Urban economics
Overview
 
Urban economics is broadly the economic study of urban areas; as such, it involves using the tools of economics to analyze urban issues such as crime, education, public transit, housing, and local government finance. More narrowly, it is a branch of microeconomics
Microeconomics
Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...

 that studies urban spatial structure and the location of households and firms.

Much urban economic analysis relies on a particular model of urban spatial structure, the monocentric city model pioneered in the 1960s by William Alonso
William Alonso
William Alonso was an Argentinian-born American planner and economist.He was born in Buenos Aires and began his career with a bachelor's degree in architectural science from Harvard University in 1954. He also received a master's degree in city planning from Harvard University's Graduate School of...

, Richard Muth, and Edwin Mills.
Encyclopedia
Urban economics is broadly the economic study of urban areas; as such, it involves using the tools of economics to analyze urban issues such as crime, education, public transit, housing, and local government finance. More narrowly, it is a branch of microeconomics
Microeconomics
Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...

 that studies urban spatial structure and the location of households and firms.

Much urban economic analysis relies on a particular model of urban spatial structure, the monocentric city model pioneered in the 1960s by William Alonso
William Alonso
William Alonso was an Argentinian-born American planner and economist.He was born in Buenos Aires and began his career with a bachelor's degree in architectural science from Harvard University in 1954. He also received a master's degree in city planning from Harvard University's Graduate School of...

, Richard Muth, and Edwin Mills. While most other forms of neoclassical economics
Neoclassical economics
Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...

 do not account for spatial relationships between individuals and organizations, urban economics focuses on these spatial relationships to understand the economic motivations underlying the formation, functioning, and development of cities.

Since its formulation in 1964, William Alonso
William Alonso
William Alonso was an Argentinian-born American planner and economist.He was born in Buenos Aires and began his career with a bachelor's degree in architectural science from Harvard University in 1954. He also received a master's degree in city planning from Harvard University's Graduate School of...

's monocentric city model of a disc-shaped Central Business District
Central business district
A central business district is the commercial and often geographic heart of a city. In North America this part of a city is commonly referred to as "downtown" or "city center"...

 (CBD) and surrounding residential region has served as a starting point for urban economic analysis. Monocentricity has become weaker over time due to changes in technology, particularly due to faster and cheaper transportation (which makes it possible for commuters to live farther from their jobs in the CBD) and communications (which allow back-office operations to move out of the CBD).

Additionally, recent research has sought to explain the polycentricity described in Joel Garreau
Joel Garreau
Joel Garreau is an American journalist, scholar and author of Radical Evolution: The Promise and Peril of Enhancing Our Minds, Our Bodies – And What It Means to Be Human, Edge City: Life on the New Frontier and The Nine Nations of North America.In 2010, Garreau became the Lincoln Professor of Law,...

's Edge City
Edge city
"Edge city" is an American term for a concentration of business, shopping, and entertainment outside a traditional urban area in what had recently been a residential suburb or semi-rural community...

. Several explanations for polycentric expansion have been proposed and summarized in models that account for factors such as utility gains from lower average land rents and increasing (or constant returns) due to economies of agglomeration
Economies of agglomeration
The term economies of agglomeration is used in urban economics to describe the benefits that firms obtain when locating near each other . This concept relates to the idea of economies of scale and network effects...

.

Introduction

Urban economics is rooted in the location theories of von Thünen
Johann Heinrich von Thünen
Johann Heinrich von Thünen was a prominent nineteenth century economist. Von Thünen was a Mecklenburg landowner, who in the first volume of his treatise, The Isolated State , developed the first serious treatment of spatial economics, connecting it with the theory of rent...

, Alonso
William Alonso
William Alonso was an Argentinian-born American planner and economist.He was born in Buenos Aires and began his career with a bachelor's degree in architectural science from Harvard University in 1954. He also received a master's degree in city planning from Harvard University's Graduate School of...

, Christaller
Walter Christaller
Walter Christaller , was a German geographer whose principal contribution to the discipline is Central Place Theory, first published in 1933...

, and Lösch that began the process of spatial economic analysis . Economics is the study of the allocation of scarce resources, and as all economic phenomena take place within a geographical space, urban economics focuses of the allocation of resources across space in relation to urban areas . Other branches of economics ignore the spatial aspects of decision making but urban economics focuses not only on the location decisions of firms, but also of cities themselves as cities themselves represent centers of economic activity .

Many spatial economic topics can be analyzed within either an urban or regional economics framework as some economic phenomena primarily affect localized urban areas while others are felt over much larger regional areas . Arthur O’Sullivan believes urban economics is divided into six related themes: market forces in the development of cities, land use within cities, urban transportation, urban problems and public policy, housing and public policy, and local government expenditures and taxes.

Market forces in the development of cities

Market forces in the development of cities relates to how the location decision of firms and households causes the development of cities. The nature and behavior of markets depends somewhat on their locations therefore market performance partly depends on geography . If a firm locates in a geographically isolated region, their market performance will be different than a firm located in a concentrated region. The location decisions of both firms and households create cities that differ in size and economic structure. When industries cluster, like in the Silicon Valley in California, they create urban areas with dominant firms and distinct economies.

By looking at location decisions of firms and households, the urban economist is able to address why cities develop where they do, why some cities are large and others small, what causes economic growth and decline, and how local governments affect urban growth . Because urban economics is concerned with asking questions about the nature and workings of the economy of a city, models and techniques developed within the field are primarily designed to analyze phenomena that are confined within the limits of a single city .

Land use

Looking at land use within metropolitan areas, the urban economist seeks to analyze the spatial organization of activities within cities. In attempts to explain observed patterns of land use, the urban economist examines the intra-city location choices of firms and households. Considering the spatial organization of activities within cities, urban economics addresses questions in terms of what determines the price of land and why those prices vary across space, the economic forces that caused the spread of employment from the central core of cities outward, identifying land-use controls, such as zoning, and interpreting how such controls affect the urban economy .

Economic policy

Economic policy is often implemented at the urban level thus economic policy is often tied to urban policy . Urban problems and public policy tie into urban economics as the theme relates urban problems, such as poverty or crime, to economics by seeking to answer questions with economic guidance. For example, does the tendency for the poor to live close to one another make them even poorer? .

Transportation and economics

Urban transportation is a theme of urban economics because it affects land-use patterns as transportation affects the relative accessibility of different sites. Issues that tie urban transportation to urban economics include the deficit that most transit authorities have, and efficiency questions about proposed transportation developments such as light-rail .

Housing and public policy

Housing and public policy relate to urban economics as housing is a unique type of commodity. Because housing is immobile, when a household chooses a dwelling, it is also choosing a location. Urban economists analyze the location choices of households in conjunction with the market effects of housing policies .
In analyzing housing policies, we make use of market structures eg, perfect market structure. There are however problems encountered in making this analysis such as funding, uncertainty,space, etc.

Government expenditures and taxes

The final theme of local government expenditures and taxes relates to urban economics as it analyzes the efficiency of the fragmented local governments presiding in metropolitan areas .

See also

  • Urban planning
    Urban planning
    Urban planning incorporates areas such as economics, design, ecology, sociology, geography, law, political science, and statistics to guide and ensure the orderly development of settlements and communities....

  • New Urbanism
    New urbanism
    New Urbanism is an urban design movement, which promotes walkable neighborhoods that contain a range of housing and job types. It arose in the United States in the early 1980s, and has gradually continued to reform many aspects of real estate development, urban planning, and municipal land-use...

  • Regional science
    Regional science
    Regional science is a field of the social sciences concerned with analytical approaches to problems that are specifically urban, rural, or regional...

  • Rural economics
    Rural economics
    Rural economics is the study of rural economies, including:* farm and non-farm industry.* economic growth, development, and change * size and spatial distribution of production and household units and interregional trade* land use...

  • Urban decay
    Urban decay
    Urban decay is the process whereby a previously functioning city, or part of a city, falls into disrepair and decrepitude...


Further reading

  • Garreau, Joel. Edge City: Life on the New Frontier. 1992. Anchor. ISBN 978-0385424349.
  • Kahn, Matthew. Green Cities: Urban Growth and the Environment. 2006. Brookings ISBN 978-0-8157-4816-8.
The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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