Urban Econ Midterm 1 Notes

Urban Econ Midterm 1 Notes

10/11/2009

What is a city? A city is a characterized by a dense population in which externalities are produced as a result. Recognition and internalization of these externalities leads to a civilization that is a city.

Internalizing externalities example: - Want to internalize congestion to reach a more socially optimal level -PMC = private marginal cost, D = demand curve that represents people’s willingness to drive, Qm= equilibrium -If SMC > PMC then there are external costs, if SMC
Coase Theorem: explains the economic efficiency of the government’s allocation of property rights. It states that in the absence of transaction costs, all government allocations of property are equally efficient because interested parties will bargain to correct the externality - Reasons why Coase does not always work, especially with a large group of people: •

transaction costs rise as more people need to express preferences to come to a Coase solution

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people have an incentive to lie, overstating damages if they expect payment and understating if they are required to pay. This leads to moral hazard problems and is a reason why some households will choose to be free-riders

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The socially optimum solution may not be the best solution

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The negotiations between the two groups (manufacturer and low income households ) will tend to be dominated by high-priced lawyers employed by rich manufacturer who is better able to pay transaction costs.

Agglomeration economies: economic forces that cause firms to locate in clusters and the advantages that result. For ex: urbanization of economies and localization

Urbanization: agglomeration economies in which different industries cluster together in a city, or urban area ex: NYC corporate headquarters (external to all firms, internal to city) Localization: agg. Economies in which firms from the same industry cluster together in one area for ex: silicon valley (external to firm, internal to industry)

Absolute advantage: ability of a firm/country to produce a greater output relative to another firm/country given that they use the same amount of resources Comparative advantage: ability of a firm/country to produce a good at a lower marginal/opportunity cost than that of another firm, explains how trade can create value for both parties

Procurement cost: the costs associated with obtaining input materials in order to produce a good. These are firm oriented and can be used to determine the location of a firm. Distribution cost: the costs associate with distributing outputs (in the process of creating a good). These are market oriented and can be used to determine location of a firm.

Jane Jacobs -She explores the three primary uses of sidewalks: safety, contact, and assimilating children - As the main contact venue, pavements contribute to building trust among neighbors over time. Moreover, self-appointed public characters such as storekeepers enhance the social structure of sidewalk life by learning the news at retail and spreading it. Jacobs argues that such trust cannot be built in artificial public places such as a game room in a housing project. Sidewalk contact and safety, together, thwart segregation and racial discrimination. - A final function of sidewalks is to provide a non-matriarchy environment for children to play. This is not achieved in the presumably “safe” city parks - an assumption that Jacobs seriously challenges due to the lack of surveillance mechanisms in parks. Successful, functional parks are those under intense use by a diverse set of companies and residents. Such parks usually possess four common characteristics: intricacy, centering, sun, and enclosure.

- First, districts must serve more than one primary function to ensure presence of people using the same common facilities at different times. Second, blocks should be short, to increase path options between points of departure and destinations, and therefore enhance social and as a result economic development. Third, buildings should be at varying ages, accommodating different people and businesses which can afford different levels of rents. Fourth, there should be a dense concentration of people, including residents, to promote visible city life. It is important that all of these four conditions are necessary to generate diversity, and absence of each one would result in homogeny and ultimately dullness. -Self destruction of outstanding successful districts occurs by ousting less affluent dwellers and businesses, to replace them with more affluent or profitable ones, probably as the multiplication of those already existing in that district. This not only erodes the variety of dwellers and businesses as the base for diversity in that specific district, but also has a cross-effect on the diversity of other localities by depriving them from such profitable businesses and affluent residents needed for mutual support.

-Part four of the book is dedicated to effective tactics to actually improve city performance. These include: subsidized dwellings, attrition of automobiles as opposed to erosion of cities by cars, improvement of visual order without sacrificing diversity, salvaging projects, and redesigning governing and planning districts. - Thus, accommodating city transportation is important, and this should not destroy the related intricate and concentrated land use. She proposes tactics of giving room to other desired city uses which compete with automobile traffic needs such as widening sidewalks for street displays which would narrow the vehicular roadbed and thereby automatically reduce car use, and traffic congestion :EX: times square pedestrian mall. Widening of streets for other uses.

10/11/2009

10/11/2009