Urban Diseconomies

Urban diseconomies refer to cost increases that occur as a result of urban growth. Globalization has created nodes of commerce and information that stimulate the expansion of urban areas. Consequently, an increasing number of places must confront problems associated with urban diseconomies. Symptoms of urban diseconomies may manifest differently depending on political, social, and other conditions.

One way to conceptualize the nexus between urban size and welfare is to consider the balance of two countervailing forces. On the one hand, as an area grows, economies of size operate to lower costs and improve efficiency. Economic advantages of increased size are known as agglomeration economies. Conversely, urban diseconomies tend to increase costs and lower productivity. They counteract the tendency for agglomeration economies to concentrate economic processes in a single place.

Urban diseconomies are critical to understanding optimum city size. Economists consider optimum city size as the point at which urban diseconomies offset economic advantages of agglomeration. Optimum size was considered that point where economies from larger size and urban diseconomies combine to maximize per capita income or some other welfare indicator. More complex analysis suggests that (a) there is no single optimum size because tastes and preferences of individuals differ; (b) optimum size of one urban place depends on the size and location of other places in the regional and global system of cities; and (c) cultural, political, geographical, and other features also influence the relationship between urban size and efficiency.