INTRODUCTION

In the prototype model of social common capital introduced in this chapter, we consider a particular type of social common capital – social infrastructure, such as highways, ports, and public transportation systems. We consider the general circumstances under which factors of production that are necessary for the professional provision of services of social common capital are either privately owned or managed as if private owned. Services of social common capital are subject to the phenomenon of congestion, resulting in the divergence between private and social costs. Therefore, to obtain efficient and equitable allocation of scarce resources, it becomes necessary to levy taxes on the use of services of social common capital. The prices charged for the use of services of social common capital exceed, by the tax rates, the prices paid to social institutions in charge of social common capital for the provision of services of social common capital. One of crucial problems in the economic analysis of social common capital is to examine how the optimum tax rates for the services of various components of social common capital are determined. The nature of services of social common capital varies to such a significant degree that it is extremely difficult to formulate a unifying theory concerning the determination of the optimum taxes on services of social common capital.