The Econometrics of Building A New Town

Abstract

PLANNING for the construction of a new town is in many ways similar to planning the development of an emerging national economy. Both processes may be framed within the context of growth, susceptible to an econometric treatment. The models of Klein and Goldberger, Tinbergen, Koyck and Bos, Harrod, Domar, and others, are well known; but the time seems distant when such sophisticated analyses of national economies can be applied to a local economy. Our paper modestly seeks to narrow this distance by developing and testing an urban growth model. Although the model was conceived for a particular growth problem and for one city, it is no less applicable to more general local development problems such as the construction of new towns. The process of building a new town may be conceptualized in a dynamic programming model which seeks to optimally schedule the allocation of budgeted funds among competing investment needs in such a fashion that the needs, or targets, are satisfied in minimum time. As a corollary, since the capital appropriation is exogenously given to the new town as a continuous increasing single-valued function of time, the targets are attained at minimum cost. The targets are defined as units of physical capacity, which in turn are dichotomized as industrial and service. Finally, because the capital appropriation equates costs, with minimum cost, as well as minimum time, the amount appropriated is also minimized.