Decentralization of Population Population Distribution (in m illions) Year Total Population in Metro Areas Population in Central Cities Population in Surrounding Ring Metro Population as Percentage ofTotal US Population Central City Population as PercentageofMetro Population 1910 34.5 22.9 11.6 37.5% 66.4% 1930 61.0 39.0 22.0 49.7% 63.9% 1950 84.9 49.7 35.2 56.1% 58.5% 1970 153.9 67.9 85.8 75.7% 44.1% 1990 192.7 77.8 114.9 77.4% 40.3% Source:R uchelm an, R. (1996).FiscalProblem softhe Evolving M etropolis.In Management Policies in L ocal Government F inance . W ashington, D .C.:InternationalCity/County M anagem entA ssociation. (pp. 35-57).
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Decentralization of Population. Decentralization of Employment; 60 Largest Metro Areas.
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Decentralization of Population
Population Distribution (in millions)
Year
Total Population in
Metro Areas Population in Central Cities
Population in Surrounding
Ring
Metro Population as Percentage of Total US
Population
Central City Population as Percentage of Metro
Population
1910
34.5
22.9
11.6
37.5 %
66.4 %
1930
61.0
39.0
22.0
49.7 %
63.9 %
1950
84.9
49.7
35.2
56.1 %
58.5 %
1970
153.9
67.9
85.8
75.7 %
44.1 %
1990
192.7
77.8
114.9
77.4 %
40.3 % Source: Ruchelman, R. (1996). Fiscal Problems of the Evolving Metropolis. In Management Policies in Local Government Finance. Washington, D.C.: International City/County Management Association. (pp. 35-57).
Decentralization of Employment;60 Largest Metro Areas
Source: Ruchelman, R. (1996). Fiscal Problems of the Evolving Metropolis. In Management Policies in Local Government Finance. Washington, D.C.: International City/County Management Association. (pp. 35-57).
Concentration of Poverty
Overview of Welfare Economics
• Pareto Efficiency• Supply & Demand• Market Equilibrium• Marginal Costs & Marginal Benefits• Market Failure• Externalities• Public Goods• Common Resources
“A planner’s primary obligation is to serve the public interest.”
- AICP Code of Ethics and Professional Conduct
Welfare Economics:The study of how different forms of economic activity and different methods of allocating scarce resources affect the well-being of individuals or communities
Pareto Efficiency:An allocation of resources is considered Pareto efficient if no alternative allocation can make at least one person better off without making someone else worse off
Supply & Demand
Demand
The relationship between the price of a good/service and the quantity purchased by consumers
Law of Demand:All else being equal, quantity demanded decreases as price increases.
(Negative relationship between price and quantity = downward slope)
Demand
PriceQuantity
Demanded
-$ 100
0.25$ 89
0.50$ 75
0.75$ 62
1.00$ 50
1.25$ 37
1.50$ 25
1.75$ 12
2.00$ 0 $-
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
$1.75
$2.00
$2.25
0 10 20 30 40 50 60 70 80 90 100 110
Pric
e
Quantity
Supply
The relationship between the price of a good/service and the quantity that producers are willing to supply
Law of Supply:All else being equal, quantity produced increases as price increases.
(Positive relationship between price and quantity = upward slope)
Consumer Surplus:The difference between what consumers are willing-to-pay and what they have to pay
Graphically, the area under the demand curve and above the price
Producer Surplus:The difference between producers’ total revenue and marginal cost
Graphically, the are above the supply curve (MC) and below the price
Consumer Surplus
$-
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
$1.75
$2.00
$2.25
0 10 20 30 40 50 60 70 80 90 100 110
Pric
e
Quantity
Producer Surplus
$-
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
$1.75
$2.00
$2.25
0 10 20 30 40 50 60 70 80 90 100 110
Pric
e
Quantity
Social Surplus
Consumer Surplus:The difference between what consumers are willing-to-pay and what they have to pay
Graphically, the area under the demand curve and above the price
Producer Surplus:The difference between producers’ total revenue and marginal cost
Graphically, the are above the supply curve (MC) and below the price
Social Surplus
$-
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
$1.75
$2.00
$2.25
0 10 20 30 40 50 60 70 80 90 100 110
Pric
e
Quantity
Realities of the Market
The private market only ensures efficiency under strict conditions, including: Many buyers and sellers (no monopolies) Identical goods and services Perfect information No barriers to entry No externalities (side effects) …
Even a “perfectly competitive” private market: cannot effectively allocate public goods or common
resources Does not address issues of distribution or equity…
“Four Vital Functions of Planning”(Klosterman, 1985) Argument for and Against Planning
1. Improves information for public and private decision making
2. Considers external effects of individual and group action
3. Promotes collective interest, esp. w/ respect to public goods
4. Considers distributional effects of market actions (equity)
Market Failure
Externalities: Economic side effects or “spillovers.” costs or benefits that stem from an economic activity, but that affect people other than those directly involved in a market transaction.
Can be POSITIVE or NEGATIVE
Market Failure
Example of negative externality
Driving involves direct cost: gas, driver’s time
…and creates indirect, or external, costs: pollution, congestion, road maintenance, etc.
The individual driver does not bear the indirect costs, and does not consider them in his/her decision-making process
Market Failure
Example of positive externality:
A beekeeper’s bees create benefits that can be captured: honey, sold to customers
… and external benefits that cannot be captured: bees pollinate nearby orchards
The orchard farmers do not pay the beekeeper for this benefit, so the beekeeper does not consider it in his decision-making process
Public Goods: Defined by non-rivalrous consumption and non-excludability
Non-rivalrous consumption: Good or service can be used by one person without detracting from the ability of other to use it
Non-excludability: Impossible or impractical to exclude some people from enjoying the benefits of a good service, even if they are unwilling to pay for it
Topics
Budgets especially revenue sources,
– Especially taxes
Guidelines for Evaluating Taxes
Equity: Progressive / Regressive Taxes
The Tax Wedge, Elasticity, and Incidence
Guidelines for Evaluating Taxes
Ease of Administration
Equity1. Ability to pay (progressivity vs. regressivity)2. Benefit principle of taxation
Efficiency1. Effect on social surplus (welfare)2. Ability to raise revenue
Tax Equity
Progressive: Burden of tax increases w/ income. Higher inc
households spend a greater percentage of their income on the tax than lower income households.
Regressive:Burden of tax decreases w/ income . Higher inc households spend a smaller percentage of their income on the tax than lower income households
Proportionate: Burden of the tax remains the same over all levels
of income
Major State and Local Taxes as Percent of Income for Family of Four
The party that actually pays the tax to the government (whether that is the seller or buyer) can pass part of that tax forward to consumer, or backward to the producer.
The party that the tax is shifted to bears the tax incidence
The incidence depends on price elasticity of supply and demand
Elasticity
The incidence of taxation, the amount of deadweight loss caused by a tax, and the amount of revenue raised by a tax all depend on how responsive the quantity supplied and quantity demanded are to changes in price
1. Unlimited outward extension of development2. Low-density residential/comm. development3. Widespread strip commercial4. Leapfrog development5. Auto dependence (private auto)6. Segregation of land uses by zones7. Reliance on trickle down or filtering process to provide
housing to low income HH8. Lack of centralized control of land uses9. Fragmentation of power over land use (many localities)10. Great fiscal disparity among localities
Burchell, Robert. (1998) The Costs of Sprawl – Revisited. Transportation Cooperative Research Program Report 39. Washington, DC: National Academy Press.