Issues in the Developed World
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Edited by H. S. Geyer
Chapter 9: The Economy of the Large European City: The Social Nature of Articulated Rationality
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  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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