostfavorable option from a standpoint of
the people living today

Group discussion on the mostfavorable option from a standpoint of
the people living 30 years from today
Final Choice

Individually choosing the mostfavorable option from a standpoint of
the people living today

Individually choosing the mostfavorable option from a standpoint of
the people living today31Appendix A.

A1. A case of financial sustainability problems
A.1.1. A narrative accountBeneath a beautiful sunset, third-grade middle school student Yuma walked home feelingdejected in spite of the sky. He felt dejected because, even though the music instruments for theschool brass band club were getting old and there were not enough of them, it had been decided thatthe club would not buy any more. Despite pestering the club’s staff advisor about it, the response had
been unsympathetic.

Staff advisor: All the same, the school didn’t have the budget for it to begin with, and the budget
has been cut recently… I’m really sorry.

The club has to avoid being unable to enter competitions due to a lack of instruments. The
club’s members thus came up with various ideas, such as raising money from classmates and local
people, but there was also opposition, which included the view that there was no reason for people to
pay and questioning who will collect the money. Today’s club activity adjourned without thediscussion reaching any resolution. Even after going home and having dinner with his family, theexpression on Yuma’s face was still downcast. His father, Shigeo, worried about the taciturn Yuma,
spoke to him.

Shigeo: Yuma, what’s the matter? You’ve been looking sad ever since you got home. Has something
happened?

Yuma: Dad, um… at the club today… they said they can’t replace our instruments because theschool doesn’t have the budget. Everyone in the club talked about it, but there wasn’t any
resolution…
32

So far, Yuma has been directing an unfocused resentment at the school budget, wondering
why the school has so little money. Speaking of this, a teacher said in a recent civics class, “TheJapanese government has more than ¥800 trillion debt, and social security expenses, such aspensions and healthcare, are continuing to increase. People may somehow be able to live well now.
But if the government cuts spending and increases taxes, the people born in the future will face anunimaginable burden to pay the bill.” Did continual spending of the government budget and personal
debts in the past lead to the current lack of budget for the brass band club? Yuma vented his
discontent to his father.

Shigeo: I see. There certainly is talk that Japan is up to its neck in debt at the moment. On the other
hand, there also seems to be an approach attempting to improve the nation’s financial position
through the promotion of decentralization by the national government, so that local matters will bedecided locally.

Taking the time to listen, Yuma gradually understood. At the moment, the national
government gives local governments many subsidies. Kochi Prefecture is no exception, andapproximately 60% of the prefecture’s budget is made up of subsidies, which it also uses for daily
expenses, such as personnel expenses and infrastructure repairs (Figure A1). In exchange for cuttingthese subsidies, the national government will transfer tax revenue sources to local governments, sothat they will pay for their own future expenditure with their own taxes. However, feeling that he did
not understand completely, Yuma kept asking questions.

33

Expenditure

Revenue
Disaster restoration

Shares and charges
Property income

Transfers

Investment
expenditure

Miscellaneous

Rents and fees
and charges

Generalcontributions

Transfer of local
consumption tax

External
revenuesourcesInternal
revenuesources
Prefectural
tax

Current
expenditure

Ordinary
construction
works

Personnel
expenses

Other
Local allocation tax +extraordinary
fiscal countermeasures
bonds

Other

Bond issues

Treasury
disbursements

Prefectural
bonds

Special grants tolocal governments

Local transferred tax
Special grants tocountermeasures
for traffic safety

Socialassistance

Grantsandsubsidies

Loans

Figure A1: The revenue and expenditure of Kochi Prefecture in 2017 18

Yuma: But if they do that, won’t the national government’s finances get worse because the taxes forthe national government will decrease?

Shigeo: That may certainly be the case at the moment. But it may change in the future. For example,
take Kochi Prefecture. The population will probably fall from what it is now in the future. Then
prefectural taxes will decline. But because they won’t necessarily make the roads shorter andgradually reduce the size of the schools to match the population, expenditure won’t fall by that much.
The only choice will be to further increase the subsidies from the national government. But if tax
revenue sources are transferred to local governments, the national government will no longer pay
that portion. It’s a case of transferring tax revenue sources to localities beforehand and then saying
later that you made an effort.
Well, that’s true. Viewed from a long-term perspective, it is likely to help the national
government’s finances. But which is better? If there are subsidies from the national government, theprefecture will get by somehow, even as the declining birthrate and aging of the population continues.
But the national government’s future finances are unreliable, and it will be the end if the national

18

Source: http://www.pref.kochi.lg.jp/soshiki/110401/files/2008123100544/file_20174241142754_1.pdf

34

government can no longer give out subsidies. Having said that, even if Kochi Prefecture does receive
tax revenue sources to control from the national government, will it be able to cope with the decline
in both the population and prefectural taxes without subsidies from the national government? Seeing
Yuma’s anxious expression, his father Shigeo showed him an article on the tablet as if he werereading his son’s mind. It was about the town of Güssing in Austria. A small municipality with apopulation of approximately 4,000 people, Güssing was apparently called the “poorest region inAustria.” Yuma read the article feeling anxious that municipalities in Kochi Prefecture might end up
like that. However, the article was about how Güssing had promoted private-sector-led heating andpower generation businesses using wood biomass with aid from the state, national government, andEU, successfully transforming itself into a wealthy municipality. More than 1,000 people had been
employed in new jobs, and tax revenue was more than double the previous level. This was because
Güssing was now able to generate a large amount of funds from outside the municipality with its
biomass business.

Yuma: Güssing became a wealthy municipality with a lot of tax revenue by being able to earnmoney from external sources. If we can do business like this ourselves, we’ll be able to manage even
without subsidies.

Shigeo: That’s right. But there are a lot of difficulties involved in actually trying to promote thiskind of business.

It seems his father had heard talk about Güssing from acquaintances. Apparently, it was the
EU rather than the local state or national government that initially worked for cooperation. At first,
despite attempts to enlist local support, it seems that people throughout the electricity and gas
industry, water companies, and smokestack industries were opposed, and politicians were notenthusiastic either. The reason the EU embarked on assistance was apparently the concern that, witha high rate of dependence on energy from outside the region, external energy supplies might cease in35the future.

Shigeo: But… if I were a business person in Güssing, I think I would probably have opposed it too.
Imagine if your work is gone, and you or your family lose your livelihood… In the first place, I
would worry about using Kochi Prefecture’s budget for a project when we don’t know if it will workor not. Unlike Güssing, if the project fails, the taxes won’t come back, and we might be left withnothing but abandoned buildings.

Yuma was surprised to see his normally quiet father speaking with such unusual passion. His
father’s impassioned remarks continued.

Shigeo: Even if the project goes well in one area, it might widen inter-regional disparities between
rich and poor. If Kochi Prefecture has the budget, shouldn’t it try to help many regions even if only alittle and protect the livelihoods of as many people as possible? I couldn’t stand it if my town wasabandoned and deserted.

Saying this, Shigeo started searching the internet for an article about Yubari. A succession ofarticles was displayed about the Yubari of the past, nostalgic for the days when it was full of coalmines, and articles reporting the decline of Yubari after the disappearance of its budget, which led tobankruptcy (Table A1). Apparently, after the bankruptcy in Yubari, most of the schools were closed
and the number of public servants was reduced by 60%. Many young people left Yubari, while only
the elderly remained. Yuma had the desolate feeling that he too might want to leave, even if it was
his hometown.

36

Table A1: Changes in Yubari City over a Ten-Year Period
ItemPre-bankrupcy

Current

Population based on basic
resident register

13,268 (March 2006)

9,025 (March 2016)

Aging rate

40% (fiscal 2005)

49% (fiscal 2015)

Balance of debt

¥35.3 billion (fiscal 2006)¥25.9 billion (fiscal 2015)

No. of city employees

263 (March 2006)

97 (March 2016)

No. of assembly members

18 (fiscal 2006)

9 (fiscal 2015)

Monthly salary of mayor¥862,000 (fiscal 2006)¥259,000 (fiscal 2015)

Monthly remuneration ofassembly members¥301,000 (fiscal 2006)¥180,000 (fiscal 2015)

No. of elementary schools

7 (fiscal 2006)

1 (fiscal 2015)

No. of middle schools

4 (fiscal 2006)

1 (fiscal 2015)

No. of elementary school
students

414 (fiscal 2006)

220 (fiscal 2015)

No. of middle school students

242 (fiscal 2006)

119 (fiscal 2015)

No. of shops

234 (2004)

114 (2012)

No. of tourists

1,469,000 (2005)

597,000 (2014)(Source: Report of the Review Committee on Yubari City’s Regeneration Policy. Translated by theauthor.)Widening disparities could also mean that there will be more and more such municipalities.
Güssing was successful, so it can be discussed in glowing terms, but there are also probably many
regions where similar attempts failed, and earning money is essentially difficult. Ultimately, should
the national government subsidize local government or should the local government be independent?
Yuma suddenly remembered the school’s brass band club. His own club might be the same as aregion where subsidies have been cut. Up until now, the club had somehow been receiving subsidies
from the school, but the school budget itself is insufficient, and the club does not know if it will be37able to continue receiving subsidies in the future. In the first place, the school budget is for everyonein the school, and not just for the use of the brass band club. In this situation, should they attempt tocontinue the brass band club’s activities by seeking subsidies from the school or should they act toobtain funds from outside and organize the instruments themselves? They will have to choose either
way. Doing it themselves sounds cool, but, in fact, it could mean getting into disputes like at today’s
club activities. If they do allocate club expenses only to their own club activities, they might raise
donations if their activities become famous enough nationally as a result, but would the children inother clubs allow that? Yuma sighed deeply while imagining the school and brass band club of the
future.

A.1.1 2. Addressing the Issues Surrounding the Positions of National and Local Governments
From the parent-child conversation in the previous section, what kind of position isconceivable for Japan’s national government and Kochi Prefecture in the future? Japan’s government
has a lot of debt, even from a global perspective. Additionally, social security expenses (pension
benefits, healthcare benefits, and nursing care benefits) are expected to increase sharply in the future.
If Japan faces a major disaster, such as a Nankai earthquake or a recession, the national government
will plunge into a fiscal crisis and the risk of no longer being able to afford the budget, including
subsidies to local governments, will increase. In these circumstances, Kochi Prefecture’s finances
have become heavily dependent on subsidies from the central government. Given this fact, thefollowing two issues for the future of Japan and Kochi Prefecture are likely to arise:Issue 1: How much should the national government remove subsidies to prefectures and promote thetransfer of tax revenue sources to prefectures to reduce Japan’s national government debt over thelong term? The more the central government cuts subsidies and transfers tax revenue sources, themore people who live in prefectures that have relied on subsidies, like Kochi Prefecture, will endure
a steady decline in public services as the population declines. The national government will use thesubsidies that have been cut to reduce Japan’s national debt. This could lead to the national38

government abandoning prefectures in regions where there is a heavy dependence on subsidies fromthe national government.

Issue 2: How much should Kochi Prefecture concentrate its budget on regions with projects that
could earn money from outside the prefecture for Kochi Prefecture to be independent in the longterm? The more Kochi Prefecture concentrates its budget on regions with projects that can earn
income from outside the region, the more people who live in other regions within the prefecture will
endure a steady decline in public services. Meanwhile, if projects are successful, regions where thebudget was invested will be revitalized, but if the projects fail, these regions will decline. This could
lead to Kochi Prefecture abandoning regions that did not establish projects that can earn external
income and regions in the prefecture where the establishment of projects failed.

Ultimately, both issues are focused on how much individuals can endure a decline in public
services.

A1.1.3. What actions should society take in 2017?
Based on the content so far, the four options in Table A2 are conceivable as positions that
could be taken by Japan’s national government and Kochi Prefecture. Which option is preferable foryou, a Japanese citizen living in Kochi Prefecture?

39

Table A2: Overview of the four options
Issu e 2:
To what extent will the prefecture abandon its internal regions for thesake of the independence of Kochi Prefecture?

Issu e 1:
To what extent will
the national
government abandon
regional prefectures tomaintain national
public services?

(Fin an cially lesssu stain able)
Maintaining national
public services isimportant, but thenational government
should not abandon
regional prefectures.
(Fin an cially moresu stain able)
To avoid the cessationof national public
services, there is no
choice but to abandon
regional prefectures.

(Fin an cially less su stain able)
Prefectural independence isimportant, but it should notabandon many regions.

(Fin an cially more su stain able)
There is no choice but to abandon
many regions for the sake ofprefectural independence.

Option 1

Option 3“Equality-oriented Kochi takes asmall gamble, relying on thenational government.”“Practical Kochi takes a big gamble,
relying on the national
government.”

Option 2

Option 4“Persevering Kochi takes a small
gamble, without relying on thenational government.”“Self-reliant Kochi takes a big
gamble, without relying on thenational government.”

Option 1 (Equality-oriented Kochi takes a small gamble, relying on the national government.)
While gradually transferring tax revenue sources to prefectures, the national government will
provide insurance to partially compensate for a lack of prefectural funds with subsidies from thenational government so that equality between prefectures can be ensured. The possibility of avoiding
a fiscal crisis for the national government can be increased somewhat, and the expansion of
economic disparities between prefectures can be reduced a little, even with the declining birthrate
and aging population in the future. Under this scenario, Kochi Prefecture will invest approximately
10% of its available budget in regions with projects likely to earn external income before thenational government’s fiscal position reaches a crisis and subsidies from the national government
are reduced. The prefecture can allocate a budget on a scale befitting a key policy to promisingregions, but it does not know whether projects will succeed. Moreover, some regions in the prefecture
will be left without a budget, causing serious adverse impact.

Option 2 (Persevering Kochi takes a small gamble, without relying on the national40

government.)
While implementing a large-scale transfer of tax revenue sources to prefectures, the national
government will practically eliminate all its subsidies to prefectures. Although the possibility of
being able to avoid a fiscal crisis for the national government can be increased, economic
disparities between prefectures are likely to increase as the decline in the birthrate and aging of the
population advance. Under this scenario, Kochi Prefecture will invest around 10% of its available
budget in regions with projects likely to earn external income, before the decline in the birthrate andaging of the population advance and prefectural tax revenue declines significantly. The prefecture
can allocate a budget on a scale that corresponds to a key policy to promising regions, but it does
not know whether projects will succeed. Moreover, some regions in the prefecture will be left without
a budget, giving rise to a serious impact.

Option 3 (Practical Kochi takes a big gamble, relying on the national government.)
While gradually transferring tax revenue sources to prefectures, the national government will
provide insurance to partially compensate for a lack of prefectural funds with subsidies from thenational government, so that equality between prefectures can be ensured. The possibility of
avoiding a fiscal crisis for the national government can be increased somewhat, and the expansionof economic disparities between prefectures can be reduced a little, even when the declining
birthrate and aging population advance in the future. Under this scenario, Kochi Prefecture will
invest around 30% of its available budget in regions with projects likely to earn external income
before the national government’s fiscal position reaches a crisis and subsidies from the national
government are reduced. The prefecture can allocate a budget on an unprecedented scale topromising regions, but it does not know whether projects will succeed. Moreover, many regions in
the prefecture will be left without a budget, giving rise to a serious impact.

Option 4 (Self-reliant Kochi takes a big gamble, without relying on the national government.)
While implementing a large-scale transfer of tax revenue sources to prefectures, the national41

government will essentially phase out all its subsidies to prefectures. Although the possibility of
being able to avoid a fiscal crisis for the national government can be increased, economic
disparities between prefectures are likely to increase, as the decline in the birthrate and aging of the
population advance. Under this scenario, Kochi Prefecture will invest around 30% of its available
budget in regions with projects likely to earn external income before the decline in the birthrate andaging of the population advance and prefectural tax revenue declines significantly. The prefecture
can allocate a larger budget to promising regions, but it does not know whether projects will succeed.
Moreover, most regions in the prefecture will be left without a budget, giving rise to serious
repercussions.

Several things should be noted regarding the above mentioned four options. First, regarding
Option 1, when gradually transferring tax revenue sources from the national government toprefectures, prefectural tax revenue will not decline immediately, but is expected to fall
approximately 15% by 2040 and Kochi Prefecture will have contributed that amount to increasing
the national fiscal soundness. Additionally, if Kochi Prefecture invests 10% of its budget inpromising regions, this is tantamount to a 10% decrease in the budget from the perspective of otherregions. Based on the above, in the future, from the perspective of the abandoned regions within
Kochi Prefecture, the prefectural budget will be (1 - 0.15) * (1 - 0.1) = 0.765, which will be adecrease of approximately 23% from the current budget. The impact will be the following examples,
which will occur simultaneously in the regions that have been abandoned in Kochi Prefecture. 19(The simulations listed below will not definitely occur in the real economy. You should consider
them as examples of the policies required to remedy a budget shortfall. Obviously, there are ways of
remedying a budget shortfall through other means, and the policies required will change according todifferent economic environments.)
19

The population of Kochi Prefecture is forecast to decline by 30% by 2040 due to the declining birthrate and aging
population. There is a strong mutual relationship between population, the size of the economy, and tax revenue.
Therefore, tax revenue is expected to decline in the same way as the population. However, because half of the budget
shortfall will be provided through national government subsidies, we anticipate that the decline in tax revenue will be
15%.

42



The repair of 23 out of 100 damaged sections of prefectural road will be carried forward to thenext fiscal year.



If there are 10 public high schools, two or three of them will be closed and consolidated.

The 209 full-time doctors at Kochi Prefecture’s health centers will be reduced by 48.

The number of wooden houses that can receive assistance for earthquake-reinforcement work
per year will decline by 23%.
Second, regarding Option 2, when eliminating subsidies in exchange for the transfer of tax

revenue sources from the national government to prefectures, prefectural tax revenue will not decline
immediately, but is expected to fall by about 30% by 2040 and Kochi Prefecture will havecontributed that amount to increasing the national fiscal soundness. Additionally, if Kochi Prefecture
invests 10% of its budget in promising regions, this is tantamount to a 10% decrease in the budget
from the perspective of other regions. Based on the above, in the future, from the perspective of theabandoned regions within Kochi Prefecture, the prefectural budget will be (1 - 0.3) * (1 - 0.1) = 0.63,
which will be a decrease of approximately 37% from the current budget. This will result in thefollowing examples occurring simultaneously in the regions that have been abandoned in Kochi
Prefecture:

The repair of 37 out of 100 damaged sections of prefectural road will be carried forward to thenext fiscal year.



If there are 10 public high schools, three or four of them will be closed and consolidated.

The 209 full-time doctors at Kochi Prefecture’s health centers will be reduced by 77.

The number of wooden houses that can receive assistance for earthquake-reinforcement work
per year will decline by 37%.

Third, regarding Option 3, when gradually transferring tax revenue sources from the national
government to prefectures, prefectural tax revenue will not decline immediately, but is expected tofall by about 15% in 2040 and Kochi Prefecture will have contributed that amount to increasing thenational fiscal soundness. Additionally, if Kochi Prefecture invests 30% of its budget in promising43

regions, this is tantamount to a 30% decrease in the budget from the perspective of other regions.
Based on the above, in the future, from the perspective of the abandoned regions within Kochi
Prefecture, the prefectural budget will be (1 - 0.15) * (1 - 0.3) = 0.595, which will be a decrease of
approximately 40% from the current budget. The impact will be that the following examples will
occur simultaneously in the regions that have been abandoned in Kochi Prefecture:

The repair of 40 out of 100 damaged sections of prefectural road will be carried forward to thenext fiscal year.



If there are 10 public high schools, four of them will be closed and consolidated.

The 209 full-time doctors at Kochi Prefecture’s health centers will be reduced by 83.

The number of wooden houses that can receive assistance for earthquake-reinforcement work
per year will decline by 40%.

Fourth, regarding Option 4, when eliminating subsidies in exchange for the transfer of tax
revenue sources from the national government to prefectures, prefectural tax revenue will not decline
immediately, but is expected to fall by about 30% in 2040 and Kochi Prefecture will havecontributed that amount to increasing the national fiscal soundness. Additionally, if Kochi Prefecture
invests 30% of its budget in promising regions, this is tantamount to a 30% decrease in the budget
from the perspective of other regions. Based on the above, in the future, from the perspective of theabandoned regions within Kochi Prefecture, the prefectural budget will be (1 - 0.3) * (1 - 0.3) = 0.49,
which will be a decrease of approximately 51% from the current budget. This will result in thefollowing examples occurring simultaneously in the regions that have been abandoned in Kochi
Prefecture:

The repair of 51 out of 100 damaged sections of prefectural road will be carried forward to thenext fiscal year.



If there are 10 public high schools, five of them will be closed and consolidated.

The 209 full-time doctors at Kochi Prefecture’s health centers will be reduced by 106.

The number of wooden houses that can receive assistance for earthquake-reinforcement work44per year will decline by 51%.

The possible impact of the four options are summarized in Table A3.

Table A3: Possible Impact of the four options

Optio n/Impact

Risk o f natio nal
go ve rnme nt fiscal
bankruptcy

Le ve l o f unifo rm public
Inde pe nde nce o f Ko chi
se rvice s fo r pre fe ctural
Pre fe cture
re side nts

Optio n 1
“Equalityoriented Kochi”

Quite large

Will not decline until
national government isbankrupt

Aiming for a little

Optio n 2
“Persevering
Kochi”

Moderate

Will decline significantly

Aiming for a little

Optio n 3
“Practical
Kochi”

Quite large

Severe decline

Aiming for a lot/
Contradiction of
independence with support
from national government

Optio n 4
“Self-reliant
Kochi”

Moderate

Extremely severe decline,
possibility of riots anddemonstrations

Aiming for a lot/Failuremeans prefecture will gounder45