Kelley and Williamson focus on the limits to urban growth by stressing high urban capital intensities, as well as public social overhead and population-sensitive private investment requirements in cities. Could
478 Economic Development and Cultural Change these investment requirements be diminished by more appropriate use of less capital-intensive technologies? One way to achieve such tech-nologies, of course, is to pursue policies that retard the rate of urban-ization. Another is to invoke the notion of "optimal city size" which, so it is alleged by some critics, implies eroding the bias that favors large cities and fostering instead the development of smaller cities and towns. Central to these issues are the costs of urbanization, and central to these costs is efficiency (and equity) in the supply of public goods.
Many governments in developed and less developed countries be-lieve that their largest cities are too big and seek policies that deflect growth to medium-sized centers. The sizes held to be optimal. vary from country to country, but the recommended totals often lie in the 250,000-500,000 range. How are such numbers calculated?
Most studies of optimal city size assume diseconomies of urban scale and seek to identify that population at which per capita public costs are minimized. But since such studies have been unable to mea-sure public-sector outputs, it is difficult to match expenditures with the public services actually purchased. Moreover, the costs are money costs, not economic costs. Lacking a theoretical basis for measuring the latter gives rise to tough questions: Are expenditures on land costs or wealth transfers? Are public employees' salaries true costs, or are they partly transfer payments? Furthermore, since per capita output appears to increase with city size, it would seem more appropriate to maximize the difference between outputs (incomes) and inputs (costs) than merely to minimize costs.27 And how are we to measure quality-adjusted public sector outputs anyway?
Although there is little hard evidence that large cities are too big, there may well be circumstances under which large additions to cur-rently underserviced populations may be impossible to accommodate in the shortrun. A higher city growth rate means greater pressure on the quality of the local environment, less time for overcoming social, institutional, and political barriers, and the postponement of the res-olution of existing problems created by past growth. A slower growth rate buys time to explore alternatives and to catch up with past needs.
Urban populations that double in size every decade would strain the absorptive capacity of cities in most developed countries; in the less developed nations such doublings are frequent and occur in a setting of inadequate human, physical, and financial resources.
27 W. Alonso, "Problems, Purposes, and Implicit Policies for a National Strategy of Urbanization," in Population. Distribution, and Policy. ed. S. M. Mazie (Washington, D.C.: Government Printing Office, 1978), pp. 635-47; and H. W. Richardson, "The Costs and Benefits of Alternative Dimensions and Perspectives," in The Population Debate:
Dimensions and Perspectives. Papers of the World Population Conference, Bucharest, 1974 (New York: United Nations, 1978), 2:131-78.
Johannes Linn's contribution to this symposium responds to these issues-issues that became especially visible among academic econo-mists after W. Arthur Lewis's Janeway Lectures in 1977.28 As Lewis reminded us, "Urbanization is decisive because it is so expensive."29 Why the concern over the costs of urbanization? Linn offers four rea-sons: (1) urbanization places a high financial burden on urban govern-ments-a financial problem made especially acute in the Third World due to imperfect capital markets there; (2) because of the high capital requirements of city building, and given the rapid growth of cities, some believe that today's Third World urbanization is responsible for growing international indebtedness; (3) the costs associated with congestion and pollution are thought to be higher in larger cities than in small, and higher in urban than in rural areas; and (4) there is the equity concern: rural areas should not subsidize urban areas.
Based on Colombian data, it is true that public expenditures per capita are higher in larger cities and urban areas, a conclusion supported by Asian data as well.Jo What is not clear, however, is how many of these expenditure patterns can be explained by per capita income.
Obviously, public expenditures are determined both by unit costs on the supply side and income plus price effects on the demand side.
Linn's conclusion on these income effects is well worth repeating:
"To the extent that urbanization costs are dependent on incomes, they are not avoidable by accelerated rural development or by favoring the development of smaller towns and cities." Unit costs aside, the user price charged may also be critical to urban demand for public services.
Subsidized public services are common in the Third World, and they do tend to be higher in urban areas since there are more services provided there.Ji
What about the unit costs of supplying public goods? The issue of scale economies in the provision of public goods is an old topic, and it underlies the optimal-city-size problem. Are unit costs higher in cities and especially higher in large cities? If so, then an argument could be made that the Third World is overurbanized. Linn summarizes the evidence on water supply, sewerage, electricity, solid-waste disposal, transportation, education, health, and other social-overhead services.
He can find no evidence to support the view that cities are inefficient
28 J. Linn, "The Costs of Urbanization in Developing Countries," in this issue. All quotations are from this article.
29 W. A. Lewis, "The Evolution of the International Economic Order," Discussion Paper no. 74 (Princeton, N.J.: Princeton University, Woodrow Wilson School, Re-search Program in Development Studies, 1977), p. 39.
30 See J. Meerman, Public Expenditure in Malaysia: Who Benefits and Why (London:
Oxford University Press, 1979); and M. Selowsky, Who Benefits from Government Ex-penditures: A Case Srudy of Colombia (London: Oxford University Press, 1979).
31 See Selowsky.
480 Economic Development and Cultural Change relative to rural areas or smaller towns. What about congestion, pol-lution, and other urban disamenities? While we need much more re-search on the question, Linn emphasizes that ''the main lesson to draw for purposes of policy is that controlling city size is rarely, if ever, the appropriate policy instrument to deal with ... congestion, pollution, public service subsidies .... The appropriate policy intervention should instead focus directly on the sources of the inefficiency, which would include the pricing of externalities through pollution and congestion charges and the pricing of urban services at cost rather than at sub-sidized rates."
What about the distributive impact of public expenditures in de-veloping countries? Michael Lipton has been in the forefront of the critics alleging overurbanization.32 For Lipton, an urban bias in public policy leads to excessive rates of urbanization and worsens the distri-bution of income. Furthermore, Lipton feels that these effects have been large. While these allegations have provoked useful debate, they have not yet generated much hard fact. But even if we accept the allegations, what do they imply for urbanization policies? Linn sug-gests: "To the extent that urban areas are subsidized by the public sector, one may indeed want to correct the balance . .. on equity grounds. But this corrective action should not involve policies geared primarily to slow down the urbanization process; rather, the subsidies provided to urban dwellers should be reduced or eliminated by appro-priate changes in taxation, user charges, and public expenditures pol-icies. Indirectly, these policies may also affect relative rural-urban pop-ulation growth rates, but judging from the empirical evidence on the determinants of rural-urban migration in developing countries this im-pact is not likely to be strong."
Nathan Keyfitz would find this view naive. In the final contribution to this symposium, Keyfitz raises four big questions: Why does in-equality in poor countries still persist? Why so great an expansion of government? Why such rapid urbanization? And why the neglect of agriculture in countries where many people are hungry? The answer, according to Keyfitz, lies in large part with the rise in urban-based, middle-class elites who reinforce and accelerate the urban bias. That is, once in power, urban elites are unlikely to pursue the corrective policies that erode their power. '' . . . even in democracies the levers of power are in the hands of the middle class, which determines the policies that make the cities grow and the countryside wilt."33
32 M. Lipton, Why Poor People Stay Poor: Urban Bias in World Development (Cam-bridge, Mass.: Harvard University Press, 1977).
33 Nathan Keyfitz, "Development and the Elimination of Poverty," in this issue. All quotations are from this article.
While economists have stressed the urban-industrial bias for some time, and have dwelt at length on the menu of policies that tend to implement that bias, in Keyfitz's hands these policies come alive as a comprehensive political economy of overurbanization.
Such are the policies that improve the lot of city people and so inciden-tally increase city sizes. They help explain the perversity ofurbanization . . . . Those who have already attained such jobs and are in power may not be directly trying to expand their numbers, but it is hard for them to avoid doing so. For one thing the urban amenities that they introduce-roads, local transport, and schools-are available in some degree to the poor. The elite cannot make the city better for themselves without ...
making it better for the newcomers, and so encouraging further new-comers . . . . The masses in the capital city are physically close enough to the government to communicate their wishes .. ..
If true, it is obviously important to learn much more about the social mechanism that causes overurbanization through the urban bias. Yet, the quantitative importance of the urban bias has never been estimated nor have the sources of Third World urbanization been established.
Perhaps the general equilibrium models of the type described by Kelley and Williamson will offer that accounting. Until then, overurbanization remains a force of unknown magnitude.