The Optimum Factory Town

Abstract

This paper studies the determination of the optimum size and arrangement of a monocentric city. The major consideration is the trade-off' between economies of scale in production in the central business district and the diseconomies of congestion in commuter transport. Planned optimum allocations and their decentralized implementation by suitable taxes and transfers are discussed. Rent and density profiles and land use are solved in closedform, and complete numerical solutions are obtained for particular parameter values. It is shown that negative exponential rent and density profiles may not be very good approximations, and that cities of more than a million inhabitants are dificult to justify in the,framework considered. * The general conceptual framework of the theory of monocentric cities is too well-known to need another airing.' In this paper I offer improvement on earlier work at several specific points. I shall indicate these by comparing this paper with some recent ones. The most serious defect common to several of these papers (e.g. those of Solow and of Oron, Pines, and Sheshinski2) is their assumption of nonincreasing returns to scale in production in the central business district. This destroys all rationale for organizing production in a city, as dispersed production will save transport costs without losing output. To preserve the urban structure, we must then impose the condition that all output has to be shipped to a point market place, which is an arbitrary and unsatisfactory way out. The role of increasing returns in understanding urban problems is clearly stated by Koopmans,3 and general theorems relating city size to increasing returns are proved by Mirrlees and Starrett.4 I shall be concerned with more specific cases which can yield approximate numerical results,