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Urban economics is broadly the economic study of
urban area An urban area, built-up area or urban agglomeration is a human settlement with a high population density and infrastructure of built environment. Urban areas are created through urbanization and are categorized by urban morphology as cities ...
s; as such, it involves using the tools of
economics Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...
to analyze urban issues such as crime, education, public transit, housing, and local government finance. More specifically, it is a branch of
microeconomics Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics fo ...
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, Richard Muth, and Edwin Mills. While most other forms of
neoclassical economics Neoclassical economics is an approach to economics in which the production, consumption and valuation (pricing) of goods and services are observed as driven by the supply and demand model. According to this line of thought, the value of a good ...
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, Alonso's monocentric city model of a disc-shaped
Central Business District A central business district (CBD) is the commercial and business centre of a city. It contains commercial space and offices, and in larger cities will often be described as a financial district. Geographically, it often coincides with the "city ...
(CBD) and the surrounding residential region has served as a starting point for urban economic analysis. Monocentricity has weakened over time because of changes in technology, particularly, 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 (born 1948) is an American journalist, scholar, and author. In 1981, Garreau published ''The Nine Nations of North America''. In 1991, he published '' Edge City: Life on the New Frontier''. In 2005, he published ''Radical Evolutio ...
's
Edge City ''Edge city'' is a term that originated in the United States for a concentration of business, shopping, and entertainment outside a traditional downtown or central business district, in what had previously been a suburban residential or rura ...
. 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 One of the major subfields of urban economics, economies of agglomeration (or agglomeration effects) describes, in broad terms, how urban agglomeration occurs in locations where cost savings can naturally arise. Most often discussed in terms of ...
.


Introduction

Urban economics is rooted in the location theories of von Thünen, Alonso, Christaller, 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 on 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 relate to how the location decision of firms and households causes the development of cities. The nature and behavior of markets depend somewhat on their locations therefore market performance partly depends on geography.. If a firm locates in a geographically isolated region, its 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 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 . Megaprojects such as this have been shown to be synonymous with unexpected costs and questionable benefits.Bent Flyvbjerg, 2013, "Mega Delusional: The Curse of the Megaproject", New Scientist, December 2, pp. 28-29


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 e.g., 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

*
Georgism Georgism, also called in modern times Geoism, and known historically as the single tax movement, is an economic ideology holding that, although people should own the value they produce themselves, the economic rent derived from land—includi ...
*
Megaprojects A megaproject is an extremely large-scale investment project. According to the ''Oxford Handbook of Megaproject Management'', "Megaprojects are large-scale, complex ventures that typically cost $1 billion or more, take many years to develop a ...
* MONU – magazine on urbanism *
New Urbanism New Urbanism is an urban design movement which promotes environmentally friendly habits by creating walkable neighbourhoods containing a wide range of housing and job types. It arose in the United States in the early 1980s, and has gradually in ...
* Regional economics * Regional science *
Rural economics Rural economics is the study of rural economies. Rural economies include both agricultural and non-agricultural industries, so rural economics has broader concerns than agricultural economics which focus more on food systems. Rural development ...
*
Urban decay Urban decay (also known as urban rot, urban death or urban blight) is the sociological process by which a previously functioning city, or part of a city, falls into disrepair and decrepitude. There is no single process that leads to urban deca ...
*
Urban ecology Urban ecology is the scientific study of the relation of living organisms with each other and their surroundings in an urban environment. An urban environment refers to environments dominated by high-density residential and commercial building ...
*
Urban geography Urban geography is the subdiscipline of geography that derives from a study of cities and urban processes. Urban geographers and urbanists examine various aspects of urban life and the built environment. Scholars, activists, and the public have ...
* Urban history *
Urban planning Urban planning, also known as town planning, city planning, regional planning, or rural planning, is a technical and political process that is focused on the development and design of land use and the built environment, including air, water, ...
*
Urban sociology Urban sociology is the sociological study of life and human interaction in metropolitan areas. It is a normative discipline of sociology seeking to study the structures, environmental processes, changes and problems of an urban area and by doin ...
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Urban studies Urban studies is based on the study of the urban development of cities. This includes studying the history of city development from an architectural point of view, to the impact of urban design on community development efforts. The core theoretica ...
*
Urban vitality Urban vitality is the quality of those spaces in cities that are capable of attracting heterogeneous people for different types of activities throughout varied time schedules. The areas of the city with high vitality are perceived as alive, live ...


References


Literature

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Further reading

*Garreau, Joel. Edge City: Life on the New Frontier. 1992. Anchor. . *Kahn, Matthew. Green Cities: Urban Growth and the Environment. 2006. Brookings . *Obeng-Odoom, Franklin. Reconstructing Urban Economics: Towards a Political Economy of the Built Environment. 2016. Zed. * Stilwell, Frank. Understanding Cities & Regions: Spatial Political Economy. 1993 . {{Authority control Urban planning Regional science