A large literature has grown up in urban economics in the last decade. It can be broadly classified into: 1) studies of the growth, composition (industry and population), and spatial form of urbanized areas; and 2) analyses of problems such as congestion, discrimination in housing and employment, and the fiscal difficulties of cities. This paper concentrates on the former, where the contributions from other disciplines have been as important as those from economics. Part One of the paper deals with models of growth and intra-urban land use. Part Two is devoted to urban simulation and efforts to build large scale statistical models for analyzing, among other things, the impact of alternative government policies on patterns of urban development.
IN The general theory of employment, interest and money we can discover what gives a book eternal youth. It is the quality of imperishable relevance to the essential, insoluble problems of time-bound humanity. A problem solved, a situation resolved into its ultimate constituents, a veil finally and irrevocably withdrawn, is the end of a matter. can salute the author who did these things, but we can no longer look into a living face and see our own enigmas and perplexities reflected there. Keynes's book, however, is a great enigma; it is the image of the vaster enigma of conduct, decision, and history itself. It is doubtless paradoxical to say that Keynes's book achieves its triumph by pointing out that the problems it is concerned with are essentially beyond solution. The business of scholars, scientists and philosophers is to gain and give understanding. But only the best of them tell us that they can describe only the shadows in the mouth of the cave. All problems are solvable, the characteristic stance of our civilization, afflicts us with a terrible myopia. If all problems are to be solvable, we must be very careful what kinds of thing we admit to the category of problems. They must be carefully tailored to fit our selfassumed omni-competence. The task which suits us, which we can do with astounding ingenuity and surprising effect, is that of analysis, the application of reason to the dismemberment of a body of information declared or assumed to be self-sufficient, and its re-constitution into a prescription for conduct. It is the selfsufficiency of such supposed bodies of information which removes them so immeasurably far from the harsh truth of things. Why was not Keynes satisfied with the Treatise? It had the Keynesian touch. It knotted up a mass of perplexities and cut them with one Alexandrine stroke. The Fundamental Equations were extremely concise and ostensibly simple. Had Myrdal been at Keynes's elbow to interpret the dream, they would have done the trick, thrown back the bolt and enabled the gates to swing open upon an undiscovered country. What was wanted was some clue to the nature of the inducement to invest. Keynes in the Treatise sought for it in a WicksellianAustrian theory of the nature of capital. (If one draws a diagram of what Keynes says about capital in the Treatise, there will appear a Hayekian triangle of the stages of production.) But this did not seem to go quite to the heart of the matter. What, in its essential nature, was the Natural Rate of Interest? This was the difficulty, the source of dissatisfaction, that led to a fresh attempt as soon as the Treatise was published. The General theory devotes a whole Book to the Inducement to Invest. The apparatus is the confrontation with each other of the Marginal Efficiency of Capital and the rate of interest. What is the M.E.C.? learn its real nature in Section V of Chapter 11. It depends on expectation. And what does expectation depend on? To find that stated, with full uncompromising explicitness, we have to look in a part of the canon which few economists seem able to endure the sight of-or else they have never heard of it. It is his reply to his critics. It appeared in the Quarterly Journal of Economics for February 1937, and it declares unequivocally that expectations do not rest on anything solid, determinable, demonstrable. We simply do not know. The General theory is a detour. (Is everything in economics a detour?) It is a detour from a path which might have led direct from the Treatise to the Q.J.E. article. Keynes and many of the readers of the Treatise were worried about how investment and saving could differ from each other. The dilemma needed only the same liberating insight that can ex-
A preliminary draft of this paper was presented at the Decemnber, 1971 meetings of the Econometric Society. This paper has benefited from the perceptive comments of a number of readers; I am particularly indebted to Ronald Bodkin, Stewart Gillmor, Zvi Griliches, Sherwin Rosen and the referees. Assistance in data compilation was provided by Peter Brubaker, Maureen Donahoe, Charles Eckert, Marshall E. Goldman, Stephen Kalos, Lawrence Kenny, Richard LeClair, and Thurman Northcross. Computations were executed on the Wesleyan University IBM 1130 computer. Research support has been provided by Wesleyan University and National Science Foundation Research Grant GS 2903.