1 - Introduction

Abstract

This chapter provides a brief overview of the concept of a neighborhood in the United States. A neighborhood can be analyzed like a good, and that it has demand, supply, and equilibrium outcomes that can be studied like those of other goods can also be studied as those of other goods. Neighborhood has now become a policymaker's word as well. They can be thought of as some physical clustering that provides collective externality to a well-defined group of people living inside or nearby the cluster. Neighborhood preservation and revitalization have become twin themes of the president's national urban policy, as well as the central focus of the first lady's public-service efforts. As neighborhoods are now viewed as rungs on a socioeconomic ladder, public funds for improvements having high visibility in low-income enclaves have often appealed to taxpayers. Welfare economists have long recognized the importance of neighborhood effects, which are said to arise whenever the utility function (production function) of one economic agent depends upon the consumption (production) of another agent. While the demand for neighborhood attributes may be relatively easy to analyze, neighborhood supply is quite another matter. While the provision of residential structure services is largely a question of housing supply, the assignment or self-assignment of households to these structures is a part of the demand for housing.