Abstract
This chapter begins by framing an economic model of the urbanization process. This conceptual framework, referred to as “the new economic geography,” aims to identify the determinants of when cities will coalesce and of the size distribution of urban places in a country or region. The conditions identified by the model as being conducive to the formation of cities include declining transportation costs, rising demand for goods produced under increasing returns to scale, and a preference for variety in the commodities and services households buy. The second part of the chapter shows that these conditions came into much greater effect in the United States during the years between 1815 and about 1850 than they had been before. The chapter concludes with a theoretical consideration of where on the map urbanization is likely to take place.
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- 1.
The material in the following section characterizes the models and discussions which were first presented in Krugman (1991) and received their most complete expression in Fujita, Krugman, and Venables (1999). The term “catastrophic agglomeration” appeared in Neary (2001). The discussion also bears in mind some of the critiques of the NEG approach drawn, for example, from Davis and Weinstein (1998) and Davis (1998).
- 2.
The production of some services is also characterized by economies of scale, and this consideration became an important determinant of which activities concentrated in New York during the twentieth century. Early in the nineteenth century, however, economies of scale primarily affected the location of manufacturing.
- 3.
Subsequent research by C. Knick Harley found that the dramatic decline in freight rates reflected in North’s index may have been driven primarily by improved efficiency in the shipment of cotton and, therefore, may have only affected the coastal and transoceanic trade of the United States. Large decreases in the cost of shipping other goods on other global routes had to await the widespread use of steam technology and metal hulls during the second half of the nineteenth century. Since, as the next chapter will demonstrate, cotton played a particularly important role in New York City’s commercial economy, North’s findings are more relevant here (Harley, 1988).
- 4.
In terms of the basic identical-households NEG model as presented by Fujita, Krugman, and Venables, the assertion here is that an increase in the number of different types of consumers would have the same impact on the likelihood of agglomeration as a decrease in the elasticity of substitution across products in the universal utility function.
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Gurwitz, A. (2019). Catastrophic Agglomeration. In: Atlantic Metropolis. Palgrave Studies in American Economic History. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-13352-8_4
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