WHAT IS URBAN ECONOMICS?

 WHAT IS URBAN ECONOMICS?

The discipline of urban economics is defined by the intersection of geography and economics. Economics explores the choices people make when resources are limited. Households make choices to maximize their utility, while firms maximize their profit. Geographers study how things are arranged across space, answering the question, Where does human activity occur? Urban economics puts economics and geography together, exploring the geographical or location choices of utility maximizing households and profit-maximizing firms. Urban economics also identifies inefficiencies in location choices and examines alternative public policies to promote efficient choices.

Urban economics can be divided into six related areas that correspond to the six parts.

1. Market forces in the development of cities. 

The interurban location decisions of firms and households generate cities of different size and economic structure. We explore the issues of why cities exist and why there are big cities and small ones.

2. Land use within cities. 

The interurban location decisions of firms and house- holds generate urban land-use patterns. In modern cities, employment is spread throughout the metropolitan area, in sharp contrast to the highly centralized cities of just 100 years ago. We explore the economic forces behind the change from centralized to decentralized cities. We also use a model of neighborhood choice to explore the issue of segregation with respect to race, income, and educational level.

3. Urban transportation. 

We explore some possible solutions to the urban congestion problem and look at the role of mass transit in the urban transportation system. One issue is whether a bus system is more efficient than a light-rail system or a heavy-rail system like BART (San Francisco) or Metro (Washington).

4. Crime and public policy. 

We look at the problem of urban crime and show the links between crime and two other urban problems, poverty and low educational achievement.

5. Housing and public policy. 

Housing choices are linked to location choices because housing is immobile. We’ll discuss why housing is different from other products and how housing policies work.

6. Local government expenditures and taxes. 

Under our fragmented system of local government, most large metropolitan areas have dozens of local governments, including municipalities, school districts, and special districts. In making location choices, households consider the mix of taxes and local public goods.