The City
What is a city?
Legally, an incorporated municipality.
U.S. Census Bureau has several categories.
urban place: 2500+ in a small area
urbanized area: 50K+
metropolitan statistical area MSA: large population nucleus and nearby areas, 50K+
consolidated metropolitan statistical area CMSA, 1 million+
3/4 US population urban, but only 2% of the land.
Economically, "A city is a spatial concentration of a large number of people."
A permanent settlement.
Density of population and commerce.
Greater human interaction.
Economic effects:
Greater specialization, division of labor
Greater possibility of external effects
Urban activity creates positive externalities.
Why do people congregate in cities?
People congregate in cities because of economies of scale and transportation costs.
The economics Nobel Prize winner William Vickrey observed that
"If transportation were costless, location would be unimportant and location rents could not arise,
while if there were no economies of scale,
production could take place on a small scale in hamlets
and location rents would be negligibly small."
Economies of scale: average cost decreases with larger size.
Transit costs have economies of scale and density.
Complementarities in production.
Comparative advantage - harbor, manufacturing, trade
Developed or by nature.
Agglomeration economies.
Economies of scale external to a firm.
Increased productivity due to density of population or enterprises.
Localization economies, due to proximity with other firms.
A cluster of stores attracts more shoppers.
1. Labor pooling, including access to specialists
2. Intermediate inputs, hence industrial complexes
3. Communication and transportation, and cross-industry spillovers.
Urbanization economies: from urban location.
The cost savings from agglomeration economies benefit society as a whole.
These economies induce higher rent.
80% of all the land value in the United States is in cities.
As Gaffney states, "people locate in cities to have many options; and they pay for it in land rent."
Jane Jacobs said that cities rather than countries
are the key engines of economic growth and development.
Despite this basis for generating wealth, economic problems have plagued cities world-wide.
These social problems are familiar -
poverty, urban blight, crime, congestion, pollution, and urban sprawl.
A major problem in California cities is the high cost of housing.
The economy is booming,
but the low-income workers needed by industry and consumers
can't afford to live in the boom areas such as Silicon Valley.
Density also leads to congestion - negative externality, unless compensated.
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The city as a small open economy
City industries are price takers in a larger economy.
Cities are small open economies in a common market.
External trade is inversely proportional to the size of an economy.
Typically 1/4 to 1/3 of local production is exported.
City structure: downtown commercial center, residential areas\
suburbs, often with their own downtowns
edge cities: major commercial areas outside city centers, with more jobs than residents
Economies of scale in manufacturing mostly from proximity.
Industries with proximity economies are in cites.
About 60% of city labor is needed for local production.
Countries with centralized government tend to have a higher concentration
of the population in the capital city.
Mexico City, 1/4 of the population. France.
Some countries have established new capitals to counter this trend -
Brazil, Rio de Janeiro to Brazilia.
Pakistan, Nigeria
Cities in History
Possibly some cities started from trade and then caused agriculture.
Until industrial revolution, 70 to 80 percent of population had to be in agriculture.
A small country could import food.
City enabled anonymity. Less conformity.
But still legal conformity. Building codes, zoning.
Elevator made skyscrapers possible.
Air condition made summer production possible in hot areas.
Cities rise and fall - Rome from 1 million to 35,000 1000 AD
ancient cities
AD 100
Rome 500K
Alexandria 250K
Antioch, Asia Minor
Seleucia: Persia 300K
Loyang 420K
Peshawar, Anuradhapura 120K
AD 500
Constantinople 400K
Alexandria 200K
Antioch
Rome
Ctesiphon, Babylon
Loyang 150K
Nanking
Teotihuacan 100K
AD 750
Constantinople 300K
Damascus 250K
Alexandria 215K
Chagan, China 800K
AD 1000
Constantinople 350K
Cordova 450K
al-Hasa (Arabia) 150K
Cairo
Baghdad
Kaifeng 400K
Kyoto 150K
Stories of some cities
Angkor, Cambodia, now ruins
Once 150K. Fell to Siam.
Lhasa, Tibet.
100K 700s and now.
1850 great cities:
1 London 2.3 million
2 Peking 1.6
3 Paris 1.3
4 Canton .8
5 Constantinople .785
6 Tokyo .780
7 New York .645
8 Bombay .575
9 St. Petersburg .502
10 Berlin, Prussia .446
1900
1. London 6.5
2. New York 4.25
3. Paris 3.33
4. Berlin 2.4
5. Chicago 1.7
6. Vienna 1.66
7. Tokyo 1.5
8. St. Petersburg 1.44
9. Manchester 1.43
10. Philadelphia 1.42
1950
1. New York 12.3
2. London 8.8
3. Tokyo 7.5
4. Paris 5.9
5. Shanghai 5.4
6. Moscow 5.1
7. Buenos Aires 5.0
8. Chicago 4.9
9. Ruhr region 4.9
10 Calcutta 4.8
City States today
Vatican City
Monaco
Singapore
Belgium & Kuwait 97% urban
Israel 90%, UK 89%