Residential Density and Spatial Externalities

Abstract

The occupation of residential space imposes externalities on those travelling from the outer margin of that space to the city centre. The free market price does match the social cost under many models of city structure, and so promotes optimal occupation of space, provided that all journeys are to and from the centre. If additionally there are journeys to the countryside for recreation, the free market understates social cost at the periphery. Public land ownership to provide social services may cause the free market price to exceed the social cost near the centre. The implication that planned densities should be less variable than those generated by the free market is generally supported by other social and economic arguments.

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