Land price is extremely high in Japan. When the national aggregate land price is assumed to be equivalent to G years of GNP, the G value for Japan is 2.3. Whereas it is 0.7 for U.S.A. In an attempt to shed light on the significances of the high G value in Japan it was analyzed using two element production functions homogeneous of degree 1.
Results obtained are:
i) With “saturation type” productions functions, the physical product F (q, n) is expressible in G approximately by the formula
where q is national land area, i is interest rate, n is supply of nonland element, pn is the price of nonland element and S is GNP. The formula predicts the product price S/F in Japan to be 20% higher than in US due to space limitations in production alone.
ii) Land price can be interpreted as the measure of decreasing returns to n due to space limitations or space shortage.
iii) The model shows neatly that public works are equivalent to obtaining new land thus effective in alleviating the space shortage in production.
iv) The realization of future city image like the Compact City proposed by Danzig7) will greatly reduce the G value in Japan thus practically solving the space shortage problem.
