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Urban Economics

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Table of Contents
What is Urban Economics?

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Five Principles of Urban Economics ..

Market Forces on the Development in the Cities
Land Use

Economic policy

Transportation and Economics

Housing and Public Policy

What is Urban Economics?

There are many definitions as to what is the right meaning for urban economics. Long list
of meanings came from the different economist such as Paul Samuelson, Bob Solow, Bob Lucas,
Bill Vickrey, Joe Stiglitz and Paul Krugman. However, here are some laid-out definitions that can
help to scrutinize the meaning of urban economics.
Urban economics is rooted in the location theories of von Thnen, Alonso, Christaller,
and Lsch that began the process of spatial economic analysis (Capello & Nijkamp 2004:34).
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 (Arnott & McMillen 2006:7) (McCann 2001:1). 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 (O'Sullivan 2003:1).
Urban Economics is is a sub-field of economics that refers to the economic analysis of
cities, and touches on a broad range of topics, such as housing, transportation, land use, the cost
and benefit of cities and urbanization, or the provision of local public goods like education.
Others also define urban economics as a branch of microeconomics that studies urban
spatial structure and the location of households and firms.
Some defined urban economics as the study of the location, choices of firms and
households, and the consequences of these choices.
Of all the mentioned definitions almost all of them are similar to each other but in
different form sentences only but conveying one simple definition. 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 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 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.
Urban economics is that it is a field of study which uses the analytical tools of economics
to explain the spatial and economic organization of cities and to deal with their special economic
problems. The word spatial is significant. Traditional economic theory omits any reference to
the dimensions of space by treating all economic activity as if it took place at a single point. It
refers to consumers and producers, firms and industries, but not to distance or contiguity,
separation or neighborhood.