13 Some Spatial Aspects of Urban Problems


The nation’s concern with urban problems began in earnest during the 1960s. It was easy to perceive that something was wrong. American cities were characterized by high unemployment among nonwhites, high crime rates, pressing fiscal problems, and serious pollution—conditions that have continued with more or less intensity to the present day.

The urban crisis was generally viewed as being aggravated by excessive population increase and interregional migration to central cities of large metropolitan areas. For some people the solution was as obvious as the problem: slow down the population growth of urban areas, either by stemming the flow from nonmetropolitan areas or by encouraging out-migration. Establishment of growth centers in less developed or economically lagging areas was urged as a plausible means of easing urban problems by keeping the rural populations employed closer to home and out of the large cities. Viable growth centers, however, were never established.

Even as proposals for diverting migration and population growth away from the larger cities were being formulated, the long-standing tide of net migration to the large cities was slowing to a trickle.1  In the 1960s, the population growth of American metropolitan areas was almost all accounted for by natural increase. As we have seen, the decade of the 1970s brought a resurgence of nonmetropolitan population growth as well as a relative (and in some cases absolute) decline in metropolitan-area populations. With this change came new perspectives on the "urban crisis." The questions being asked today often concern the problems of urban areas in transition from one economic base to another, and we have come to recognize more fully that the powerful forces of decentralization that were discussed at length in Chapter 7 are at the root of many of the most pressing urban problems.

In the present chapter, we focus attention on the role of changes in spatial patterns of urban activities in the emergence of current urban problems, and we discuss associated policy issues. We shall concentrate on four areas of special concern and importance: declining activity in the central core of cities, urban poverty, the transportation of people within urban areas, and fiscal disparity between central cities and their surrounding suburbs. All of the problems that we shall discuss are related and can be traced to underlying changes in land use, location, or locational advantage that make life or business survival more difficult for some groups. By relating these problems to changes in locational incentives, useful perspective can be gained on the challenges they pose and the responses they may elicit.


Given the extent of decentralization of economic activity that has characterized urban areas in the United States,2  we could accept it as normal that the central core of an urban area will tend to show less rapid growth (in terms of such measures as employment, business sales, and daytime population) than peripheral areas. No special problem or basis for concern would arise from such a trend. Actually, however, the downtown areas of many American cities are in trouble, and their ills constitute part of the whole complex of urban problems.

There are three principal symptoms: declining levels of activity, congestion, and environmental deterioration. The distress is, of course, felt in different ways by such different groups as downtown merchants, property owners, commuters, residents, shoppers, and taxpayers.

13.2.1 Declining Levels of Activity

The acute cause for concern here is, as noted above, absolute losses rather than merely a failure to keep up with the suburbs. Although the number of office jobs is increasing in many downtown areas, especially those of the larger metropolises, a great many other downtown activities shrank substantially in the years following the end of World War II, when removal of wartime constraints on automobile production, motor fuels, and new construction released some pent-up pressures for suburbanization. Estimates of average daily travel into the Chicago "Loop" appear in Figure 13-1 for the period 1946-1961, in which time the city’s population was roughly stable but the Chicago SMSA’s population rose about 20 percent.

Figure 13-2 refers to another case—the Manhattan central business district, comprising that part of the island below 61st Street—over a much longer period and with some information on the types of vehicles in which people entered the area. It appears that the total traffic peaked some time around the end of World War II and then fell off, as in Chicago’s case. Most of the decline between 1963 and 1971 was in off-peak riders, with rush-hour travel nearly constant. There was a large increase in the use of individual motor vehicles and other vehicles.

By American standards, both Chicago and New York are well provided with rapid transit. In cities lacking such facilities, the decline in the relative importance of the central business district as a trip destination has probably been still more marked.

In Chapter 7, reasons for the reduced locational attractiveness of the downtown areas in recent decades were adduced for manufacturing, wholesale and retail trade, residence, routine office work, and some types of information-processing activities such as research. Activities historically attached to downtown locations are (1) those that require a great deal of daily face-to-face contact with a variety of activities that are themselves subject to strong cluster economies (such as the financial district, law firms, power-structure luncheon clubs, and the like), (2) activities such as opera houses, city halls, newspapers, or museums serving the entire metropolitan population at a single location, and (3) activities catering to large numbers of out-of-town visitors (such as hotels, convention halls, and wholesalers’ or manufacturers’ salesrooms for visiting buyers).

The use of planes and cars by out-of-town visitors has greatly weakened these central ties for such categories as hotels and convention halls, and many business conferences are now being held in suburban motels and rented space at airports. Regional sales and service offices that are the home bases for traveling sales or servicing personnel have similarly found access advantage in outlying locations. After these and other defections, the corporate headquarters office has remained as a bulwark of downtown areas. Even in this activity, however, there has been a continual segmenting of office functions, with many of the more routine jobs being shifted to suburban locations.

Accordingly, it appears that declining downtown employment is either already prevalent or threatened in each of the major categories of activity that have historically made up the city core. The mutual interaction between fewer employees and fewer customers is obvious.

Though the actuality or the prospect of absolute decline in central business districts obviously injures property owners and others who have a stake in the level of downtown activity, we need not fall into the place prosperity fallacy of assuming that every location as such has a "right" to be shielded against obsolescence. If downtown decay is to be treated as a legitimate public concern justifying preventive action, the case for such concern and action should be made on a broader basis than the interest of the property holders immediately involved. The basic questions for policy judgment are (1) whether an active and viable downtown is a valuable part of the urban economic and social complex, affecting its overall efficiency and quality of life, and (2) whether there are substantial hidden social benefits and externalities not taken into account in the market pricing system. It is hoped that the rest of this chapter will be of some help to the reader in forming an opinion on these questions.

13.2.2 Congestion

Another cause for concern in downtown areas is traffic congestion—which is not only inordinately wasteful of time and street space but is certainly one of the important reasons for the declining popularity of downtown locations. Concern with congestion may seem paradoxical, since total travel to downtown areas is apparently not growing much and in many cities is even diminishing. The explanation lies partly in the greater use of automobiles and partly in the increased peaking of the traffic in rush hours.

Congestion affects two types of movement: circulation within the downtown area by vehicles and pedestrians, and movement into and out of the area (primarily by vehicles). The former problem has been acute as long as large cities have existed,3  and it would be difficult to demonstrate any great progress or retrogression, in terms of speed or comfort, for mobility within downtown areas. Getting into and out of downtown has however become more of a problem with the decay of public transit, greater distances from residential areas, and vastly increased use of the space-consuming private automobile. Thus it is at least a fair surmise that the time required for downtown circulation and access has not been reduced. In the face of improved access by suburbanites to suburban jobs and shopping facilities, this implies deterioration in the relative access advantages of downtowns.

13.2.3 Amenity

There is abundant evidence that the troubles of downtown areas involve in part some unfavorable manifestations of obsolescence. The street utility layouts and the buildings of high-density downtown areas are more expensive to modernize than those of less intensively developed neighborhoods. In situations of rapid locational and technological change, it is especially difficult for districts and buildings to grow old gracefully and to develop the positive attractions associated with maturity and age in downtown areas that have grown up under more stable and regulated conditions (such as those of many old European cities). So far at least, it seems clear that downtown amenities have not merely failed to keep pace with those of outer areas but have suffered absolute deterioration.

Greater use of automobiles is partly responsible. Whether parking at the curb, in open lots, or in multilevel garages, cars occupy large amounts of scarce downtown space and thus reduce convenience of access by increasing the distance from one work or shopping destination to another. In a thoroughly motorized city such as Los Angeles, more than two-thirds of the downtown area can be preempted by streets and parking facilities, and this is all "dead space" as far as any ultimate destinations are concerned. The prime potential advantage of a downtown—quick and convenient access among various kinds of activities—is thus dissipated.

Another factor in deterioration of the quality of downtown life reflects rising income levels and the changing distribution of income groups of the population. In Chapter 7, we found that urban growth was associated with the proliferation of subcenters of economic activity. With rising income levels, the density of demand increases, and a metropolitan area can support more shops catering to the more affluent population. Some of these will be located in subcenters that, in effect, compete with the downtown shopping district and draw away potential customers. Even more important, however, has been the effect of suburbanization. As the middle- and higher-income people have led the way to the suburbs, the populations with closest access to downtown areas are increasingly the poor. The changing composition of downtown consumer demands has been apparent in the cheapening of stores, restaurants, amusements, and other types of consumer-serving facilities; and this, of course, further discourages the more affluent from choosing downtown as a place to work, play, shop, or live.

13.2.4 Some Responses

We have identified and explained some aspects of a major urban problem variously described as "strangulation," "the downtown dilemma," "dry rot at the core," and in other equally vivid terms. What can or should be done about it?

It is important to keep reminding ourselves that the raison d’être of an urban concentration is provision for close, easy, and multifarious interpersonal contact. From this standpoint, an urban pattern is "efficient" when there is a focal point for concentration of as many as possible of those activities that require access to a high proportion of the firms and households of the area and are best concentrated (because of scale economies or external economies of close agglomeration) in one single location in the area.4

Among the activities that are logical candidates for central location, on the basis of their access and agglomeration requirements, terminals for interregional passenger transport are certainly included. Yet airports, in the present state of air transport technology, are obviously far too space consuming and noisy to be eligible for anything like a central location, and become increasingly remote as they get larger. If the interurban public transport of the future can be compactly designed and compatible with intensive development in its terminal area, it is reasonable to expect cities to have their main passenger terminals integrated centrally with their internal transportation as they were until around the middle of this century.5  Possible developments in fast interurban ground transport (for example, in the Boston—Washington "Northeast Corridor") suggest some hope in this direction. Prospects for relocating air terminals to city centers seem much more conjectural. But it is possible that at some future time urban historians will consider as a curious temporary aberration the latter-twentieth-century period in which interurban transport did not go directly from one city center to another.

Perhaps the most fundamental and abiding urban problem involves the search for ways to exploit the city’s unique potential for maximum mass and diversity of contact, choice, and opportunity without unduly sacrificing other values. However, we need to understand a great deal more (and in more specific and quantitative terms) about what urbanism contributes to economic and social progress through its contact opportunities. There is room for more empirical analysis as well as for amplification of the theories of location and regional development to cover complex spatial relations involving contact and time as major parameters. A host of suggestive hypotheses still await verification.6

The problem of advantages of concentration and how to exploit them comes to a head in the central business district, since there the potential contact opportunities are highest and the conflict with space requirements the most serious. A basic challenge to the ingenuity of urbanists is to devise ways of improving downtown areas in the three relevant aspects: making them easy to get to, easy to get around in, and attractive and effective as places to work or visit.

As yet, we do not know very much about the effectiveness of various methods of increasing the realized contact potential of central business districts. Efforts in this direction in the United States have been fragmentary and often mutually conflicting, and there has been some reluctance to regard experiences in foreign cities (such as Rotterdam or even Toronto) as applicable to American cities. Pedestrian malls have in general been tiny and tentative. New downtown amenities have mostly been in the form of wider streets, parking garages, convention halls, and shiny skyscrapers. Radical modernization of mass transit, integrated with adequate parking and transfer facilities at outlying stations and adequate intradowntown facilities (such as minibuses and moving sidewalks), has not been tried. Policies of various public authorities on transport have generally been both conflicting and self-defeating, as will be shown later.7  Imaginative and consistent transport planning is basic to any improvement or even maintenance of the functional effectiveness of downtown areas, though clearly not the only essential element in a solution. The possible benefits of a more efficient system for bringing large numbers of people into close contact in agreeable surroundings appear large in terms of revitalization of the urban mechanism at its center.


13.3.1 Dimensions of Urban Poverty

Our primary concern in this section is with the spatial distribution of poverty and its incidence. We shall find that important related trends can be explained substantially by the forces that have shaped American patterns of urbanization.

There are two fundamentally different ways of defining poverty. It may be defined in absolute terms, by establishing a threshold level of income that is consistent with a standard of living which satisfies basic needs, or in relative terms (e.g., 50 percent of the median income). Poverty statistics compiled by the U.S. Bureau of the Census are based on absolute standards. Thus by the 1981 standard, an average nonfarm family of four8  with an annual income below $9287 was considered poor (i.e., classified as living in poverty).9

The poverty thresholds for various groups change from year to year to reflect the effects of inflation on the purchasing power of income; therefore, in "real" terms they have remained virtually unchanged since the 1960s. Median income has risen substantially since that time, so it is not surprising that the poverty rate (the percentage of persons classified as poor) has fallen from 22.2 percent in 1960 to 14 percent in 1981.10 Much less progress would be evidenced if a relative standard had been applied.

Table 13-1 shows that poverty in the United States is primarily urban poverty. In 1981, nearly 61 percent of the persons living in poverty resided in metropolitan areas; whereas only 43.9 percent of the nation’s poor were urban in 1959. Within metropolitan areas, the majority of the poor live in central cities. However, the percentage of urban poor who live outside central cities has increased from just under 39 percent in 1959 to roughly 42 percent in 1981. Thus not surprisingly, these figures indicate that as the nation’s population became more urban, poverty became concentrated in metropolitan areas; and as the metropolitan populations moved to the suburbs, urban poverty became somewhat less concentrated in central cities.

Table 13-2 offers additional perspective on the poverty problem by focusing on its racial incidence in major geographic groupings. Looking first at the figures for the United States as a whole, we find that in 1981 the incidence of poverty among blacks was over three times that of whites and that this ratio has changed very little since 1959. Thus while there are many more white persons classified as poor (in 1981 two out of three poor persons were white),11  in terms of life’s chances, blacks have a tremendous burden to overcome.

The high incidence of poverty among urban blacks in 1959, as shown in Table 13-2, relates directly to the in-migration of poor persons "released" from the agricultural sector.12  The rapid increase in metropolitan populations of the 1950s was due largely to the decline of the agricultural sector and consequent interregional migration, which brought many rural poor people, especially blacks, to the nation’s largest urban areas. The magnitude of this movement and the subsequent concentrations of poverty in urban areas were at the heart of the "urban crisis" as perceived in the 1960s and early 1970s. Despite these regional shifts, nonmetropolitan areas continue to exhibit high rates of poverty. Table 13-2 indicates that in 1981 the percentage of poor persons in nonmetropolitan areas was nearly as large as that in the central cities of metropolitan areas.

At least some portion of the apparent gains made by blacks in the 1960s was a result of an explicit reaction to the urban crisis. The "War on Poverty" declared by President Lyndon B. Johnson represented an important phase of income redistribution in the United States. The rapid economic growth of the overall economy during this period also could have contributed to whatever progress these figures suggest.

Focusing on metropolitan areas as a whole, we find that the percentage of persons living in poverty decreased during the 1960s; however the poverty rate increased for all races during the 1970s. This setback was largest among blacks—particularly those residing in central cities. But the incidence of poverty among suburban blacks actually fell slightly from 1970 to 1981, even in the face of an adverse trend in poverty for the nation as a whole.

One factor aggravating the problems of urban poverty areas is their sheer size and cohesiveness. They represent segregation (often racial) on a grand scale, in contrast to a pattern of small poverty or minority group pockets. And it is all too clear that a given aggregate amount of poverty and deprivation is a far more serious problem if it is solidly massed in one large area than if it were scattered throughout a city. This will be recognized in theoretical terms as a case of adverse neighborhood effects, or external diseconomies of agglomeration.

In a large poverty area, a much greater proportion of the residents live far from the edges, where there would be at least some exposure to superior opportunity, amenity, evidences of hope, and avenues of gradual escape; and the "outside world" can come to be something remote and alien, identified as an oppressive and hostile "establishment." Polarization of ways of life and attitudes between poor persons and outsiders is fostered in such situations. In more specific terms, access to jobs is harder, and genuine integration of schools becomes impossible without such controversial devices as the long-distance busing of schoolchildren. Improvement, rehabilitation, and renewal of housing are more difficult in an extensive slum, since the prevailing character of the neighborhood determines both the incentive to improve an individual property and the benefits thereby achieved.13  Maintenance of public safety likewise poses greater problems in massive areas of poverty and social stress.

Another particularly aggravating factor in poverty areas is poor access to employment opportunities. Although urban poverty areas are typically rather central, their people are at an increasing disadvantage in job access. This partly reflects the fact that they are the least mobile group in the whole urban area, in terms of either work or change of residence. Many cannot afford cars and find even transit fares a serious financial burden. Overall home-to-work commuting speeds by most existing modes of transit are lower than by car, which restricts the feasible range of commutation. (Halving one’s commuting speed reduces by 75 percent the area that is within one hour’s travel time.)

The effect of decentralization on the urban poor is complex. Many of the jobs that promoted access to skill ladders and encouraged mobility for generations of European and other immigrants were going to the suburbs, or had already gone, while the concentrations of urban poor were growing in the nation’s central cities. The consequence of this has been described by some as a "dual" labor market, whereby many persons are trapped in a last-hired, first-fired class of jobs with little opportunity for advancement.

The suburbanization of whites has been a feature of urban areas for many years; however, as we saw in Chapter 7, evidence of significant suburbanization of blacks was first apparent in the 1970s. Some of the growth of black populations outside central cities during the 1970s may be the result of "spillover," rather than of suburbanization per Se. That is, as the number of central-city blacks increases, it is likely that black neighborhoods will simply be extended beyond the central-city boundary. As noted earlier, however, Table 13-2 indicates that the incidence of black poverty outside central cities changed little during the 1970s, while poverty among central-city blacks increased substantially. From this, one is tempted to draw the conclusion that suburbanization among blacks has been selective, just as it has been for whites; higher-income blacks have moved to the suburbs in sufficient numbers to overcome an adverse national trend in poverty that has been particularly difficult for blacks as a whole. Reduced discrimination and advances made by blacks in gaining better jobs may be enhancing their residential mobility within metropolitan areas. Also, suburbanization itself may be improving the job access of blacks and enabling more of them to move above the poverty level.

13.3.2 Some Policy Considerations

The magnitude of the urban poverty problem precludes a detailed discussion of related policies here. However, a subset of policy issues is explicitly spatial in nature and deserves at least some mention. We shall concentrate on policies for central-city poverty areas, which have come to be called ghettos.14

Since the most urgent need of poor populations is more jobs, policies to stimulate new business growth in and near poverty areas have been given a good deal of consideration. The task is not easy, since the prevailing trends of location are in the opposite direction, with increased emphasis on just those things that the inner-city areas lack: ample space for expansion, low taxes, and a community environment offering amenity, visibility, prestige, and quick access to circumferential and intercity highways. It can be surmised that a large permanent subsidy would be needed to entice enough private employers to locate near central-city poverty areas and employ wholly or mainly local residents; and that such large sums might better be used in other ways to provide improved job access.

A policy akin to "import substitution" had some strong adherents in the 1960s and early 1970s. Recommendations entailed assistance to ghetto entrepreneurs to establish small consumer-serving businesses within the area. The assumption was that such "black capitalism" can take advantage not only of an ample low-cost labor supply but also of a somewhat protected home market (that is, the ghetto consumers will prefer to patronize a firm operated and staffed by neighbors). It was also urged that the profits of such enterprises would accrue to ghetto residents and would, to a greater extent, be spent in the neighborhood. The importance of developing black entrepreneurial skills and financial backing, so that blacks can win a more adequate foothold on the middle and higher rungs of the business management ladder, was also recognized.

Unquestionably, the nurturing of a much larger cadre of black business managers and entrepreneurs, and the accumulation of capital and credit-worthiness by black-controlled firms, must play an essential part in redressing the wide interracial gap in levels of opportunity that exists today. At the same time, there are obvious limitations on what can be accomplished in the kinds of businesses that can be expected to survive within ghetto areas proper. Profitability is color blind; what is profitable for blacks would be equally profitable for whites. With respect to the actual creation of additional black employment, it is not realistic to expect much more to materialize than the equivalent of replacing whites now working in ghetto areas. Such a number would be small compared to ghetto unemployment. Moreover, empirical investigations have shown that the neighborhood multiplier effects created by additional employment and income in ghetto areas are extremely small.15

More recently, the merits of "enterprise zones" in poverty areas have been the focus of substantial debate.16  The idea is to create an open "free-market environment" in order to stimulate economic activities of all sorts. Thus the program would not be limited to activities serving the local market but also would hope to attract manufacturing and other activities to inner-city poverty areas. The incentives for relocation and local development include primarily (1) tax relief and (2) easing of government regulations.

Such programs seem to deny the real disadvantages of central-city locations that are so characteristic of urban areas, and it is difficult to be optimistic about their success. It is doubtful whether the possible savings afforded by tax exemption would be enough to match the economies associated with production and distribution in suburban locations, especially in light of the considerable body of evidence suggesting that taxes are not a powerful locational determinant.17

The effects of reduced government regulations are difficult to gauge. Some productivity gains can be expected, but their size relative to the competitive advantages of suburban locations is a matter of speculation. Further, this aspect of the subsidy involved in enterprise zones may well imply further concentration of "nuisance" industries (i.e., industries with relatively large negative side effects such as noise, dirt, or traffic congestion) in poverty areas.18 Thus the social and environmental costs of this policy may be substantial.

All the measures discussed above share a place prosperity approach, in that they focus on improving conditions and opportunities within the distressed area itself. This is not to say that such measures are misguided or unnecessary. But a complementary line of endeavor, involving opportunities outside central-city ghettos, must be considered also.

One approach has been to recognize the relatively long distances between ghetto areas and the areas of positive employment growth: a handicap compounded by inadequacy of public transit, low car ownership, generally low job qualifications, and discrimination. These component factors of the access problem were being attacked in various cities by the late 1960s or were the subject of serious proposals for government action. Special bus routes were established on a trial basis to take ghetto workers to job locations previously out of reach;19  programs were proposed for financing automobile purchase or rental by ghetto workers seeking to extend their commuting range; continuing public programs of education, training, and inducement to cooperating employers nibbled away at the problems of inadequate training and employer discrimination; and some progress was made in attacking the more serious and extensive racial discrimination practiced by unions.

Here, at least, the "people prosperity" side of the poverty problem is recognized more explicitly. With black suburbanization now a reality, many of the old concerns about removing barriers to black decentralization seem less pressing. However, job training and programs for the provision of high-quality basic education should be priority items on any list of policies designed to encourage mobility, even at the local or intraurban level.


Among the major urban problems covered in this chapter, transportation has a special claim to our attention—not because it is necessarily the most pressing or the most complex, but because it is the most fully identified with the economics of location and space, which is the province of this book.

Urban transportation in America today involves mainly the uses and requirements of the private automobile, and the serious problems confronting us emerge mainly from difficulties in locational accommodation to the very rapid adoption of this mode of travel. Data from the Census Bureau show that for metropolitan areas having a population of one million or more, over 80 percent of all workers commute to their jobs by car, truck, or van. Of these, the vast majority drive alone. Public transit is the principal means of transportation for only 11.9 percent of all workers in these cities.20

The twentieth-century locational adjustments required by the use of the automobile were even more drastic and far-reaching than those required in the nineteenth century by the advent of the railroad. In the United States at any rate, the speed of introduction of the new means of transport was somewhat greater in the case of the automobile. The changed conditions of transport apply to a wider range of distances, routes, and types of travel. A higher proportion of the population—approaching 100 percent—is directly affected. More potent and articulate political pressures are generated because of the greater number of parties directly involved. Coming at a later stage of economic development, the locational impact of the automobile was imposed on a larger complex of fixed facilities than was the impact of railroads; for that reason it created more functional and locational obsolescence of capital. Particularly relevant within urban areas is the fact that the automobile is not merely a conqueror of distance but, at the same time, is in its own right a major claimant for scarce space. A substantial part of the difficulty caused by automobile use in urban areas is precisely due to its large space requirements. Moreover, the automobile appears to be the chief culprit in the air pollution crisis that has threatened the very habitability of densely populated urban areas.

13.4.1 Some Transport Problems

One aspect of the urban transport problem shows up in the statistics of travel distances and times, not to mention the complaints of individual commuters. It seems that the search for quicker journeys, to work and to other destinations, has been in large part self-defeating. This is particularly true with regard to daily work trips in urban areas, both large and small. By and large, the advantages of speed, flexibility, and better roads have been offset by increased traffic and, most important, by a vastly wider separation of residences and work places. The average commuter travels greater distances in an American urban area than he or she did ten or twenty years ago but spends about as much time en route. Relative to the time spent at work, time spent in traveling to and from work has probably even increased. In addition, the trip is more costly. As to whether the strain or disutility of the trip is greater for the automobile driver or for the public transit rider, there appears to be no consensus; this is likely to remain a matter of personal taste. But up to the present, the direct consumer benefits of automobile ownership seem to involve not reduction of travel times but somewhat more spacious styles of living and a greater variety and frequency of recreational and other nonwork journeys.

A second aspect of the transport problem, affecting some of the people all the time and all of the people some of the time, is the emasculation of public transport services that has resulted directly from automobile competition and indirectly through dispersed residence and employment patterns fostered by highway transport. For example, rapid transit systems can achieve substantial economies of scale if large numbers of persons are concentrated along "trunk line" routes. A dispersed population means that volumes of traffic sufficient to generate these economies can be realized only if passenger collection systems or "feeder lines" are used. The time and expense involved for commuters in making changes from one bus line to another or from bus to rapid transit reduce the attractiveness of public transportation. As additional dispersion occurs, public transit is put at further disadvantage, worsening access for substantial groups of the population (especially the poor).

13.4.2 Approaches to Solution

In a theoretically perfect "transportation market," the person wanting transport would choose the most efficient mode and would be willing to pay for it up to the point where incremental benefits no longer exceeded incremental costs. Each kind of transport service provided by others to the user would be made available in response to demand, up to the point where incremental revenues no longer exceeded incremental costs of providing the service.

In the present urban setting, however, such an ideally efficient allocation of resources is an unattainable and therefore partially irrelevant goal. The obstacles to any easy attainment of an efficient solution lie partly in travelers’ assessments of their own costs, partly in the externalities involved in transport investment and traffic congestion, partly in the lack of coordination of public policies, and partly in the feedback effect of the supply of transport services and facilities on subsequent demand.

The costs of operating a private automobile have been variously estimated, depending on the type of car, roads, and traffic conditions; the allowances for tolls; and the distance driven per year. The Federal Highway Administration estimated the costs of owning and operating a car in 1979 at 24.6, 21.7, and 18.5 cents a mile for standard, compact, and subcompact models respectively.21  For a typical new car in that year, they estimated that gasoline, oil, and maintenance accounted for just under half these expenses; fuel per se represented only 26 percent of total costs. The remainder was attributable to fixed costs, such as depreciation, insurance, registration, and taxes.22

The commuter making a decision on whether to drive to work or use public transportation may be inclined to look just at the direct out-of-pocket costs associated with the specific trip; that is, fuel plus any parking fees or tolls involved. It may be reasoned that a car is needed in any case, so that expenses other than fuel and parking are fixed costs unaffected by car use and therefore properly ignored in the marginal decision. But maintenance, repairs, and insurance premiums are in fact affected by mileage driven; and in a growing proportion of households, the issue of having a second or even a third car is relevant. If the need for an additional car depends on whether or not a breadwinner drives to work, then obviously the whole cost associated with owning that added ear ought to be taken into account in the choice of commuting mode.

Even if the traveler were to weigh his own costs fully, a misallocation of resources in urban transport could result from a failure to charge him for the use of highways, parking facilities, or public transit in accordance with how much it costs to provide those facilities.

The building and maintenance of highways (including the necessary traffic control appurtenances) is necessarily a public function. It is financed, in the United States, by the proceeds of state and federal motor fuel taxes and license fees plus further funds from the public treasuries. Because of this, it is often argued that motor travel within cities and elsewhere is heavily subsidized, which would help to explain the growing extent of private automobile commuting and the decay of public transit services.

The existence and magnitude of such subsidy are extremely difficult to establish. A searching study by John R. Meyer, J. F. Kain, and M. Wohl in the early 1960s reached the conclusion that the user charges levied on motorists nearly if not wholly cover the costs of providing urban facilities for motor traffic except for regular travel on "local streets and roads" and peak-hour travel on high-cost urban expressways.23

There is not, however, general agreement that the subsidy element is inconsequential. Meyer, Kain, and Wohl argue that partial payment for local streets and roads out of general funds is not really subsidy, since such facilities would be needed regardless of whether private automobiles or public transit were used for trunk-line traffic. But since local streets and roads include everything that is not a state or federal highway, it is hard to believe that their widths, construction costs, and maintenance expenditures are in the long run really independent of the number of cars in operation. If such streets (or, say, everything beyond minimal two-lane access roadways) were built and maintained solely from charges on motorists, there would doubtless be fewer motorists, fewer highway commuters, and a smaller effective demand for freeways. There would also be better public transit.

The exception noted by the same authors in regard to peak-hour travel is a vital one. The size and design of a roadway have to be geared to maximum rather than average traffic load, and in this sense the incremental cost of providing for one more car is many times greater in the rush hour than at off-peak hours. This principle is, of course, equally true for public transit services.

Congestion costs are a prime example of the multifarious externalities of urban economies that pose a challenge to the pricing system and the economic insight of public authorities.24  "Marginal travelers" in the rush hour are to some extent penalized for their timing by having a slower and less pleasant journey; but they are not charged anything for the discomfort and delay they impose on the rest of the traffic stream. For example, rush-hour travelers as a group are surely more responsible than the off-peak driver for costs of the next added expressway lane.

One approach to this problem is to internalize the cost of peak travel; that is, make rush-hour travelers pay at least some of the extra costs for which they are responsible. Estimates of such costs vary substantially from city to city and even within cities. As an indication of their magnitude, however, one study of urban transportation in San Francisco recommended congestion tolls of 16.3 cents per mile (in 1973 prices) for peak hours of the week in the central city.25  Ingenious suggestions have been formulated that would make it possible to assess and collect congestion tolls, both for public transit and for private automobiles. For example, individualized electronic signals emitted by cars could be recorded at short range by receivers along congested routes, appropriate charges automatically figured by electronic computer, and bills periodically rendered to the car owner.26

The role of various levels of government in financing highway and transit improvements also has affected the balance between private automobile and public transit. Federal and state highway authorities enjoy their own special revenue sources. In 1980, motor fuel tax collections by all levels of government amounted to $14.7 billion, while state and local motor vehicle and operators’ license fees brought in an additional $5.7 billion.27  These sources are ready-made and powerful mechanisms for channeling money into urban streets and expressways; there is no corresponding source of public funds for public transit.

Another factor here is the sharing of expenses among various levels of government. Since World War II, the state and federal governments have shouldered increasingly large shares of the financial responsibility as long-distance intercity and interstate routes assumed more importance and the cost of road building outran the revenue-raising powers of local governments. Presently, up to nine-tenths of the cost of an urban freeway can be covered by federal money and the rest by state money. Even though all, or nearly all, of the total cost is ultimately met from state and federal taxes on vehicles and fuels, the fact that most of the funds come from Washington naturally makes such expressways appear to the local and state governments and their citizens as goodies to be won, rather than as investments to be judiciously pondered.

Bias toward private automobile transport is also encouraged by current practices concerning the provision of public parking facilities in downtown areas. Some space is provided free at the curb, an additional amount at the curb for quite low fees, and a growing amount in garages built by municipal parking authorities and either operated publicly or leased to private operators. An element of subsidy is implied, of course, by the fact that municipalities are in the parking business at all. The argument advanced for this activity is that there is a demand for the service which could not otherwise be met; but this argument can involve a degree of circularity. The demand for downtown parking depends on how easy it is for people to drive into the downtown area; thus each new expressway creates fresh evidence in support of the parking authority’s desire to expand. At the same time, provision of easier and cheaper parking downtown makes more people want to drive there, producing fresh evidence in support of the highway planners’ projects. Since two or more separate agencies and budgets are involved, coordination is, at best, difficult to achieve. It is a little reminiscent of the man who took another piece of bread in order to finish his butter, and then another piece of butter in order to finish his bread. . .

Perhaps a rational policy would be to determine first the maximum number of private automobiles that can efficiently circulate within the downtown area, given the rather inelastic limits of downtown street space. This could then be translated into needed parking capacity, and parking fees could then be set at such a level as to discourage any additional downtown trips. Such a policy, however, would require a degree of coordination and bureaucratic restraint that apparently does not widely prevail.

The rate schedules for parking are likewise open to criticism on economic grounds. A reasonable schedule of rates would heavily penalize the all-day parker who comes in at the peak hour in the morning and leaves at the peak hour in the evening, and would offer much lower rates to the short-time off-peak parker, who adds little to traffic congestion but much to the sales of downtown merchants. In practice, however, the opposite principles are generally followed. Hourly rates are lowest for the all-day parker, generally a rush-hour commuter who is the real culprit in creating the demand for more highway and related facilities; and rates are generally designed to promote fullest use of the parking facilities, regardless of the effect on traffic.

A minor but interesting misallocation of resources can arise from the provision of parking space that is free or below cost by business establishments or institutions for their employees or patrons. Space is not a free good, so the cost of a "free" parking lot is in effect shared among all the employees or patrons, including those who do not use the lot. Transit riders and pedestrians are thus made to subsidize drivers. Urban universities, for example, are always under strong pressure from a majority of the students and staff to furnish subsidized parking space. It may be overlooked that this policy really amounts to a special penalty on the members of the university community who do not use cars to get to the campus; and these people may well be less affluent than those who enjoy the subsidy.

The combination of forces described above contributed to a steady decline in public transit service levels throughout the 1960s and early 1970s.28  Transit costs have been rising steadily. Although fares have also increased, they do not come close to covering the total costs of providing transit services.29  In response to this and formidable political pressure from urban constituencies, Congress passed the Urban Mass Transportation Act of 1964. Capital grants programs under this act were operating at a rate of approximately $2 billion dollars a year in the latter half of the 1970s, and more recently they have been in the neighborhood of $2.5 billion to $3 billion per year. The federal subsidy for operating expenses has always been substantially less than $1 billion per year,30  although local and state subsidies have been common.

The small size of these commitments relative to state and federal highway funds reveals a striking bias in public investment. The apparent historical and political reasons for it are interesting. State, and especially federal, aid to highway building has been defended on two quite separate grounds. One is fiscal: Local sources of taxation have simply not been adequate to finance all of the public services and investments demanded. The other reason is geographical: Intercity and interregional highways serve much more than a local need.

In financing intrametropolitan expressways, the fiscal justification is, of course, applicable. The same justification could be invoked in support of state and federal aid to urban transit, since such transit is recognized as an essential public service in any sizable urban area, and public transit firms have long been strictly regulated as public utilities. But there has been a good deal of delay in recognizing that unaided private enterprise can no longer compete effectively with automobiles operated on the public highways, and government has been slow to accept any responsibility. It has been much easier (though harder on the patrons) to let the private transit firms sink into bankruptcy before finally taking over their equipment at junk prices.31

The geographical justification for state and federal aid is not legitimately applicable to the transport within metropolitan areas with which we are concerned in this chapter. But in terms of governmental organization and legislative authority, roads are roads. State and federal aid does not stop at the city or metropolitan boundary but carries a predominant share of the burden for major arteries and particularly expressways within urban areas serving local needs. It seems obvious that urban transit facilities and services should be equally eligible for outside financial support.

The question of subsidies is complex indeed, and their effects on resource allocation can be significant. If all transport technologies (private and public) were priced so as to cover the marginal social costs imposed by transport users, the efficiency of resource allocation would be improved. In such a world, subsidies would serve two distinguishable ends. First, for technologies characterized by increasing returns to scale, such as public transit, setting price equal to marginal cost would necessarily imply operating deficits (marginal cost is always less than average cost when scale economies are realized). Thus subsidies would be necessary to ensure continuation of vital services. Second, subsidies would serve as a mechanism for income redistribution, ensuring that those most in need were provided with basic services. Hence efficiency and equity would each be given explicit consideration.

Short of implementing such a set of policies, however, we are left to recommend that the nature of public subsidies and their effects be fully recognized in a balanced transport program. If highway and transit investments were both financed in the same way, it would be feasible and eminently logical to pose the investment decisions to voters as alternatives, explicitly spelling out the tradeoffs involved. For example, the benefits of a projected rapid-transit route could be assessed in terms of how much highway investment would be saved as a result. Even more broadly, one might try to include the savings in private automobile ownership and operating costs; and more broadly still, one could evaluate the long-run implications of the decision in terms of the transportation costs involved in a dispersed, road-oriented metropolitan complex compared to those in a partially transit—oriented spatial pattern.32  Our previous discussion explains why the issue is almost never posed in such terms. And unless voters are asked the right questions, they can hardly be expected to give the right answers.


Another major problem, closely related to those of transport, poverty, and declining levels of activity in central business districts, is fiscal distress in central cities of metropolitan areas. Strain on fiscal resources of local governments is evidenced by rising local tax rates, growing dissatisfaction with the quality of public services, and rapidly rising reliance on state and federal financial support and programs.

The decentralization of economic activity has been a major contributing factor to these trends. Suburbanization of middle- and upper-income families, decreasing population, and coincident shifts in employment have meant that the tax base of many central cities has been weakened substantially. However, central-city public expenditures have been slow to respond by adjusting downward. In part, this is due to the fact that these governments have always provided some services for the metropolitan area as a whole. Museums, parks, and zoos are there for all to use and enjoy; they are rarely restricted to city residents. Additionally, as we found earlier in this chapter, the majority of urban poor reside in central cities, and the rate of poverty in central cities increased substantially during the 1970s (see Tables 13-1 and 13-2). The provision of public services to this segment of the population also has added to the burden of local governments.

The recent growth of nonmetropolitan areas and the rapid shift of economic activity from the Northeast and North Central regions of the country to the South and West have contributed to the difficulties imposed by decentralization on cities in declining regions. Thus the fiscal crisis we observe results from a complex mixture of economic factors. Policies formulated to cope with problems stemming from decentralization may be quite inappropriate as mechanisms for dealing with problems associated with the transition of economic base in declining but highly industrialized urban areas.

We shall turn first to specific consequences of central-city fiscal problems and then go on to discuss policy options. We shall look also at some related issues from a regional development perspective.

13.5.1 Some Economic Effects of Fiscal Distress

William H. Oakland has identified several specific consequences of central-city financial problems that concern issues of resource allocation as well as equity.33

Since public expenditure in central cities has been relatively insensitive to population decline, the weakening of the local tax base in central cities (especially property values) has meant rapidly rising tax rates. By contrast, the tax base in suburban areas has been growing, and the tax rates have increased more slowly in these areas. Location decisions certainly reflect this fiscal disparity. While this has meant tax savings for individuals and businesses moving to the suburbs, it has added to the tax burden of those remaining in the city. The net result has been an increase in total transportation costs and wasted resources for the economy as a whole.34

Another resource allocation issue mentioned by Oakland concerns the provision of "public goods." By definition, the provision of pure public goods by any local authority would mean that all metropolitan-area residents could enjoy associated benefits. The benefit-cost calculus by which optimal levels of provision for such goods are determined theoretically does not depend on the distribution of population between city and suburbs. If decentralization results in a diminished willingness and ability of central-city governments to pay for such goods, resource misallocation is implied.

Equity issues also are involved. A substantial share of the cost of providing public services to central-city poor is borne by middle- and upper-income city residents. Thus our cities are clearly playing an important redistributive role in the economic system. In Oakland’s view, income redistribution is a matter of concern for the whole society, and the social benefits of redistribution do not stop at the central-city boundary. Thus "equity would require a household’s redistributive burden to be independent of the community in which it resides."35

13.5.2 Some Problems and Policy Responses

Each of the consequences of urban fiscal distress mentioned above can be traced to a mismatch between the area of concern for specific public services and the area responsible for financing these services.36  In this sense, the spatial dimension of related policies lies in recognizing that public service needs can be categorized as being of local, metropolitan, regional, or national concern.

Metropolitan Needs for Public Services. Since some services that are typically provided by central-city governments are important to the metropolitan area as a whole, their planning, operation, and financing should be carried out with that perspective in mind. Water and sewer systems, intrametropolitan highways and transit, airports, large metropolitan outdoor recreation areas, and some types of local environmental protection seem to fit this category. Fairly strong arguments could be made for adding to the list such services as police and fire protection, libraries, and museums.

For these activities, the economies of scale and the need for coordination are so strong that independent efforts by individual municipalities produce wasteful duplication, inefficiently small facilities, and much bickering. Metropolitan governments, however, are virtually nonexistent in the United States and do not seem likely to proliferate soon. In default of an appropriate existing unit of government, the most practical recourse seems to be the creation of special-purpose metropolitan authorities or districts, with the constituent cities and towns sharing the costs, benefits, and ultimate control. Such districts are particularly common in cases of water supply, sewerage, and rapid transit services, and there are also a number of metropolitan park districts; more fragmentary mergers of two or three adjacent small municipalities or rural school districts also exist for special purposes.

Higher Levels of Government as Providers of "Local" Services. When the public services in question are clearly a metropolitan responsibility, the role of the state or federal government should be limited. If no suitable metropolitan fiscal unit with adequate taxing power exists, however, a higher level of government (state or federal) may serve as an expedient substitute. Nevertheless, our earlier discussion of the prevailing bias in aid to intraurban highways compared to transit underlies the necessity of a clear understanding of the appropriate role of external financing of those services that benefit a single metropolitan area rather than the whole country.

In some instances, the area of concern extends well beyond the metropolitan-area boundary. For example, we have argued previously that it is inappropriate as a matter of equity for local governments to shoulder the responsibility for income redistribution. On this basis, it is easy to recommend that the cost of welfare services should be the responsibility of state and federal governments, rather than individual cities. In practice, the public financing of welfare does follow this structure; however, as Oakland points out, similar justification exists for extending support to local governments for the public services consumed by the poor.37 Equity considerations also argue for reductions in the local role in financing primary and secondary education. These services are now supported primarily from local property tax receipts, and there is an obvious danger of inequity as the structure of property values changes with decentralization.

User Charges for Public Services. The fact that a service is provided by a public agency does not mean that it has to be provided free and thus paid for by the taxpayers as a group. On the contrary, there are cogent arguments (to be found in any elementary economics textbook) for applying the pricing mechanism as far as is feasible as a check on demand and a guide to supply. The exceptions are cases in which it is technically unfeasible or socially undesirable to charge individual users (such as public safety and basic education).

The desirability of applying the user charge principle more widely to transport facilities and services has already been suggested. If users of street space, public transit, and curb or off-street parking space were charged according to the incremental costs that they impose on the public authority, depending on the time and place of use, a more efficient use of scarce space and transport investment could be achieved. Charges for such utility-type public services as sewerage and water supply could also be geared more closely than they are to the incremental cost of providing such service to the individual user or the individual neighborhood.38

User charges placed on those services most commonly used by non-residents could be an effective mechanism for reducing fiscal disparity between the city and suburbs. By thus reducing the economic incentives that encourage suburbanization, user charges would promote a land-use pattern more compact in character and conducive to lower average cost of all utility-type services, including transportation.

Intergovernmental Financial Assistance. Direct aid from higher levels of government has had a major impact on local government finances. The most important program of this type is known as General Revenue Sharing (GRS) and was enacted in 1972. Its purpose is to provide fiscal support from the federal government to state and local governments in the form of unrestricted grants. Generally, funds that had been designated for specific programs, such as housing, urban renewal, or public transportation, are combined under this program and given to lower levels of government to spend as they see fit.

To the extent that such aid is directed specifically to central cities most in need, it can go far toward relieving the problems of resource allocation and equity mentioned above.39  Grants of this sort can, for example, ensure that local governments have the financial resources to make public goods available to all persons in a metropolitan area. They also have the potential of addressing the equity problems that arise when local governments must assume responsibility for the provision of public services to the poor.

As mechanisms for correcting locational distortions, problems associated with the provision of public goods, and redistributional inequities, it is likely that GRS and other such programs will fall short of their task. Part of the reason lies with existing political pressures, which encourage the dispersal of such funds to many localities. Part lies also in the fact that we have come to rely on grants programs to meet a wide range of objectives. The importance of each of these factors can be brought out if we examine the character of federal grants programs as a political response to urban development problems—that is, problems faced by urban areas most seriously affected by regional shifts in economic activity.

13.5.3 Federal Programs for Urban Development

As the General Revenue Sharing legislation was being written, one of the most hotly contested issues was that of the mechanism by which grants would be distributed regionally and to various cities and towns. This was basically a matter of choosing between two alternatives. The first would target funds to specific areas on the basis of "need," however defined. The second would spread funds as broadly as possible, so that virtually every political jurisdiction would be assured of participation. As Paul R. Dommel puts it, "The coalition-building process leading to enactment of general revenue sharing resulted in entitlements to all states and all units of general purpose local government, nearly 39,000 recipients. "40  Targeting was thus a second-level priority.

Because general revenue sharing funds were so widely distributed, the political costs of altering the distributional formula to favor urban areas more explicitly would have been enormous.

The Community Development Block Grant Program. The federal response to this situation was the Community Development Block Grant (CDBG) program enacted in 1974, which has been described as "urban revenue sharing."41  It consolidated a number of programs carried out by the U.S. Department of Housing and Urban Development (HUD) such as urban renewal, model cities, and neighborhood improvements. Though CDBG funds had to be used in projects included under the programs replaced by the CDBG program, local governments had more latitude in choosing how to spend these funds.

Unlike general revenue sharing, the targeting of funds is given a high priority under the CDBG program; thus "need" is defined in terms of the objectives of the program. To quote Harold L. Bunce and Norman J. Glickman:

The 1974 Act listed several national objectives and also stipulated that activities financed with CDBG funds must benefit principally families with low or moderate income, or aid in the prevention or elimination of slums, blight, or other urgent community development needs.42

Accordingly, the distributional formula now in use for this program is sensitive to slow population growth, the incidence of poverty, and the age of housing. As one might expect, by these criteria older industrial cities rank highly and are particularly favored by the CDBG formula.43

The Urban Development Action Grant Program. The Urban Development Action Grant (UDAG) program provides direct capital subsidies to encourage private investment in distressed urban areas. Unlike indirect subsidies to capital such as the public provision of sewer systems, UDAG funds are meant "to provide local jurisdiction with ‘up-front’ money to help them capture and ‘leverage’ private investment when it is ‘live’ or ready to be committed; hence the term Action Grant."44 Thus applications to HUD for UDAG funds include commitments from private investors that they will go ahead with a specific project if a subsidy is made available. The final package of incentives may include state and local government contributions to the private investors as well as the federal UDAG funds.

Here the intent is to create jobs by initiative of the private sector, one consequence of which would be to strengthen the tax base of the local community. Thus areas with out-migration and stagnating or declining tax bases are given high priority under this program; but the criteria for designation as a distressed area are sufficiently broad so that "In Fiscal 1978, 66 percent of all central cities in the United States were eligible for the UDAG program, as were a smaller percentage of all suburbs and nonmetropolitan areas."45  Eligible places are concentrated in the Northeast and North Central regions, which together account for 42 percent of UDAG funds.46

The CBS program is by far the largest of the "grants programs operated by the federal government; yet because its funds are widely distributed, it is an inefficient mechanism for dealing with the resource allocation and equity problems that accompany fiscal distress in central cities. CDBG and UDAG have been targeted at such areas, but these are development programs that happen to relieve some of the problems mentioned earlier.

The characteristics of CDBG and UDAG programs expose a great deal about what Americans learned and failed to learn from the experiences of the Economic Development Administration and the regional commissions, as discussed in Chapter 12. In this respect we might note some similarities and differences between regional programs such as those and the more recent "urban" development programs.

All of these programs can be described as "place prosperity" directed, with "worst first" priorities; distressed areas are defined, and then funds are targeted to those areas.47  Thus in the United States the essential roles of human resource development and out-migration in economic adjustment have not yet been fully recognized. Though some contracyclical programs, such as the one implemented during the recession of 1981-1983, have included job retraining provisions, our longer-term strategies continue to eschew this option.

One of the major differences between the earlier programs and those directed toward urban areas concerns the organization of development efforts. Although the planning districts and regional commissions actually established under the Public Works and Economic Development Act of 1965 had serious faults (Section 12.7), the development programs associated with these efforts recognized a need for planning that went beyond immediate political boundaries. In contrast, urban programs treat individual political jurisdictions as if they were always the best development planning regions. Although the wide latitude that local governments have in spending CDBG funds enhances this program’s value as a mechanism for dealing with fiscal problems, this characteristic detracts from its value as a development program; here, as with the UDAG program, one need not justify funding for a particular project on the basis of an overall development strategy.

It is rarely the case that a single policy can achieve diverse ends. Policy makers must recognize that problems concerning regional development demand explicit attention, as do the fiscal problems specific to urban areas (which may have little to do with development per se). A coordinated federal-regional response to the metropolitan and nonmetropolitan problems of the 1980s seems unlikely. Instead policies continue to rely on federal largess, offered through a political system that makes it difficult to avoid partisan interests.


We have covered four important problems of present and foreseeable urban life—with emphasis throughout on the spatial aspects, wherein the special interests and competences of the regional economist are particularly relevant. It should now be clear that judgments about goals and policies have to be made in a broad context that recognizes at least the major interrelationships among poverty, downtown areas, transport, and public finance.

Having these insights, however, does not endow even the most learned urban economists with a set of "right answers." What, then, is their useful role? They can contribute to a realistic and objective presentation of the implications of alternative courses of development, especially in terms of spatial patterns, access, neighborhood character, public services, and fiscal burdens, so that voters will know what they are really voting for and decision makers will know what problems they are creating for themselves. They can use the economist’s criterion of efficiency to expose hidden costs, externalities, and demonstrably self-defeating or inconsistent combinations of policies. Finally, on the basis of their insights into the nature of the process of urban change, they can advocate flexibility and variety as basic aims on a par with the conventional objectives of high income, low unemployment, equity, and security.48

Recognition of the value of flexibility follows from recognition that an urban economy is a live organism. Thus any formal design for the physical layout of an urban area should be challenged with the question of what happens in response to the forces of change discussed earlier in this book: growth, aging, economic improvement, and the unforeseeable variety of changes in technology. No design can be judged until pictured in a state of adjustment. Our most acute distresses, and our most intriguing opportunities, are accompaniments of adjustment.

A fundamental urban value that is partly distinct from flexibility is variety. The prime function of a city is to provide opportunities for the widest possible variety of contacts. The employer wants to be able to tap a labor market and find, on short notice, the right skills and aptitudes; the job seeker wants to find a job that fits his or her abilities, interests, and personal preferences; the business firm wants to be able to choose from a wide range of technical, advisory, transport, and marketing services; the shopper wants a large selection of wares from which to choose; the homeseeker wants to find a neighborhood and a house tailored to his or her needs; and so on. Wide freedom of choice in these and other respects is unquestionably both desirable and conducive to the best utilization of the community’s resources, quite aside from any other merits or faults that cities may have.

Sheer size is associated with increased latitude of choice. A larger city contains not merely more of each kind of activity and opportunity but more kinds, permitting a closer and more efficient fit of supply to demand. But size is not the only determinant of variety—this is a characteristic that can vary rather widely among cities of a given size, and one that can be enhanced or impaired by technical change or other factors. Let us merely note here a few of the many ways in which urban variety of choice relates to the spatial pattern.

A conscious policy of fostering variety of opportunity and choice will entail efforts to increase interoccupational, interindustry, and spatial mobility. Programs of education, training and retraining, and improved placement organization are directed this way. These developments, in addition to providing greater spatial mobility, more effective communication, and progress in softening racial and other discriminatory barriers, should widen effective job choice—making urban labor markets less imperfect as markets, while at the same time increasing interregional mobility and choice.

Two spatial factors are principally involved in widening job choices within urban areas: reduced residential segregation and improved transportation. Both are especially applicable to low-income, low-skilled, and nonwhite members of the labor force; these are the people for whom and from whom the greatest economic benefits will accrue in the widening of urban residential and work choice and the fuller utilization of manpower resources that this makes possible.

The above suggests that intraurban transportation (private, public, or both) has a case for subsidy (though not necessarily an ever-increasing amount of subsidy).49  On the basis of the general virtues of widened choice, one could argue for preserving and developing a wide range of densities of development and a wide range of modes of intraurban transport. These could include a core-and-radial configuration with high-density, high-speed transit services on special rights of way in one setting, and a more even dispersion, replicated subcenters, and a de-emphasized central core with low-density, automobile transport in another.50

Interregionally, the widening of job choices would be greatly enhanced if government-operated employment (job-hunting) services were organized on a national basis rather than by individual states or municipalities. Given the rapid rate of technological change in electronic data transmission, such a change is surely more feasible now than in the recent past.

Another aspect of variety in the urban pattern is variety in levels and "styles" of public services. The desire of small suburban municipalities to preserve their independence is very strong; this is related to but not identical with their desire to preserve homogeneity in such characteristics as race, income, or religion. We cannot consistently condemn their resistance to annexation or metropolitan government while still recognizing the value of keeping the latitude of choice of environments as wide as possible.

The difficulty, and the challenge to administrative ingenuity, comes in reconciling diversity and local pride with a suitable degree of coordination in basic services of common importance to the whole metropolitan area—such as water management, health services, higher education, and transport.

We are still groping for an answer to this problem. Apparently what a large urban area needs, for optimum functional efficiency and satisfaction, is great heterogeneity and diversity on a macrospatial scale; but this is associated in practice with homogeneity on a microspatial scale.51


This chapter deals mainly with the spatial aspects of four urban problems: downtown obsolescence, poverty, transportation of people, and fiscal distress in central cities.

The drift of activity from downtown to outlying areas was observed, and some explanatory factors suggested, in Chapter 7. Additional factors include traffic congestion and the loss of convenience and amenity for pedestrians in central areas—much of which is associated with the relatively large space requirements of the private automobile.

High-density downtown areas are believed to have a high, perhaps unique potential in terms of external economies and other benefits derived from variety of direct personal access. More adequate exploitation of these potential benefits, however, awaits innovative redesign of downtown spatial structure and means of circulation, with focus on the convenience of the pedestrian.

Poverty in the United States is concentrated in metropolitan areas, and its incidence is particularly high among blacks. The factors contributing to decentralization within the nation’s large cities have affected the poor significantly. One important aspect of decentralization has been the movement of jobs to suburban communities, which has hindered the opportunities open to the central-city poor. Some policies that have been suggested for encouraging the growth of employment in urban ghettos do not give sufficient recognition to the powerful locational forces governing the trends toward decentralization within urban areas.

General adoption of automobile transport has affected in one way or another the whole range of urban problems. Densities of settlement have been greatly reduced, resulting in generally longer commuting journeys and other types of trips. Access problems for nondrivers (including many of the poor) have been aggravated. The potential contact advantage of downtown areas has been dissipated to a major extent.

Efforts to avoid or mitigate such undesirable side effects of this revolution in transport should take account of distortions in the market for urban personal transport services. It has been argued that distortions biasing decisions toward still greater reliance on private transport arise from (1) failure of individual travelers to evaluate their driving costs fully; and (2) public policies on financing and pricing of roads, parking facilities, and other facilities and services that involve net subsidies to highway commuters. The resulting emasculation of public transport in American cities has apparently contributed both to the decay of downtown areas and to the uniformity of residential density and character over large areas.

A fourth major urban problem has been the increasing inability of municipal governments to finance the services that their residents, workers, and visitors demand. Fiscal difficulties have been especially acute in the central cities of metropolitan areas. Suburbanization has weakened the tax base of many cities, and recent population shifts have added to this problem. Fiscal disparities between central cities and suburbs result in resource allocation and equity problems. These can be mitigated to some extent by various policies. One of the most important of these policies has been direct aid from the federal government in the form of grants.

One of the greatest challenges facing urban economists and planners is the need to reconcile and coordinate metropolitan-area interests without sacrificing the legitimate diversity of community life styles and aspirations. Variety of choice for the individual should in fact be one of the chief ultimate objectives for urban planning and public policy.



Congestion tolls

Congestion costs



Anthony Downs, Urban Problems and Prospects, 2nd ed. (Chicago: Rand McNally, 1976).

John F. Kain and John R. Meyer, "Transportation and Poverty," in John F. Kain (ed.), Essays on Urban Spatial Structure (Cambridge, Mass.: Ballinger, 1975), pp. 341-352.

John R. Meyer, J. F. Kain, and M. Wohl, The Urban Transportation Problem (Cambridge, Mass.: Harvard University Press, 1965).

Peter Mieszkowski and Mahlon R. Straszheim (eds.), Current Issues in Urban Economics (Baltimore: Johns Hopkins University Press, 1979).

William H. Oakland, "Central Cities: Fiscal Plight and Prospects for Reform," in Peter Mieszkowski and Mahlon R. Straszheim (eds.), Current Issues in Urban Economics (Baltimore: Johns Hopkins University Press, 1979), pp. 322-358.

Arthur F. Schreiber and Richard B. Clemmer, Economics of Urban Problems: An Introduction, 3rd ed. (Boston: Houghton Mifflin, 1982).

Mahlon R. Straszheim, "Assessing the Social Costs of Urban Transportation Technologies," in Peter Mieszkowski and Mahlon R. Straszheim (eds.), Current Issues in Urban Economics (Baltimore: Johns Hopkins University Press, 1979), pp. 196-232.

Raymond Vernon, Metropolis 1985 (Cambridge, Mass.: Harvard University Press, 1960).



1. See Harry W. Richardson, Regional Economics (Urbana: University of Illinois Press, 1978), pp. 281-289, or a more detailed discussion of the transition in regional problems and policies.

2. See Section 7.7.

3. In Julius Caesar’s Rome, vehicles were excluded from the continuously built-up area during the daylight hours in an effort to cope with traffic jams. Faded photographs of Fifth Avenue in horse-and-buggy days show it crammed from curb to curb in the rush hour.

4. For a suggested "hierarchy of CBD land uses and land values," identifying a series of specific business activities and the ranges of land values that they can support, see Larry Smith, "Space for the CBD’s Functions," Journal of the American Institute of Planners, 27, 1 (February 1961), Table 4, p. 38.

5. This suggestion is introduced simply as provocative speculation. John R. Meyer, J. F. Kain, and M. Wohl, The Urban Transportation Problem (Cambridge, Mass.: Harvard University Press, 1965), Chapter 2, expect freight terminals to move to beltway junction locations, and we do not dispute the reasonableness of that projection.

6. See, for example, three sources cited in earlier chapters: Robert M. Lichtenberg, One Tenth of a Nation (Cambridge, Mass.: Harvard University Press, 1960); Benjamin Chinitz, "Contrasts in Agglomeration; New York and Pittsburgh," American Economic Review, 51, 2 (May 1961), 279-289; and Harry W. Richardson, Regional Growth Theory (London: Macmillan, 1973).

7. See Section 13.4 and also E. M. Hoover, "Motor Metropolis," Journal of Industrial Economics, 13, 3 (June 1965), 177.

8. A family of four may be comprised of two parents and two children, four adults (two or more children over the age of eighteen), or other such combinations, and poverty standards have been established for each of these. Thus the "average" referred to here is taken across all such standards for a family of four.

9. U. S. Bureau of the Census, Current Population Reports, Series P-60, No. 138, Characteristics of the Population Below the Poverty Level: 1981 (Washington, D.C.: Government Printing Office, 1983), p. 1.

10. Ibid., Table 1, p. 7.

11. Ibid.

12. See John F. Cogan, "The Decline of Black Teenage Employment: 1950-1970," American Economic Review, 72, 4 (September 1982) 621-638.

13. See Otto A. Davis and Andrew B. Whinston, "The Economics of Urban Renewal," in James Q. Wilson (ed.), Urban Renewal: The Record and the Controversy (Cambridge, Mass.: MIT Press, 1966), pp. 50-67.

14. The term "ghetto" implies ethnic segregation rather than poverty per se, and was originally applied to those parts of Italian cities to which Jews were confined. The first ghetto was established in 1516 on Ghèto (Foundry) Island in Venice.

15. For a sobering appraisal of programs aimed at stimulating new business enterprises in ghettos, see Sar Levitan, Garth Mangum, and Robert Taggart III, Economic Opportunity in the Ghetto: The Partnership of Government and Business (Baltimore: Johns Hopkins University Press, 1970). See also William H. Oakland, F. T. Sparrow, and H. L. Stettler III, "Ghetto Multipliers: A Case Study of Hough," Journal of Regional Science, 11, 3 (December 1971), 337-345.

16. See Peter J. Ferrara, "The Rationale for Enterprise Zones," Cato Journal, 2, 2 (Fall 1982), 361-371; and Otto A. Davis and Denise DiPasquale, "Enterprise Zones: New Deal, Old Deal, or No Deal" Cato Journal, 2, 2 (Fall 1982), 391-406.

17. See Davis and DiPasquale, "Enterprise Zones," p. 397.

18. Raymond J. Struyk and Franklin J. James, Intrametropolitan Industrial Location (Lexington, Mass.: Lexington Books, D. C. Heath, 1975), pp. 115-122, examines patterns of intraurban location for manufacturing activities in a sample of four cities and finds that activities of this type may be especially attracted to poverty areas.

19. For an account of an unsuccessful attempt along these lines in St. Louis and some indication of the difficulties involved, see John M. Goering, "Transporting the Unemployed," Growth and Change, 2, 1 (January 1971), 34-37.

20. These percentages are calculated from data published in the U.S. Bureau of the Census, Statistical Abstract of the United States. 1982-1983, 103rd ed. (Washington, D.C.: Government Printing Office, 1982), Table 1079, p. 622.

21. See G. Kulp, D. B. Shonka, and M. C. Holcomb, Transportation Energy Conservation Data Book. Edition .5 (Oak Ridge, Tenn.: Oak Ridge National Laboratory, November 1981), pp. 2-28.

22. Ibid., pp. 2-29. These estimates represent a ten-year average of costs per mile for a new car purchased in 1979. Estimates of fixed costs include garaging, parking, and tolls, although a portion of each could be classified as variable costs.

23. Meyer, Kain, and Wohl, Urban Transportation, especially Chapter 4. A more recent study, by Mahlon R. Straszheim, "Assessing the Social Costs of Urban Transportation Technologies," in Peter Mieszkowski and Mahlon R. Straszheim (eds.), Current Issues in Urban Economics (Baltimore: Johns Hopkins University Press, 1979), pp. 196-232, also finds that capital costs that can be attributed to private auto use are small. Straszheim estimates that roadway land and construction costs, defined on a long-run average cost basis, add only 1.8 cents per mile (in 1975 prices) to automobile costs.

24. Congestion costs are the most important negative externality associated with auto use, but others are also significant. Straszheim. ‘Social Costs," p. 214, estimates that congestion costs account for nearly 70 percent of the total costs associated with such externalities. He attributes the remainder to pollution, right-of-way costs (noise, smell, etc.), and construction dislocation.

25. Theodore E. Keeler and Kenneth A. Small, The Full Cost of Urban Transport, Part 3 (Berkeley, Calif.: Institute of Urban and Regional Development, University of California, July 1975).

26. See William S. Vickrey, "Congestion Theory and Transport Investment’, American Economic Review, 59, 2 (May 1969), 251-260; and Vickrey, "Current Issues in Transportation,’ in Neil W. Chamberlain (ed.), Contemporary Economic Issues (Homewood, Ill.: Irwin, 1969), pp. 185-240. Vickrey led the way in developing the theory of congestion tolls and in working out practical ways of assessing and collecting them.

27. U.S. Bureau of the Census, Statistical Abstract of the United States: 1982-1983, 103rd ed. (Washington, D.C.: Government Printing Office, 1982), Table 466, p. 276.

28. Revenue passengers carried by public transit dropped steadily from 7521 million in 1960 to 5643 million in 1975. There has been a small but significant rebound in public transit service by this measure in subsequent years. See U.S. Bureau of the Census, Statistical Abstract of the United States: 1982-1983, 103rd ed. (Washington, D.C.: Government Printing Office, 1982), Table 1080, p. 623.

29. Straszheim, "Social Costs," pp. 199-204.

30. The source of this information was correspondence from the U.S. Department of Transportation, Washington, D.C.

Because capital expenditures have been favored by the financing arrangements for transit systems and highways, substantial building programs have been undertaken without adequate planning for future maintenance. This has placed the current operating budgets of some states and localities under serious strain.

31. The Port Authority of New York is a good example of the reluctance of local public authorities to assume responsibility for really supporting local transit. The Port Authority enthusiastically built and operated profitable bridges, tunnels, and a central bus terminal but refused to help salvage any form of rail transit (on the grounds that its overall earnings position would be impaired) until it was finally pressured into taking over the trans-Hudson tubes on a "just this once but never again" basis. For a critique of local-government posture toward private transit firms, see E. M. Hoover, "Motor Metropolis," Journal of Industrial Economics, 13, 3 (June 1965), 177-192.

32. Vickrey argues that the usual methods of evaluating costs and benefits of alternative types of urban transport have a built-in bias in favor of modes that require large amounts of space, and against "land-saving" modes (mass rapid transit). Briefly, his argument runs as follows. The differential access advantages of urban sites are not fully reflected in rent bids and land prices, since part of the benefits of proximity accrue to parties other than the occupier of a given site—it is in fact these mutual or external economies of proximity that constitute the main basis of urbanism. Since urban land tends, then, to be valued in the market at less than the true social value created by its access opportunities, cost assessment for alternative transportation projects (for example, transit versus highways) understate the costs of the more land-using type of transport compared to those of the more land-saving type. Vickrey, "Current Issues in Transportation, pp. 220-221.

33. This section and portions of the following section concerning policy options draw heavily on William H. Oakland, "Central Cities: Fiscal Plight and Prospects for Reform," in Peter Mieszkowski and Mahlon R. Straszheim (eds.), Current Issues in Urban Economics (Baltimore: Johns Hopkins University Press, 1979), pp. 322-358. which offers excellent perspective on central-city fiscal problems and should be given high priority by readers interested in this topic. Oakland is concerned with spatial and nonspatial aspects of urban fiscal distress. The latter, which he describes as focusing on the tendency of local governments toward over-expenditure, are not included in the discussion to follow.

34. Ibid., p. 333.

35. Ibid., p. 334.

36. See Mancur Olson, Jr., "The Principle of 'Fiscal Equivalence': The Division of Responsibilities Among Different Levels of Government," American Economic Review. 59, 1 (May 1969), 479-487, for a discussion of some related issues.

37. Oakland, "Central Cities," p. 334.

38. Two excellent treatments of this complicated question are Patrick Mann, "The Application of User Charges for Urban Public Services," Reviews in Urban Economics, 1, 2 (Winter 1968), 25-46; and William W. Vickrey, "General and Specific Financing of Urban Services," in Howard G. Schaller (ed.), Public Expenditure Decisions in the Urban Community (Washington, D.C.: Resources for the Future, 1963), pp. 62-90.

39. See Oakland, "Central Cities," pp. 348-351.

40. Paul R. Dommel, "Distributional Impacts of General Revenue Sharing," in Norman J. Glickman (ed.), The Urban Impacts of Federal Policies (Baltimore: Johns Hopkins University Press, 1980), p. 545.

41. See Harold L. Bunce and Norman J. Glickman, "The Spatial Dimensions of the Community Development Block Grant Program: Targeting and Urban Impacts," in Glickman (ed.), The Urban Impacts of Federal Policies, pp. 515-541.

42. Ibid., p. 516.

43. Ibid., Table 5, p. 525.

44. Susan S. Jacobs and Elizabeth A. Roistacher, "The Urban Impacts of HUD’s Urban Development Action Grant Program, or Where’s the Action in Action Grants," in Norman J. Glickman (ed.), The Urban Impacts of Federal Policies, p. 340.

45. Ibid., p. 347.

46. Ibid., p. 348.

47. As discussed in Chapter 12, the criticisms leveled at programs with a place prosperity orientation recognize that the best way to help people in an area is to direct policies to those persons in need rather than to the areas in which they happen to reside. Oakland, "Central Cities," argues that grants programs established specifically to address the equity and efficiency problems associated with urban fiscal distress cannot be criticized on these grounds, as their immediate concern is not the well-being of the poor or disadvantaged. The programs described above, however, are not nearly so farsighted in their intent, and the usual criticisms of place versus people prosperity are applicable to a substantial degree.

48. For a good statement of the value of wide choice in this context, see Webb S. Fiser, Mastery of the Metropolis (Englewood Cliffs, N.J.: Prentice-Hall, 1962), pp. 160 ff.

49. On the rationale for subsidy to public transport in urban areas, see Benjamin Chinitz, "City and Suburb," in Benjamin Chinitz (ed.), City and Suburb (Englewood Cliffs, N.J.: Prentice-Hall, 1964), pp. 35-41 (part of a Section written by the editor).

50. One thing that makes comparative evaluation difficult is that in terms of return on the transport investment, each of the schemes tends to be somewhat self-justifying. That is, a well-developed rapid-transit system fosters the kind of settlement pattern that gives such a system good business, while reliance on highways fosters the kind of settlement pattern that can least economically be served by anything but the private automobile.

51. For a discussion of some related issues, see Charles M. Tiebout, "A Pure Theory of Local Expenditure, Journal of Political Economy, 64, 5 (October 1956), 416-424; and William B. Neenan, Urban Public Economics (Belmont, Calif.: Wadsworth, 1981), pp. 59-67.