Week 9: Study Guide December 6, 2010

1.*Why populations are shifting from rural to urban
The Industrial Revolution caused massive urbanization because of its innovations in agriculture, transportation, and production

2.*Different definitions for cities
Cities form because:
There is incentive to be close together
Protection or coercion
Social Interaction
Specialization
Public Good
Inequal Productivity of land
Some land better producing beads, some better at producing shirts
Non-Constant return to scale in exchange
Not equal cost trading 100 items 100 times vs. 100 items 1 time (Transport costs)
Non-constant returns to scale in production
Quantity of item produced per hour is not constant with variations in number of/productivity of workers
Place with a relatively high population density
Census definitions:
Urban area: minimum population = 2,500
Urban population: people living in urban areas
Metropolitan area: at least 50k people
Micropolitan area: 10k to 50k people
Principal city: largest municipality in metro area
Trading Cities
Cities produce specific items, then trade those items for other items they do not produce as efficiently
Economies of scale play a factor
Factory Town
Entice rural workers to move to city by offering wages that are greater than those from the rural market+the extra cost of living for living in the city
Processing Towns
Resource oriented firms
Sugar beets and transport of either sugar from sugar beets or entire sugar beet

3.*What incentives encourage the formation of cities
Requirements for Formation
Agricultural surplus
Urban production to exchange for food
Transportation system for exchange
Benefits of centralized exchange and centralized productions
Market forces that generate cities
Incentives for Formation
Benefits of centralized exchange and centralized productions
Market forces that generate cities
Larger labor pool (can match job and employee skills better)
Gain benefits from exchange of information amongst firms
Share of suppliers

4.*The conditions required for trading cities to form
Assume some workers are more productive.
Incentive to trade
Assume trade has economies of scale
Incentive to be close together
Financial institutions
Writing systems
When comparative advantage is combined with scale economies in exchange
Factory cities develop when there are scale economies in production
DO PRACTICE PROBLEMS ON BB!

5.*The decision of where to process goods
Have to factor in the extra cost of moving the entire weight of harvested good vs. the cost of moving just the processed good
Sugar beets vs. just sugar
Spatial competition among firms generates a market area for each firm and system of cities
Goods are processed near a source if:
The goods tend to lose weight/volume
Sugar cane, dried fruit, ore, maple syrup
Processing costs are cheaper near source
Source is close to coal, hydro electric, cheap labor
Quickness of processing is important
Canned fruits/veggies, wine
Goods are processed centrally if:
When transport costs are relatively low
Computers
When large economies of scale exist
Cars
When large economies from clustering exist
Movies
Goods are processed near consumers if:
When processing increases transport costs
Soda
When face time with consumers is important
Tailored cloths
When time of consumption is important
Meals

6.*Why shared inputs, shared labor pools, shared knowledge and better labor matching encourages firms to cluster
Increases benefits and reduces costs, as well as results in higher productivity
Why do firms locate close to one another?
Localization economies: firms in an industry cluster
Urbanization economies: firms in different industries cluster
Intermediate inputs:
An Example: Dressmakers produce high fashion dresses
Rapid changes in fashion and output: Firms are small & nimble
Scale economies in buttons large relative to demand of single dressmaker
Face time require to design and fabricate buttons to fit dresses
Dressmakers share a button-maker, and cluster to facilitate face time
Labor Pools
Varying demand for each firm: Software & TV programs
Fixed industry-wide demand: zero-sum changes in demand across firms
Example: success of one firm’s GIS software at expense of others
Locational equilibrium: Wage in cluster = expected wage in isolated site = $10
Labor Matching
Firms and workers not always perfectly matched
For example, an experienced accountant working as a cook.
Mismatches require training costs to eliminate skill gap
Larger city generates better matches
Firms and workers not always perfectly matched
For example, an experienced accountant working as a cook.
Mismatches require training costs to eliminate skill gap
Larger city generates better matches
Knowledge
Firms in an industry share ideas and knowledge
Innovations are discussed, improved, and adopted
Knowledge spill over
Skills and technology tend to “spill” outside of firms, even when the firm does not want this to happen.- silicon valley
****Firms will cluster until profit in cluster equals profit as individual

7.*Other non firm factors that encourage large cities
Utility of a worker in a larger city is greater
Joint Labor Supply
Large cities offer better employment opportunities for two-earner families
Metal-processing firms (men) located close to textile mills (women)
Power couples attracted to cities, with better employment matches
Learning Opportunities
Human capital increased by learning through imitation
Urban migrates acquire skills and experience permanent increase in wage
Social Opportunities: Better matches of social interest in large city

8.*How and why city utility changes with city size
Localization and urbanization economies increase productivity & wage
Commute time increases with city size, decreasing leisure time

9.*Why cities have different sizes
Sizes can change due to a new innovation in one city that increases the productivity of the labor force, thus increasing the utility of living in that city
Results in one city growing while others shrink, until utility of living in all cities is equal
New utility is likely somewhere between the utility in the non-innovating city and innovating city immediately after the introduction of the new innovation
Size can be effected by location and nearby geographic features
Water ways/features that promote movement of products can result in the agglomeration of many firms, thus many laborers, creating a Trading City
(Labor multiplier plays a role)?
Cities with industries that have jobs with greater labor multipliers will be larger
Each additional employed individual will require more other individuals to supply the goods/services that they will demand

10.*Shifts in labor supply and labor demand
Labor demand:
Increase demand for export goods
Decrease production cost => decrease output price => increase output
Increase productivity
Decrease tax
Increase public services
Land use policies: accommodate firms seeking expansion or relocation
Labor supply- positive slope
Simplifying assumptions: fixed hours per worker; fixed participation rate
Positive slope: Migration in response to wage differences
Increase in wage attracts workers to the city
Axiom 1: Growing city offer higher wage to offset higher cost of living
Elasticity( living cost, total employment) = 0.20
Elasticity (wage, total employment) = 0.20
Elasticity (labor supply, wage) = 5.0
What causes an increase in Labor supply?
Improve amenities such as environmental quality
Decrease disamenities such as crime
Decrease residential taxes such as property tax or sales tax
Improve residential public services

11.*How environmental policy affects cities
Environmental policy decreases labor demand
Increases production cost of polluting good => increase price
Increase in price => decrease output and labor demand
Improvement in environment increases labor supply
Net effects on total employment logically indeterminate

12.*What determines market value and land rent
Market value: Amount paid to take ownership
Land rent: Periodic payment from user to owner
Axiom 1: Price of land adjusts for locational equilibrium
Each firm earns zero economic profit after paying for land
Variation in freight cost generates variation in land rent
Bid Rent for Urban Land Depends on Accessibility
WTP: Maximum amount for lot large enough for production facility
WTP=Total revenue – non-land costs
Bid rent per hectare = WTP divided by lot size
Bid Rent for Farm Land depends on fertility
WTP for hectare of land= Total revenue – non-land costs
Bid rent per hectare = WTP divided by lot size
Bid Rent for Office Land depends on Accessibility
(Travel Distance West + Travel Distance East) x 2 = Total Travel Distance
Principle of median location: Travel distance minimized at median location

13. *How factor substitution affects the bid-rent curve
Transportation costs change as you move out from the city
This cost is reflected in the decrease in land rent
Bid rent curve becomes more convex as you increase the substitution
People will decide to live in smaller homes as you move closer to the city since prices are greater per sqft
Further increases the number of individuals on a hectare
Bid Rent curve is further convexes

14.*Why and how consumers substitute for housing as housing prices increase
a. Substitute smaller houses as housing prices increases, because it’s too expensive
b. If household that moves closer can afford 1,000 sf, is that the best choice?
c. Higher price: Higher opportunity cost per square foot housing
d. Consumers substitute other goods for housing, decreasing sf of housing

15.*How introducing time value as a cost to residents affects location decisions
a. Time value is a cost because the further away from employment a person is, the higher the time cost is due to transportation
b. Studies show that consumers value travel time @ 1/3 to ½ wage rate
c. Higher opportunity cost of commuting = steeper housing price curve and bid rent curve
d. Introduction of time cost brings in additional factor of commuting costs, not just gas costs
e. Note: This result conflicts with our observation that low income housing is usually centrally located. What’s going on here?
f. Low income housing in located at the center of a city because it is the leftovers of old residential land as richer individuals more out of the city to the suburbs.
g. “Low income housing households locate close to the center b/c their relatively low housing consumption means they have little to gain by moving outward.” Pg 191
h. Crime and other factors lead to preferences to live outside of the city, which often outweigh the time value cost.
Therefore, low-income housing is usually centrally located even though there is a low time cost, which would seem to increase the value, because other costs such as crime outweigh this benefit
i. Note: This result conflicts with our observation that low income housing is usually centrally located. What’s going on here?

16.*What is occurring at boundries where land use changes type
a. The land at the boundary points becomes more efficient for use in one sector over another.
b. For example, as move out from city center, towards the beltlines and highways, land will become more efficient to be used by manufacturers than offices, which like to be more tightly aggregated.

17.*The advantages of polycentric and monocentric cities
Model of monocentric cities
a. Central export node for freight
b. Horse-drawn wagons for intracity freight
c. Hub-spoke streetcar system for commuting
d. Central information exchange
e. Allow for efficient public transport when population density is greater
Polycentric Cities
f. Personal car ownership had a major effect on the shift to a polycentric city
g. Creates pockets throughout the city that brings local goods closer to consumers
h. Have a barber shop in every neighborhood, instead of all of them in the CBD
i. Reduced commuting costs to get to these goods
j. Land is cheaper

18.*How 18th century technology encouraged the development of monocentric cities
a. Built fix rail systems, like trolleys, that led from the outer parts to the city center.
b. New building techniques were developed that allowed builders to build upward
c. Improved agricultural practices that made that process more efficient. (Farmers produced a surplus of crops/food)
d. Use of coal as a power source, movement away from water powered manufacturing
i. Allowed more factories to be built close to each other

19.*How changes in technology affect bid-rent curves
i. New building techniques increase the height of buildings
1. Increases the number of houses per hectare
2. Increases substitution
ii. New transportation techniques, trucks, highways, flattens the bid rent curve
1. Right side of the curve moves upward
2. Cost of commuting into the city is less, thus the rate of change of the bid rent is less
3. Lower wages b/c travel costs are less and more workers can afford to travel into the city to work
a. This moves the bid rent curve down in addition to the flattening

20.*How sub-centers are formed
i. Sub-center: Area where employment density is at least 25 workers per hectare and total employment is at least 10,000
ii. Infrastructure (roadways, etc .) impacts where they are formed
iii. Problems with a single center
1. Overcrowded
2. Transportation
3. Externalities—pollution, etc.
4. Can be too much clustering—really high wages
iv. Mixed-industrial sub-centers: Started out as low-density manufacturing areas near a transport node (airport, port, or marina) and grew as they attracted other activities.)
v. Mixed-service sub-centers: like traditional downtowns, provide a wide range of services, and many functioned as independent centers before they were absorbed into the metropolitan economy
vi. Specialized-manufacturing sub-centers: include old manufacturing areas as well as newer areas near airports that produce aerospace equipment
vii. Service-oriented sub-centers: Employ workers in service activities such as medical care, entertainment, and education
viii. Specialized entertainment sub-centers: Employ workers in television and film

21.*The relationship between city age and the spatial patterns of cities
i. Cities used to benefit from centralization, so cities with older growth are more centralized
ii. Newer cities have greater degree of decentralization and subcenters (LA)
1. Lower commuting costs
2. Government subsidies promote movement out of the city (Suburbs)
iii. Older cities built on the concept of monocentric city (NY)
1. Based on old transportation techniques
iv. After 1970s, it was less beneficial to be centralized so office space began moving to the suburbs, resulting in less centralization in newer growth cities, and more urban sprawl
1. Before 1970s: Suburban activities were paper-processing
2. New information technology reduced centralization advantages
v. Urban sprawl became even more prominent due to:
1. Lower commuting costs and higher income
2. Culture: Higher density among Asians and Immigrants
3. Government Policies:
a. Congestion: Under-pricing of commuting encourages long commutes
b. Mortgage subsidies: Increase housing consumption
c. Under-pricing of fringe infrastructure
d. Zoning: Minimum lot sizes to exclude high-density housing

22.*Why sky scrapers tend to be too tall
i. Competition to be the tallest will result in too much money spent on skyscrapers due to inefficiencies.
ii. Marginal principle: Increase height as long as MB > MC
iii. Profit-maximizing height: MB = MC
iv. Implications:
1. Large gap between tallest and second tallest; observed in real cities
2. Wasteful competition dissipates profit
a. Look at graph—maximum benefit is where marginal cost=marginal benefit
b. Higher than that, less benefit is realized, and it is inefficient

23.*The factors that communities tend to segregate on
When people want different levels of local public goods segregation by preferences is useful.
When taxes are based on a trait that varies between people, segregation by that trait is useful.

24.*How segregation improves the public goods problem
-Segregation allows cities and neighborhoods to get exactly what they want and produce products that are in demand for the neighborhood. Such as if the neighborhood is segregated and they want a park but not a movie theater they can put money into parks instead of a movie theater.
-When people want different levels of local public goods segregation by preferences is useful

25.*Why rent premium may be different for different socio-demographic groups

26.*Why some neighborhoods become segregated and some become mixed
Racial Segregation: byproduct of income segregation: small contribution
Minimum lot size zoning excludes low-income households
Racial steering (reflecting prejudice) reduces access of black households
Public housing concentrates low-income households
Low-crime neighborhood increases with income → income segregation
Demand for school spending increases with income

27.*Why schools have a broad distribution in performance
-based on income in the parents of the students who attend the demand for certain things will vary.
-With more income, graduation, support, going on to college, all increases
-With lower income higher drop out rates and crime which will result in a cycle where education is not the highest priority

28.*Policy responses to the view of homelessness as a problem with individuals
Individual problems: addiction, abuse, mental illness, and income shock
Structural problems: lack of low income housing, unemployment, great depression analogy
-Decrease incentive to be homeless (police enforcement, fewer services, private response)
-Address Individual issues (treat mental illness, provide addiction counseling, job training, provide housing conditional on individual’s behavior) → low success rate at changing behavior
-Address structural issues (high housing costs lead to high homeless, high rental vacancies lead to low homeless)

29.*Policy responses to the view of homelessness as a problem with the housing market
Providing subsidies increases demand
Public housing lowers price, leads to less private provision of housing
Housing assistance reduces the incentive to work
-Housing policy should be location specific:
Areas with high vacancies are more appropriate for vouchers
Areas with inelastic supply are more appropriate for supply subsidies

30.*The draw backs of both demand and supply responses to the housing problem
Demand Side: housing subsidies (tax write offs) rent vouchers
Supply Side: public housing, subsidize low income housing providers

31.*The economic and sociological approach to explaining crime
Economic: Criminals respond to incentives
Crime reduced by increasing costs (police and prisons)
Crime reduced by increasing returns to lawful activities (schools)
Sociological: crime is caused by environment and culture

32.*The main sources of the cost of crime
Half of the cost of visible crime is from punishment
Est. total cost is 250 billion annually
Corporate and white collar crime
Costs are difficult to estimate
Health care fraud exceeds 100 billion annually
-Transfer of wealth (tax fraud, theft)
-Destruction of wealth (property damage, psychological trauma)
-Failure to create wealth (low investment in high crime areas)

33.*Why some crime may be better than no crime (and the assumptions behind this)
-There will money that is spent on education to increase students graduating and not dropping out, the benefit is lower incarceration and victim costs
-Socially efficient quantity of crime, marginal victim cost equals marginal prevention cost, crimes are more costly to prevent than to experience.

34.*How the rational person decides whether to commit a crime
Utility function U($)=($)^1/2
Expected utility % of not getting caught ($if you don’t get caught)^1/2 + %if you get caught($ you loose)^1/2

35.*Some limitations to the model of the rational criminal
-People generally risk averse: need more than $44 to offset risk of -$36
-People tend to prefer certainty to risk
-The utility of a gamble is the expected value of the utility, not the utility of the expected value

36.*Why the elasticity of crime with respect to severity of punishment is relatively low
-longer prison term increases crime cost, shifting MC curve upward
-Elasticity close to zero
-Harden criminal, prison schooling, criminals tend to be short sited

37.*The main roles of incarceration
Longer prison term increases crime cost, shifting MC (Supply) upward
Elasticity close to zero
Longer prison term causes offsetting changes
Harden criminal: lower anguish cost shifts MC (supply) downward
Prison Schooling: skill acquisition shifts MC downward
Criminal tend to be short sited
Incapacitation?
Take criminals out of circulation
Mixed results: each prisoner would have committed 0-17 crimes
Marginal benefits and costs of incarceration (BELOW)

38.*Why average benefit of incapacitation may be higher than the marginal benefit of incapacitation
-Marginal benefit: $15,000 avoided crime
-Excludes benefits of reduced fear and proactive measures
-Marginal cost: $36,000 in facility cost and opportunity cost

39.*How congestion pricing works
Benefits: Decrease in trip time from reduced volume; reduction of other taxes
Costs: Tax for drivers; lost consumer surplus for former drivers
-Congestion tax improves efficiency of urban economy
1. Modal Substitution: switch to carpool, transit, bike
2. Time to Travel: switch to off-peak travel
3. Travel Route: switch to less congested route
4. Location Choice: change residence or workplace, cutting distance

40.*How congestion pricing affects individual and city wellbeing
Improves efficiency of urban economy
Consider two-city region with fixed population

41.*How congestion pricing affects behavior
Modal substitution
Time of travel
Travel route
Location choices

42.*How Gasoline taxes affect behavior
Encourages modal substitution (1) and location choices (4)
Does not affect time of travel (2) or route (3)
Applies to driving on uncongested road (other than small carpool effect)
Addresses pollution, carbon and road wear externalities

43.*Policy responses to automobile air pollution
Economic approach: tax- marginal external cost
Monitoring device allows direct charge for emissions
One-time pollution tax depends on expected emissions, but not mileage

44.*Why safety policies such as seatbelt laws have unintended consequences
Small reduction in death rates
Higher collision rates
Increased injury and death rates for pedestrians and bicyclists

45.*The factors that affect the demand for mass transit
Time Cost Elasticities
-Line-haul time (in-vehicle time)
- Access time (walk and wait time)
Opportunity cost of transit time
Non-commuting trips: more elastic demand in general

46.*Why and when heavy rail eventually becomes more effective than bus service
Heavy Rail may be best choice for New York and Chicago, ridership below threshold
Mainline: riders require other mode for access
Widely spaced stations: improves line-haul at expense of access time
High access cost of BART limits its advantage over autos
-Bus System: headway (time between buses), space between stops

47.*Why it makes sense to subsidize mass transit (ignoring externalities)
Fixed costs generate negatively sloped average cost
Economies of volume: more frequent service and lower time cost
Marginal principle: MB (from demand) = MC
Efficient pricing generates deficit

Week 8: Economics and Urban Transportation November 22, 2010

Introduction:
• Economic Analysis can elucidate well-known problems of transportation by:
o Failing infrastructure
o Financially weak public transit
o Environmental Impacts of Transportation
o Motor-Vehicle accidents
o Traffic Congestion
• Calculations play important role in understanding some of these problems and in defining the categories of potential policy responses

Failing Infrastructure:
• Past 2 decades, sharp decline in percentage of GNP (gross national product)
• Total value of capital stock has declined similarly as a percentage of national product by 8%
• Affects transportation especially roads, highways, bridges, and subways
• Improving public infrastructure would have high rate of return
o Macroeconomic studies relationship between public infrastructure and productivity and micro cost and benefits
• U.S. needs to spend more on public infrastructure (has gone from $21 billion to $32)
• Pricing policies often cause infrastructure to be built to accommodate inefficient numbers and mixes of users
• Highways must meet demands during high peak driving hours
• Optimizing investment strategies and better managing the infrastructure through pricing can create measurable and large reductions in cost of providing any given level of infrastructure
• More effective amount of useful infrastructure can be substantially increased without necessarily increasing the long-run cost of investment

Financially Pressed Mass Transit:
• The U.S. in comparison to Europe does not have near the amount of traffic, but receives enormous subsidies about $13.5 billion in 1993
• This is 12 fold increase in real terms since 1970
• Half of the increase occurred during the 70’s as a source of local and state fiscal crisis
• (Mohring) public transit is subject to sharply increasing returns to service frequency.
o Demand on corridor rises, transit provider can respond in multiple way
o Maintaining the same routes with the same service frequency, allowing average cost to decline
o Increase route density and/or service frequency
• Primary justification for transit subsidies from economic theory
• Property of increasing returns to scale, limits viability of mass transit in US because population density is so low
o France, UK, Italy, and Germany occupies more than six times the area
• The subsidies appear to have encourage dramatic increases in management personnel and in union wage rates, with substantial fall in labor productivity
• Possible response: radically change the institution structure of mass transit through privatization
• Possible response: shift responsibility for providing transit subsidies to local governments
o Local taxpayers will discipline transit agencies to provide only cost- effective services

Environmental Effects of Transportation
• Effects of transportation on the environment constitute enormous subject with political profile
• Estimates of typical costs of driving an automobile in urban areas of US.
• Figures from the table represent average social costs; exclude taxes and marginal externality costs
• Estimates of air pollution cost use methods including direct assessment of health costs, statistical correlations between air pollution and mortality
o Resulting implications for aggregate costs from the pollution caused by gasoline-powered vehicles
• Global warning (due to greenhouse effect) more difficult to analyze – effects are so dependent on poorly understood relationships and economic impacts in the future
• What would happen if estimated social costs of pollution and shadow value or carbon dioxide emissions were charged to users?
o Raise average fuel tax, would leave U.S. fuel taxes well below most European levels
• These cost support two conclusions:
o People place high value on environmental impacts of motor vehicles, measured by willingness-to-pay to reduce the known health effects and adopt measures to forestall unknown devastating climate effects
o This value appears to be well below that which would indicate a willingness to reverse the longstanding shift toward high levels of automobile ownership

Motor-Vehicle Accidents
• Accounted for 42,000 deaths and 2.0 million and 5.7 million injuries in U.S. in 1993
• Leading cause of death for people 1-24
• Do not seem to stimulate the same kind of public response as some less easily measure problems
• Accident costs, while substantial are not large enough to overwhelm the other costs that people voluntarily bear when driving
• Customers are willing to put up substantial sums to improve safety (paying for antilock breaks, air bags, and other safety features)
• Government intervention:
o Widespread use of insurance reduces individual’s incentive to pay voluntarily for safety measures
o Insurance rates bear only an indirect relationship to the amount of driving, may be causing drivers to perceive what really is a variable social cost (accidents) and fixed private cost (insurance)
o Accident costs are external to individual driver, borne instead by pedestrians, bicyclists, occupants of other vehicles, public-health system at large, and financed police department
• Even in the absence of other measures: to reduce danger of accidents, charging people the social cost of accidents would lead at most to only moderate changes in overall use of motor vehicles
• Reducing overall automobile use is a very clumsy way to address problem of accidents
• Costs are far less than the value people place on automobile travel, technological, or behavioral measures to reduce accidents rates
• Increasing laws against drunk driving
o Measure affecting roads, vehicles, and drivers are effective

Traffic Congestion
• ∫Traffic congestion a problem of urban transportation where there is a solution
o Congestion pricing of highways (charges traffic)
• Studies provide ample evidence that forms of congestion pricing are technically and administratively feasible
• Policies may create real and substantial benefits, can do little to reduce the most severe congestion:
o Existence of latent demand: people currently deterred from driving at congested times and places
o “Fundamental law of traffic congestion”
• Mass transit provided with increasing returns of scale can have more perverse effect
o Equilibrium is established between full cost of travel by auto and transit
o Expanding road capacity then draws users away from mass transit, driving up average cost, until new equilibrium is made
• In this situation, implementing congestion pricing could produce a modal shift toward mass transit resulting in decrease in average full cost of travel by transit
• Urban economy is being drained by the waste inherent in traffic congestion
• Those who fear congestion pricing, tend to forget that every dollar extracted can be used to add urban services
• Qualification requires:
o Revenues be used in ways to benefit urban residents and businesses
o Danger: possibility of “capture” of the revenues by special-interest analysis
• Effects on land-use and commuting patters
o Encourage shorter work trips
o Long run promoting jobs-housing balance in land-use patterns
• Congestion pricing is a respectable policy alternative
• Widespread adoption of congestion pricing is not likely in foreseeable future
• Congestion is an inherently self-limiting phenomenon

Quiz Reviews November 22, 2010

1. What are the effects of a Lower wage on Land Market? -Lindsey Olsen
Decrease in resident income shifts the bid-rent curve shifts downward
Decrease in residential bid decreases residential territory and quantity of labor supplied
Decrease in wage (production costs) shifts the business bid-rent curve shifts upward
Increase in business bid-rent increases business territory and quantity of labor demanded


2. How has transportation been affected by urban sprawl? -Huy Din Tran

It causes congestion from the traffic of people commuting to their jobs
Causes more pollution and distribution of car from driving longer distances
More construction of roads and highways
→ Caused by: lower commuting cost and higher income

3. List three factors that contributed to the formation of monocentric cities. -Joshua Ripley
 NOTE: you should also be able to explain how the factors contribute to monocentric cities.

Industrial revolution: innovations generated economies of scale
Large-Scale Production: exploit localization economies
Innovation in transportation: Wider exploitation of comparative advantage

4. How does European policy towards sprawl differ from that of the U.S.? -Riley Danford
 (I would probably ask it like this: Why do European cities tend to experience less sprawl than American cities?)

European have higher cost of personal transportation (gas tax and auto sales tax)
They promote small neighborhood shops that increase high-density living
Transportation infrastructure favors mass transit
Agriculture subsidies allow fringe farmers to outbid urban uses

5. Give an example of a positional good and explain how the market for that good may be inefficient. -Lance Kaufman
Postional good: products and services whose value is mostly (if not exclusively) a function of their ranking in desirability by others, in comparison to substitutes.
goods which are valued specifically because of their relative quality, can not be created
Fast cars may be considered to be inherently scarce because one’s perception of a car’s speed depends on its relation to other vehicles, but there is still an absolute value attached to satisfaction gained from the speed at which a car can travel; it can be considered as having a positional aspect in that only some cars can be the fastest. Because a car is a complex product made of many other materials, some of which (such as steel) are limited in supply and some which (such as leather) are renewable

1. Can education be a reason for lower income family to move into a higher income neighborhood? Explain why or why not. – Riley Danford
Yes, I believe that it does depend on the family and their priorities. Lower income families typically live in lower income neighborhoods, which have a less funded education and an environment that many students drop out, which could continue the cycle of low income. Moving into a higher income neighborhood would allow a student to be surrounded by peers who potentially could influence and allow them to see the necessity of staying in school to get an education to receive a job. I believe if education is important enough to the decision makers that it would definitely be a reason to move into a higher income neighborhood.



2. What are some consequences of income and racial segregation? What effect do these have on the economy? – Sara O’Neal
Racial Segregation:
No diversity among the community and the community members
Leads to non-walkable streets
Lower satisfaction with life
Different levels of local public goods
Tax based on traits could start to occur
Lower graduation rate that leads to less role models leads to harder time getting a job which results in poverty

Tax:
Vaiation of tax
Lot zoning
Lower income homes that are further away from suburban jobs

When there is a distinct segregation involving income and race I believe it creates great tension between the two. It also leads to a cycle of staying within your own “category.” In the economy those who have low income and are racial segregated leads to crime, poverty, and lack of education.



3. What are individual problems that can lead to homelessness?
How about structural problems? – Kirstie Wilding
Individual:
Addiction, abuse, mental illness, income shock

Structural:
Lack of low income housing, unemployment, Great Depression Analogy

4. What kind of consequences do we see because of homelessness? Explain what inefficiencies it may cause in society. – Huy Dinh Tran
Health, abuse, social stigma, security

Costs:
Congestion in park/walkways
Lost productivity
Empathic cost
Debates among if they should provide homeless shelters
Cost of upholding homeless shelters.
Externalities
Expenses

5. How does segregation improve the provision of public goods and the equity of taxation? – Lance
Segregation leads to improvements of provisions of public goods because the individual segregated neighborhoods can supply and make the goods that they need and want. There is no unnecessary extra supply among the neighborhoods but what is produced is what is demanded. Taxation wit segregation could result people being taxed better fitting their current income status and situation.

1.Why would converting a lane to a HOV/Bus lane slow down/speed up traffic in the remaining lanes? -Mark Prats
-Modal Substitution: carpool
-Time to Travel: change times
-Change routes
-Combine trips

2.How does Congestion Tax reduce Traffic? -Lindsey Olsen
-Modal Substitution: switch to carpool transit or bike
-Time to travel: switch to off-peak travel
-Travel route: switch to less congested route
-Location Choices: change residence or workplace, cutting travel distance

Week 7: Culture, Wealth, and Crime November 14, 2010

Crips and Bloods: Culture, Wealth , and Crime

Throughout recent American history gangs have become an impactful part of people’s lives. The past 20 years there have been 15,000 deaths alone that have been from gangs. These gang members believe that they do not choose their destiny, but their destiny chooses them. This may be a result from the fact that today’s culture prevents these members from getting out. This culture of what should be demolished from years ago prevents African Americans from getting proper education, which decreases the likelihood of getting a well-paying job that helps them support their families. This cycle leads to the increase amount of gangs and the attractions of wanting to be in the gangs. As proclaimed in the videos these members are fulfilling a club, association, connection that was not allowed to them from years ago.

African Americans grew up with the same dreams as every other American, wanting a piece of The American Dream, but this was increasingly taken from the as each day passed. There was a strict segregation between these Americans and White Americans based solely on their skin color. Although there had been some improvements from getting rid of slavery and allowing American Americans to vote, there is still the animosity between the two groups and a complete difference of lifestyles. Unfortunately these lifestyles of culture and wealth lead to the crime rates.

Coming from the video you could see that in California the high end and most expensive areas were typically surrounded by where the Crips and Bloods were originated. In these areas you can easily see the difference in the culture that is created from discrepancies between education, job opportunities, income, and social status that lead to where most African Americans are at now. When this cycle of culture and lifestyle continues and never seems to change you cannot expect there to be change at all. I believe that what leads to the increased crime not only for African Americans but anyone with this difference in culture and wealth is the ability not to get out of the cycle.

When there is a culture with decreased satisfaction and funding to school and support for education it leads to more dropout rates and less opportunities to succeed in job opportunities. When there are not any job opportunities or ability when they have not completed school. This leads to decrease in wealth and typically resulting to crime to get money.

Crime results from needing an affiliation to something, finding a group to associate with, or needing money or supplies. Any of these reasons will lead to crime due to what they want and having the benefits to them outweighing the potential costs. Those looking for affiliation want a group that will be there through thick and thin. Gangs typically are a version of a newfound brotherhood; collectively believing, wanting, and disliking the same things. This group of brothers, gang members, and what become family members to some require some short of initiation. The initiation could be anything from simple theft or murder. Throughout being in these groups they adapt for protecting each other and what they stand for. When something starts to infer on their beliefs or members they will go for blood to protect them. For them the cost of getting caught by police and put in jail does not out way the benefit to have that family and affiliation. To prevent crime it would take the policy and dramatic increase of punishments to make any sort of impact. The cost must outweigh the benefits for the members to make any impact of decreasing crime.

For the need of money and supplies getting them to survive is what is the most important. Wanting to have money for food, shelter, clothes, and possessions is something that doesn’t just appear out of no wear. There are many methods to getting what you need in this manner that are a result of crime. Theft is often a primary one, it could be from stores, homes, anything. But there is also the problem of mugging innocent people around town. This increases danger in certain areas but also can be a cycle of crime in itself. When mugging occurs to certain people in a certain area it could cause retaliation. Selling drugs or illegal substance is another method to make money to buy products or services.

There is also the problem of prostitution among many girls trying to make money for food or shelter. From the movie clip Very Young Girls you can see the impact of what prostitution on these girls. The average age of these girls are 13 and have the feeling that they have no other choice than to do this. These girls do not understand what is really going on and have not been taught about what the motives of these people and “pimps” true motive is. But believe that they are truly “loved” and will do whatever they are asked of by these men to have that affiliation and to make money. In my opinion I believe that to decrease prostitution has to be come from education of these girls that they cannot rely on someone to give them affection when they just want money from them.

Overall, to decrease crime the separation of these two cultures must be more encompassing. This separation of education, wealth, jobs, social status is what leads to crime. The need to have affiliation and money is caused from the cyclical problem of not having the education one needs to make good choices about what is right and wrong and realize what certain actions have certain consequences. Having the knowledge to know that you can get out the area that you are in and change the cycle that continues. Continuing to understand the importance of completing school to get a job to not having to result to crime to get money and association. I also believe that increasing the consequences for committing theses crimes will start an impact but knowledge and consequences are in my belief the best sources of finding some end to these crimes.

Group Research November 1, 2010

I have attached some links that I have found for our group debate. This will provide information not only on University of Oregon’s Education but education within the state funded by the government.

http://financialaid.uoregon.edu/0910_cost_of_attendance

http://financialaid.uoregon.edu/0910_cost_of_attendance

-Graduation rate of only 66 percent
-Budget crisis of historic proportions

http://www.oregoned.org/site/pp.asp?c=9dKKKYMDH&b=130918

Week 5: Subdivided October 31, 2010

How do you define community?
Community to me are the people around you who are there for support. These are the neighbors that help watch your kids or pets when your gone. In a community you are there for one another, in multiple ways, not just the people around you in your day to day life. Connecting with each other is another key part of a community, being able to relate to each other in some form or fashion.

Dictionary Definition: a social group of any size whose members reside in a specific locality, share government, and often have a common cultural and historical heritage.

Community Articles:

http://www.ci.minneapolis.mn.us/communications/docs/CEdefn_language.pdf

I found this article to just look into more of the community aspect and found it really interesting actually. Although it is directed towards a committee I found that it pointed out some great points about community members and what is sought out by these members. I used it to enhance my opinions and understanding of the community aspect. I realize now that community is completely different than what it was many years ago for whatever reasons that has changed people it has changed, for the better and the worse.

Why has civic activity declined over the last few decades?
Civic activity has declined due to many factors such as suburbs increasing, two worker families. People became more focused on their own families and needs and finding a way to accomplish their needs only. The long drives to commute to works, takes away time that would or could be social connection to your neighbors and community members.

Why are people attracted to living in suburbs?
Cost of living is less than living in the cities. The lifestyle is a lot different than that of in a city. Less traffic, pollution, dense population, crime rates, etc. The lifestyle to attract people to live in the suburbs is different from that of those who love the city. Having the ability to have a yard to play with your kids in, being able to ride around in parks on a bike, small town stores, no big city trouble are all characteristics of living in the suburbs.

Growing up I lived in the suburbs, and I know for my family they loved it because there was not much trouble to get into and that us as kids had the ability to go out and play and not have our parents worry too much about us.

Do people rationally choose commuting time? (Weigh all the costs and benefits?)
Living outside of the cities does cost because the opportunity cost of traveling taking away from other activities that residents could be doing. Also the cost of the actual travel, this is including not only gas cost but repair for cars. Traffic is another factor that plays, is there a lot of traffic when going to or from work that impacts your other activities that could be taking place. But the cost of living is typically less expensive outside the city. If you enjoy commuting to work and taking time alone this could be a benefit to a resident. In my opinion to determine if the decision is rational it depends on the person, and what is important to them, if they don’t mind less time at home or if the cost of traveling is worth it, is what matters.

Why is development a community issue?
People are sensitive and what to be able to have an impact on what their community looks like. Some communities want to have a certain look to them or do not care at all. When there is development it has the possibility to affect the entire community. Too much development can take away from the suburb feel. “It is in everyone’s vision, when you look out your window and what you see” (Video Clip)

How does the floor plan and architecture of houses impact the neighborhood?
The people can have difference in what should be the feel and look of the neighborhood. When these huge and architecturally great houses are built near houses that are not the same it impacts the other community members in a negative way. The character of the neighbor can be changed by the architecture style.

Having the large garages in front instead of a door takes away from the community feel. Not welcoming and inviting to others, but showing off your possessions and what you own. To me it can cause a lot of hostility between people who are building these large “Castle” houses compared to the traditional homes that are originally there.

How can the architecture of subdivisions be explained as an optimal market outcome?
Architecture of subdivisions have the ability to be optimal in the market because if the design and architecture of the homes is bringing in new residents and increasing the profit within the city and satisfying other residents it will make the community better off. When this situation is true you can see that the market will benefit from the architecture fitting to the form of what the community members what and desire to be apart of their community.

How can the architecture of subdivisions be explained as an inefficient market outcome?
Architecture has the problem that it can cause conflict between community members and create stress and hostility. When this occurs it can restrict the community from coming together and will be a negative affect of the growth and production that is occurring. Inefficient markets have a negative impact and when architecture is not followed by the standards or the likes of the members that are already there it will have this affect on everyone and the economy.

Why is design more prevalent in consumable goods than neighborhoods?
In architecture design is not acknowledged is said by the movie, but to me I believe it depends on the person, because what is beautiful to one person is not to another. But from the movie I learned that there can ways around making more profit from cheaper materials that what actually is architecturally pleasing.

Why license beauticians but not developers?
In my opinion I feel that this question is completely valid in that both of them should be licensed and treated the same way. But trying to answer the question along with this assignment, I would have to say that housing is you can create to yourself and that most people higher a developer or that buy into what the developer wants to produce. But at the same time I feel that beauticians fall into that same category as well, so it is hard for me to decide what makes this requirement. The good thing that i believe is that both occupation requires schooling that must be met.

What is new urbanism?
Creating neighborhoods based on idea on supporting community life and integrating activities such as shopping and having the city based around people and not cars and transportation systems. This is similar to the cities such as New York and Chicago. Living near shops and offices and diversity with townhouses, apartments,condos and housing all around it. The goal of new urbanism is to create a lifestyle and compact where you can get to everything you need provided to you with out the use of cars. Retrieving info from culture that results in a sustainable culture for humans.

Articles:

http://newurbannetwork.com/about-new-urbanism

http://en.wikipedia.org/wiki/New_Urbanism

Why are walkable streets important for neighborhoods?
Because streets are the the form of commuting around and getting one place to another. It is the success to create a place that is worth living that must have streets. Feel good to feel on, destination places near by will lead to people meeting each other. The destination is key to the walkable streets creating the community because people can meet each other on the way to your destination. Taking people out of their cars and walking to get rid of isolation.

It is also extremely important to those who are alone (divorced, windowed, single) to have the community feel and connection and they receive that from streets and destination locations.

How does diversity affect communities?
Diversity brings about both positive and negative affects. It brings the opportunity to create democracy and having different opinions and views with problems and issues that arise. It creates public life possible instead of having those who are the exact same control one area and the other group not at all. It helps create the whole idea of community and what differing people bring to the plate not only opinions but stories, supplies, and help for each other.

Why do some people seek diversity and others avoid it?
Those who seek diversity want more that just living along side people who are the exact same as you. That they are different from you and can teach you new opinions and views. People who avoid it may be scared of what is different and too nervous to live alongside those who see and live differently.

How do communities based on geographic proximity differ from communities based on other commonalities?
Those who live in communities that are based on geographic may have the problem of staying connected to those who live very close to the city and those who live outside the city edge as seen in the video clip. But I also think that those who live in geographic communities may have more diversity amongst them that can bring different people closer to one another.

Communities based on commonalities are going to have more people who are similar living in the same regions. For those who avoid diversity this will bring the community closer because they are similar but takes away from people who may be in multiple “groups” and separating the diversity completely.

When are leaders important to the development of communities?
Leaders bring about activities and celebrations for communities. It takes one person to take action for a new park, fourth of July celebration, and block parties. Without the leaders people would remain separate from each other and not be encouraged to create that community amongst them. Leaders can also help solve problems that could occur within the community and find a resolution quicker and easier.

Why do neighborhoods tend to become more isolated as average income increases?
As average income increase people start to purchase homes in subdivisions that isolate themselves from their names and take away from the need to walk from place to place. When those core walkable streets are gone from the neighborhoods people do not connect with one another and result in no community atmosphere. People will become just dependent on their family or one set of neighbors and remain isolated from the rest.

Does this imply that community is an inferior good? (Defend your answer)
Inferior good: is a good that decreases in demand when consumer income rises, unlike normal goods, for which the opposite is observed.
I believe that technically be definition that neighborhoods are an inferior good, because I believe that a majority of people desire nicer and larger homes as their incomes increase. And although they may like the community feel they would prefer to have the “upgraded” home. In exchange for this upgraded home they do loose the community feel which results that it would be an inferior good. But there is always an exception to the rule; there are people who much rather either spend their money else where ie cars, vacations, schooling, instead of homes and those who income increases but still want the community feel and will remain there instead of moving somewhere else with a bigger home.

Self Evaluation Week 5 October 25, 2010

It’s week 5, and wanted to reflect back on my overall effort, progress, and completion of goals within this class and the assignments. So I am gonna give a brief overview of how I feel that I am doing, what I need to improve or change for the rest of the term. I am also using this a tool to complete my goals, because this is a source that I believe is needed to complete goals that are not necessarily so short or long but in between. Within the assignments I believe that I have completed them in every aspect that has been requested of me and what I believe should be put into them for what I want to get out. I have picked the topics that apply to my personality and method of learning. From this week forward I want to tailor them even more, and come up with other options or changes to enhance my learning experience. From my goals I think they that I have been completely them too. I think that they are a little easier so I am going to develop new goals that are a little more challenging and will help my personal experience within the class. I have been taking good notes within class and reviewing the slides and notes later on, but need to step this up even more to better my in class quiz scores. I have been emailing and trying to communicate with the professor more, and want to double this with talking to him about more options for quiz grades and optional assignments. In and out of class I need to start reviewing notes and slides more in depth and often to help with my quiz scores. Overall I think I am doing a great job with effort and completing assignments and my goals. I do think there is room for improvement and going to push my self even more for the rest of the term.

Week 4: Analyzing Eugene’s Land Prices October 24, 2010

Introduction
For this project I really wanted to look into the difference of land prices for student housing. I have noticed that there this a dramatic different in the cost of housing for students relative to the location to campus. The three main locations that I wanted to compare where on campus housing such as dorm rooms, then apartments for students that are not on campus but relatively close to campus then student apartments that are not close to campus but are still with in the campus region. Throughout the research I found that there many aspects that are affecting the price range. But I will do a break down of each of the locations and their different prices and what they provide and the housing types.

Dorms
For the Entire school year which is only school days and does not include holiday when school is not in session. So during holidays such as Thanksgiving, Christmas, and Spring break you do not have the option to stay at your housing. The location is preferred for students because it is on campus. The enhanced double is typically in the building of the living learning centers north and south. These two buildings are located in the center of campus. There is food in the bottom in the building that can be added to the cost of rent to help those students who may be on a tight budget. The building provides a lot of amenities such as the electricity, water, and heating bills are included in the cost of rent. But living in the dorms has a lot of disadvantages, among these is no kitchen, shared restrooms, no personal room, no living room, and centered around other students, which results in lack of privacy. The cost is affected directly by the university and the amount of students that are applying for living that year. For the school year of 2010-2011 the cost for this enhanced double was $9,881. This is broken down into 3 terms consisting of three months. Which is about $1,097.88 a month. But one of the main draw backs from living in the dorms is that there are resident assistants that are in charge of making sure that the living situation is under control. Although this is similar to a rental company, they will live in the same area as you. They have more rules and restrictions that prevent students beyond their first year of living there.

Apartment Housing Near Campus
This apartment housing near campus is within two blocks of the university’s campus. This is in complete walking distance that takes about 6 minutes to walk out the door to buildings that are on the edge of the campus and into a classroom. These apartments are extremely nice and well taken care of. They usually will have around 3-5 roommates. The apartments have good sized rooms for each roommate, kitchen, living room, bathrooms, and washing machines. The amenities have a direct relation to the price that one will pay per month. Having the ability to have your own space, room, laundry, bathroom, and still be close to campus will allow the price to be driven up by the owners of the apartments. Each month a renter will pay $640 a month which is $5760 for the school year. There is an advantage though from the apartment with the time but could be a disadvantage as well. Students are not forced out of their living residences even when holidays come up. But most of the time the rental agencies will require you to sign a full 12 month contract. This will increase the school year cost of rent to $7,680. Also in the cost of living in these apartments we took average amounts for the bills of water, heat, and electricity. These bills average about $83 a month. There for your monthly cost is about $723 and school year cost about $8676.

Apartment of Campus
For this apartment calculation it is similar to the other apartment, it is owned by the same rental company and the apartment contracts are the same. The main difference is that these apartments are 12 blocks off of campus and take 23 minutes to walk to get to the same building as the close apartments. These apartments are built in the similar manner and have the same amenities as the other apartments. The cost of these apartments are $500 per month for each of the roommates, this adds up to $4500 for the 9 month school year, but is $6000 for the 12 month which is usually the requirement for apartment contracts. But adding on the previous calculated cost for heating, water, and electricity of $83 it adds up to being $583 per month and $5247 for the 9 month school year.

Conclusion
Throughout this research I saw that there is more than just the location that affects the cost. Although, I think in this situation for college students, who are here just for the educational purpose location is extremely important if not the main priority. You can see that between the two apartments the cost dramatically jumps because of the location to campus. But when a student housing is on campus it is the most expensive but it is not as desirable as the other locations, because there is not any of the amenities provided to them. Even though it is just a one and done bill, it does not offer any desired aspects beyond location and one bill. Students have to find out for themselves if the price is the most important relevant to cost.

Week 3: Size and Growth of Cities October 12, 2010

Option 1: Size and Growth of Cities

1. Introduction:
• Labor and Capital are concentrated around cities, individual industries are as well
• Geographic concentration can resort from industry and the demands from those who are within the boundaries.
• Will lead into the lead the forces that lead to concentration, both clusters and aggregate activities in cities.
•Sources of agglomeration economies
-Sharing of input whose production with increased returns of scale
-Labor market pooling
2.1 The Scope of Urban Increasing Returns
• Economies exist when scale of urban environment adds to the productivity
• Industry Scope agglomeration economies extend across industry boundaries
• Geographic Scope proximity to where the city is located
• Temporal one agent’s interaction with another to have effect on productivity.

2.2 Strategiest for evaluating the Scope of Agglomeration Economies
2.2.1 Context
• External economies: shifters of an establishment’s production function.
• Aggregate urban external effect arises as sum of large number of individual externalities
• Increase in distance for spatial, industrial, or temporal will lead to attenuation of agglomerative effect of establishment
• Total benefit of agglomeration= the sume over interaction partners of effect with (geographic, industrial, and temporal distance)

2.2.2 Measuring the Scope
• A should include amount of economic activity present in different industries from j.
• Determines industries that will benefit from proximity
• Typically relies on one or more key aspects but NEVER all three

2.2.3 Estimating the production function: omitted variables and simultaneity
• Estimate the production function; xj (employment, land, capital, and materials)
• Labor inputs are easiest to measure (hours worked, workers, skill level)

2.2.4 Indirect strategies
• Four indirect approaches:
o Growth of total employment (easily available and linear)
o Scope and effect of agglomeration on productivity has been to focus on births of new establishments and employment
o Scope and influence of agglomeration is to study wages
o Rents (productivity should be capitalized in both wages and rents)

2.3 Industrial Scope
2.3.1 Urbanization or localization economies
• Localized industry disadvantages:
• Proxied by employment in the industry
o Work is chiefly of one kid
o Wages can be high and the cost of labor and money earnings for families are low
• Impact of Urbanization
• Doubling of industry scale leads to increase in productivity, while doubling city population leads to increase.
• Henderson and Nakamura are more favorable to localization economies

2.3.2 Specialization and Diversity
• Specify industrial scope: degree of employment specialization
• Combes argues specialization must be taken with caution, can lead to more growth among mature industries
• Absolute versus relative effects.
• Leads to diversity, can result in urbanization economy and encourages growth and births

2.3.3 Other work on industrial scope
• Spilt opinions between economists
• Manufacturing: specialization and diversity have negative effects, but eventually becomes positive

2.3.4 Continuity and industrial scope
• Distance between location is much more clear and easily calculated compared to distance between industries
• Cities emphasize managerial and information around activity of the specific benefits from the personal contacts

2.4 Geographic Scope
• Use to be based on political boundaries (ie. States, and counties)
• Measures county-level employment density, theory of agglomeration is based around density (positive effect)
• New arrivals are more likely to be attracted to zip codes as employment in the own industry within one mile increases
• Many of the effects are localized, but are also spillovers

2.5 Temporal Scope
• Static vs. Dynamic
o Dynamic effect: knowledge spillover, could take other forms
• 3 major estimation: individual rates being regressed attribute and characteristics of workers
o worker is at work, recent migrants would receiver higher wage because they are “most able”
• Workers leaving city, wages at new location are higher the larger the size of the previous city.

2.6 Industrial organization
2.6.1 Competition
• Local competition encourages innovation by forcing firms to innovate or fail
• Localization economies arise from the presence of establishments rather than size of the establishment
• Establishment size may be associated with different way of business
• Smaller establishments may be more flexible and open to nearby companies, and result in good neighbors

2.6.2 Industrial organization and business culture
• Local technological capabilities are not fundamental source
• Adding additional employee at a small firm typically has a significant and positive effect on births and new firm employment
• Henderson: small firms enjoy larger increment to the productivity, as own-industry employment increases in the same city
• “Bohemians” artistic occupation categories, tend to innovate more than do less creative cities
• Tolerant environment are more innovative

2.6.3 The Urban Rate Race
• Selection model: hard working individuals choose to locate in an active professional environment
o Work longer hours
• Rate Race Model: competition encourages individuals to work longer hours when its is important to be noticed
o Among young professionals who have most to gain
• Young individuals work longer hours: rivals are present and rewards

3. The sources of urban increasing returns
• 3 main assumed sources: Knowledge spillover, labor market pooling, and input sharing
• Marshallian microfoundations of agglomeration economies: Natrual advantages, Input sharing, Knowledge spillover, Home market effects, Consumption, Rent seeking, Multiple
• Same sort of evidence is required to identify the microfoundations of agglomeration economies, except even more data
• Ideal data is not always realistically available so some economic compromise is made

3.1. Increasing returns or natural advantage?
• Example of natural advantage: Steel industry thrived around great lakes because of the presence of iron, ore, and coal
• Marshal theorizes the chief causes of localization of industry being physical geographic conditions
• Natural resources are important in determining agglomerations, there for a smaller process of agglomeration
• Ellison and Glaeser show that the percentage of agglomeration that is predicted by the natural
advantage proxies is roughly 20%.
• Studies however often assume that various factors such as labor, are immobile which may skew research
• Little evidence of external economies impacting regional specialization.

3.2. What do the productivity studies have to say about microfoundations?
• agglomeration economies whose sources are knowledge spillovers, labor market pooling, or input sharing all manifest themselves in pretty much the same way in terms of productivity
• high productivity, employment, wages, and rents reflect the presence of agglomeration conomies. They are not, however, evidence of any particular agglomeration economy.
• Growth requires profitability. Profitability requires productivity, which may be enhanced in a dynamic sense by agglomeration economies.
• Growth fosters agglomeration by making inputs available to entrepreneurs.
• Claims such as spillover can be possible contributors of growth influenced by localization, but not necessarily the only contributor
• Increase in wage does not necessarily reflect the accumulation of knowledge or indicate a spillover
• Productivity studies have served to better indicate the existence of agglomeration economies, however they are less successful in identifying the source of the agglomeration economies
• Unable to make inferences from data on productivity, growth, or wages

3.3. Individual microfoundations
• one may be able to assess the theoretical claims on input sharing and agglomeration when relating information on actual input sharing taking place to location patterns

3.3.1. Input sharing
• Marshall’s notion of input sharing depends crucially on the existence of scale economies
in input production.
• Holmes studies the connection between the characteristics of a firm’s location – concentrated or not – on input sharing.
• industrial concentration strongly suggests input sharing
• The papers reviewed in this section provide fairly strong evidence that input sharing is important, both for cities and overall

3.3.2. Knowledge spillovers
• Difficult to identify as knowledge is not bought or sold
• Spatially concentrated areas
• Regions differ in the way their knowledge spills over
• Level of education in an area may be a contributing factor

3.3.3. Labor market pooling
• 2 related interpretations of labor market pooling.
• workers should be better matched in large cities (an urbanization effect) or in industrial concentrations (a localization effect).
• labor market pooling is fundamentally about risk.
• Risk can be worker and firm-specific or industry-specific
• an industry shock could result in a worker losing a job
• industry specific shock discourages localization, while the match-specific shocks described above encourage it.

3.3.4. Home market effects
• Home market effects exist

3.3.5. Consumption
• recently studies have emphasized the consumption possibilities of large cities as sources of agglomeration.
• In large cities, there may be goods and services available that are not available elsewhere
• Large cities may offer various aesthetic charms
• Large cities may allow the provision of public goods that would not be possible in a smaller place
• Relatively dense settlement of a large city allows speed of interaction that would not be possible in a smaller city (i.e., social interactions).
• The key idea is that a larger market may allow goods to be more closely tailored to individual consumers’ tastes.
• The idea that workers would be willing to give up real wage to enjoy a city’s consumption
amenities is a key concept and part of urban quality of life

3.3.6. Rent-seeking
Holmes speculates that public policy influences location patterns around borders and impacts location

3.4. The relative importance of Marshallian microfoundations
• Even in the absence of knowledge spillovers, Audretsch and Feldman show that innovation is more concentrated in an industry with a high ratio of R&D to sales, a greater reliance on skilled labor, and where more university research is devoted to research relevant to that industry.
• Concentration of industry, concentration of production
• Ellison and Glaeser’s equation measures spatial concentration without any contamination associated with industrial organization.

4. Case evidence
• even the most refined data set and most sophisticated econometric techniques will not be able to address all of the idiosyncratic conditions that contribute to agglomeration
• There is much to be learned about the nature of agglomeration
From actual case studies.

4.1. The New York Metropolitan Region Study
• External economies are central to NY’s history
• Transportation and ports spurred industry, shipping fostered trade
• Valuable case study but cannot draw universal conclusions from it

4.2. Regional Clusters of Innovation Project
• Study competition
• The heart of the approach is that a business will become more productive when factor markets are favorable, when suppliers are available, when consumers are demanding, and when competitive pressures compel sustained innovation.
• Cluster mapping project identifies 41 clusters in North America
• Institutions matter to agglomerations, such as alumni networks
• Can account for specifics such as government actions and taxes

4.3. Regional advantage
• Silicon valley, regional advantage of corporate organization which valued and fostered rapid change, even in terms of changing jobs, contributing to a knowledge spill over

5. Conclusion
• Questions whether old or new, can still help us identify knowledge and knowledge gaps that could influence public policy as well as future productivity
• The more knowledge of successful agglomeration economies we have, the more successful we will be in encouraging their duplication else where

Week 2: Agriculture October 6, 2010

Option 1: Food Inc.

What is the “pastoral fantasy” and why do food markers promote it?
The idea of having every food product available for consumption whenever needed, even out of season. Changing the food to make it easier to produce. Food markers promote it because they are making so much money on selling food this way. The food is produced with chemicals and alterations that are controlled by companies.

How does the food industry increase the productivity of labor, and what are the consequences for wage and job quality?
They use large warehouses and chemicals to change the production of food. They are no longer working directly with farmers, and are hiding the true story of the production of these foods. It has large consequences on wages and job quality because the farmers are not working with organic food anymore and are being paid minimally so that the large corporations can make more.

A monopsony is a market in which there is one large buyer. How does the existence of monopsonies in the food industry (i.e. McDonalds) effect the diversity and quality of food markets?
Because of this monopsonies workers are trained to do one thing, they can pay low wage and easily replaceable. The food was inexpensive and easily produced which made it into a monopsonies. It being the largest purchaser of ground beef they get to control the taste of the ground beef, thus they control the food system and the quality of the product.

How has the market share of top beef produces changed in the last 40 years? What does this suggest about the cost structure for the industry?
There have never been companies that have controlled this much of the market years ago. This results in those companies changing the product and those who grow/responsible for the product. The cost structure of the industry is set by those companies because they are the biggest buyer of the product and buy in large amounts.

What is the primary advantage to mass producing food?
Mass producing food is easier and can be responsible for one sole product and process. Also when you are the sole mass producer of a product all the buyers come to you to purchase it and you know that you are not in much of a competition but can set the price because there is no one else providing the product.

Why does the US have laws regarding the humane treatment of animals?
Because in our society now treatment of animals for consumption is in inhumane. Farmers and companies are doing this for mass production and do not care about the treatment of the animals. Setting regulations and laws for the treatment is in an effort to help those animals and those who are in the care of the animals. But it needs to be stepped up to ensure that the consumers of the product are going to be ok and that the animals are not cruelly treated in this process.

How does breading for rapid growth effect the wellbeing of chickens?
The chickens are injected or given hormones to enlarge their breast to meet the preference of white meat. This affects the chickens because they grow at a rapid rate and can not fully mature before they are taken to the factories.

In addition to low wages, why might producers prefer illegal immigrant workers over citizens?
Because they do not let the stereotype of the work affect them when they are looking for work in general and a way to provide for their family. With illegal immigrants they do not have to worry about the hazards of the chemicals and hormones affecting the workers because the workers can not sue the company because they are illegally in the country. The farmers will use this to their advantage.

Why does the government promote the production of corn?
Because almost all products in the supermarket and products that are produced contain corn or soy bean. You can do multiple things with corn, in addition to feeding it to animals. Now it is used to feed fish in fish farms.

How does the overproduction of corn affect the market price of beef?
Because corn is so cheap and used as food for animals the price of beef is driven down because the feed is cheaper. And the reason for feeding them corn is because it is really cheap and it makes them fat.

Why are food born illness outbreaks like e-coli growing in geographic size and number of people affected?
It is an outbreak because of the food that is feed to the animals, also when the animals are standing ankle deep in their manure and the disease can pass quickly and it not addressed because it goes so quickly to the slaughter house.

Why do the FDA and other regulatory agencies appear ineffective at reducing food born illnesses?
Because of the rate of production and technology of food production it can not keep up with the regulations needed. Now that there are only 13 slaughter houses, there are multiple cows in one meat patty increasing the chance of transferring diseases.

What market mechanism gives produces incentive to provide safe food?
When food is not safe the market can stop, the demand for the product will decrease dramatically and find another substitutes for the product. Also during this time when people are extremely concerned with the production of food and getting sick.

Without searching on the internet, list all the brand names you can think of that have produced contaminated food.
Jack in the box and the spinach outbreak

Why are processed calories (fast food, junk food, TV dinners, ect) cheaper than unprocessed calories (vegetables)?
The production of processed food is easier than unprocessed although the food is not changed.

Some unprocesses calories, such as potatoes and beans, are cheap. Why are low income people unlikely to purchase these foods?
Because these unprocessed foods are not as filling as the others and can get more food such as fast food then those.

In what ways is diabetes a result of rational choice? How could it be explained as an irrational choice (not optimal?)
Diabetes can result from high levels of high blood sugar, which can be a result from having foods that are high in sugars and these foods typically are processed foods. Some argue that it is a rational choice because people should know that these foods cause this disease, but others say that consumers are not aware of the effects of these processed food problems and the issues and disease that could be bring along with them.

How does distancing management decisions from the product process effect the outcomes for society?
Having distance between the management decisions and the product process effects society because it develops a disconnect and allows different ideas,thought, and processes to occur. The decision makers can make changes or decisions with out involving the process’ opinions or thoughts to come into account or vise versa.

How does transparency change the behavior of firms?
If the decisions are made public for the firms it could cause a reaction from consumers to the firms. If firms are making unethical decisions and consumers know about it, it could cause the firms to fail. It could also promote and establish other firms who are making ethical decisions.

Economists tend to criticize labor unions for increasing wages above equilibrium levels. Higher wages lead to lower production and fewer jobs. When might unions be beneficial for society?
Unions can help societies when firms are paying below equilibrium and are focusing more on the firm rather than the employees. For society union firms provide that assistance when firms only care about making a profit and not their employees.

Why do producers prefer regular daily deportations of illegal immigrants over occasional large raids?
Because then they are only loosing a couple of workers and still can continue the to produce their product. But when its large raids they could potentially loose all workers and would have to stop production.

Should producers bear responsibility for attracting illegal immigrants?
Yes, I believe that they are the ones searching for the cheap workers and not having to deal with unions or potential law suits from harms that can happen during production. When producers want employees like this and attract employees like this, I feel that they should be held responsible because they are trying to cheat the system in multiple different forms.

How does growth in production affect the objectives of firm decision makers?
When there is a dramatic growth of production decisions makers have to figure out a method to adjust to this production growth. Are they going to high more workers, expand, or remain the same and try to remain at the same production level. Decision makers also have to think about the effects that it would have on the firm and its employees and what best suites both of them while providing to their consumers.

How does the acquisition of a firm by a conglomerate affect the firm’s objective function?

Patent laws are one method of creating property rights for public goods. What tradeoff does society face when shift production of public goods from public to private groups? (For example, when seed breeding switches from land grant universities to companies like Monsanto.)
Society no longer can really determine what is happening to the product, because of the production is now under private groups. The private groups now do not have to turn in their records.

Why is it useful for the government to give industry executives powerful regulatory positions?
Government then can hold the executives the responsibility for the production that occurs under them. The more regulation that occurred in these positions the better it would be for outside consumers and producers.

What are veggie libel laws?
Laws that prohibit and limit the disparagement of food. It allows producers to more easily sue critiques of the food. Including publishing a photo of food operations.

What are cheeseburger laws?
Makes it very difficult to sue the companies against these laws and the firms that produce the food, and the protection that they have under the veggie libel laws.

What can cause volatility in the price of food?
Production cost increasing, supply increase or decrease, natural disaster, disease, health information, etc.

How do volatile prices affect low income food producers?
If it strings to far from what is normal and acceptable for consumers and producers it could harm both sides. If it volatiles to high from the norm low income food producers would not be able to compete with other companies, because of the price of the product.