International Handbook of Urban Policy, Volume 2

International Handbook of Urban Policy, Volume 2

Issues in the Developed World

Elgar original reference

Edited by H. S. Geyer

This Handbook brings together a range of viewpoints on a number of the burning issues affecting urban sustainability in North America and Europe at the beginning of the 21st century. H.S. Geyer and his contributors cover a wide spectrum of the urban policy issues that determine the growth and development progress as well as the livability of cities in the Occident.

Chapter 9: The Economy of the Large European City: The Social Nature of Articulated Rationality

F. Moulaert and J. Nussbaumer

Subjects: politics and public policy, public policy, urban and regional studies, urban studies


F. Moulaert and J. Nussbaumer 1. Introduction Since urban economic analysis began straddling itself on the heritage of von Thünen’s location ([1826–63] 1875) and Christaller’s central place theory (1935) – or rather the Löschian ‘crystallization’ of it (Lösch [1939] 1954) – there has been strong pressure within mainstream economics to build an urban economic theory on the foundations of neoclassical spatial economics. Rational economic behaviour would be seen to include the selection of assets and activities through market mechanisms, innovation in capital stock as led by productivity norms, and spatial agglomeration resulting from the pursuit of lower communication and transaction costs in both production systems and markets. Even though the more naïve foundations of neoclassical economics (full information, pure competition, instantaneous market adaptation) have been abandoned in contemporary economic orthodoxy, the criteria of profit maximization and optimal productivity for investment live on. Contemporary urban economic models have married these to timid expressions of the dynamics of learning, of path-dependence and of scale effects on demand and supply. The relatively recent and broadly accepted new economic geography launched by Krugman (1998) among others, and strongly defended by scholars such as Thisse and Fujita, bears witness to this ‘new’ synthesis in orthodox urban economics (Fujita and Thisse, 2000).1 In this chapter we do not evaluate the innovativeness of this ‘new’ synthesis, but examine the analytical relevance of rational economic theorizing for urban development analysis. We argue that even if the intentions of the economic agents are ‘rational’ – for...

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