I was reading Chambers’s book on economics. When I spoke of the book to a certain high official in the treasury bureau one day, he became much interested and wanted me to show him the translation. ... I began translating it ... when I came upon the word “competition” for which there was no equivalent in Japanese, and I was obliged to use an invention of my own, kyoso, literally, “race-fight.”

When the official saw my translation, he appeared much impressed. Then he said suddenly, “Here is the word, ‘fight.’ What does it mean? It is such an unpeaceful word.”

“That is nothing new,” I replied. “That is exactly what all Japanese merchants are doing. For instance, if one merchant begins to sell things cheap, his neighbor will try to sell them even cheaper. Or if one merchant improves his merchandise to attract more buyers, another will try to take the trade from him by offering goods of still better quality. Thus all merchants ‘race and fight’ and this is the way money values are fixed. This process is termed kyoso in the science of economics.”

“I understand. But don’t you think there is too much effort in Western affairs?”

“It isn’t too much effort. It is the fundamentals of the world of commerce.”

“Yes, perhaps,” went on the official. “I understand the idea, but that word, ‘fight’ is not conducive to peace. I could not take the paper with that word to the chancellor.”

It is obvious that the government official could understand the instrumental value of competition at least to some extent, but he could not dare to confer the sacred status of the economic principle for managing a nation to the unpeaceful idea of competition.

The second conventional belief on the use and value of competition as a resource allocation mechanism persisted ever since. Indeed, there are numerous instances in which references were made to such expression as excessive competition or destructive competition in the public writings on the management of Japan’s market economy. Suffice it to quote just one example. During the rapid growth period of the 1960s, one of the major concerns of MITI (the Ministry of International Trade and Industry) was the avoidance of “excessive competition in investment” in some class of manufacturing industries. It was alleged that excessive competition in investment tends to develop in industries characterized by heavy overhead capital, homogeneous products, and oligopoly, typical examples thereof being iron and steel, petroleum refining, petrochemicals, certain other chemicals, cement, paper and pulp, and sugar refining.

It may deserve recollection that the dictionary meaning of “excessive,” viz., “extreme,” “unreasonable,” and “too much,” connote in common “overshooting one or the other ‘optimal’ or ‘reasonable’ standard.” Thus, the logical coherence of the second conventional belief can be properly examined only if we specify “one or the other ‘optimal’ or ‘reasonable’ standard.” Before doing this logical exercise in the next section, however, it may not be out of place to cite a thoughtful observation made by Ryutaro Komiya (1975, p.214) on the “excessive competition in investment” in the 1960s.

The “excessive competition in investment” in an industry appears to me to depend on the following three factors: (i) the products of the industry are homogeneous, not differentiated;