III. Social Overhead Capital

The late 1960s saw an increased desire in Japan to improve its social overhead capital. Industrialization and urbanization have made private cost diverge from social cost in the form of inadequate housing and pollution. While per capita income has risen in Japan, its living environment has not been improved at the same rate. Japan is poorer than other advanced countries in public housing, waste disposal facilities, public parks, health and medical services, social welfare facilities, educational and cultural facilities, and so on. These goods and services are what are now called public goods, and are essential for maintaining normal modern living. They may be regarded as public or social overhead capital, which serves primarily industrial activities like railroads, highways, harbors, airports, etc.; or consumption activities like housing, water services, sewage services, parks, parking lots, schools, hospitals, etc.; or environmental conservation activities. In what follows, we shall examine consumption or living-related social overhead capital, particularly water services, sewage services, and open space. We shall look at the current state of this type of capital, the mechanism that regulates its supply, and the reasons why its supply tends to lag behind demand.