There is no doubt that Michael Keren is right and that the point is important.1 In the initial discussion of my model, I simply misinterpreted the rising relative cost of the urban public services to nmean that it will beconme harder for society to provide them. As Keren shows, the rising productivity elsewhere in the economy that is the source of the increasing opportunitv cost of the services, also automatically nmeans that the conmmunity will be able mor-e easily, if it wishes, to pay for these services, despite their rising cost. The implications of Keren's point are worth spelling out. The basic argument of the original anal-sis still renmains valid: the financial problem of the cities increases (in part) because the costs of the services rise more rapidly than the general price level. This may well lead to cumulative deteriora