03-28-2023, 03:53 AM
THRESHOLD ANALYSIS- AN ECONOMIC TOOL FOR TOWN AND REGIONAL PLANNING
J. T. HUGHES and J. KOZLOWSKI
Economics and planning are interrelated on two planes. Firstly, planning decisions are shaped by and in turn shape economic activity in an area. It is impossible to ignore such important variables as travel to work, shopping, income levels and growth of employment in determining the physical pattern of development
The planning process will influence directly or indirectly investment decisions which account for a large part of national resource
Threshold analysis has been developed primarily by physical planners but, it will be argued, incorporates an analysis which is 'economic' in character. By considering
alternative forms of development its approach to a planning problem has much in common with that of the economist and thus aids economic analysis of that problem
This allocation problem may be resolve
(a) goal formulation - in what terms we define 'best'
(b) how do we achieve the allocation decide in (a) as best
The main basis for the development of threshold theory was the simple observation that towns encounter some physical limitations to their spatial growth due either to topography, or to their public utility networks and existing land uses. These limitations, a common phenomenon in the growth of human settlements, may be called the THRESHOLDS of urban development.
Their main characteristic is that they are not irremediable, but can be overcome only at a high cost in capital investment. In some cases these costs may be disproportionate to the 'normal' investment costs necessary for any town growth but in all cases the initial costs will mean that the cost per head to population will rise. In other words, a threshold may have two types of impact on costs. It always involves a sharp rise as capital expenditures are required to open up new areas. But, secondly, it may represent the need to use new higher-cost land for the town's development, for example by using land which is more steeply sloping or with poor load-bearing qualities.
Threshold analysis easily develops into a study of the problem of development costs. Capital investment costs necessary for town expansion change with time and are dependent on the relation between the town's growth and the successive threshold lines limiting its further development. In general the costs necessary to locate a new inhabitant in a town (Ci) are at least twofold: costs not connected with given location of investments necessary to accommodate new inhabitants, which can be called 'normal costs' (Cn); and costs heavily dependent upon existing conditions and characteristics of given land (Ct). Thus, Ci = Cn+Ct, The costs defined as Ct, ('abnormal development costs') will fall generally into four categories:
(i) costs of essential land improvements (for building purposes), or additional construction costs connected with the topographical characteristics of the analysed area.
(ii) costs of acquisition of land (including the market price, and various compensation costs) which must be paid to open the land for urban development.
(iii) costs of equipping the land with the main public utility networks (including both the lines and the work of resources).
(iv) costs of new communication routes necessary to make given areas accessible.
(v) cost associated with altering existing land uses.
Costs may also be categorised by the moment of time when the costs must be incurred. One type is those which must be spent before the land is suitable for development (water, sewage networks, roads, etc). The second type may be spread over the whole period of development (i.e. costs connected with building on land with low load bearing capacity of soil). The relationship of this division to overhead and direct costs is obvious. The timing of these costs and the work associated with them will have repercussions for the programming of investment.
It is clear that the need to overcome a given threshold line will result in a rise in investment costs (Ct). The overstepping of the threshold, i.e. completing of all investments necessary to open new land for town ex- pansion, results in a decline in those costs. The inflexion points on the costs curve are in fact another way of presenting the thresholds. Thus the notion of "Threshold Costs' may be defined as the costs necessary to over- come the threshold line limiting physcial development
The Economist's Approach
It has been shown that threshold analysis like economic analysis is concerned with the problem of efficiency, the optimum use of resources. Since, however, so many unquantifiable elements enter into planning decisions, it is inevitable that the role of the economist must be restricted. If we assume that the value judgments of the planner are fixed, threshold analysis is a means of discovering the most efficient way in which to effect his proposals. It is also possible by using the technique to demonstrate the economic consequences of changing these judgments. But as an operational tool its concern is with the 'production' conditions, that is the best way of fulfilling previously formulated goals.
There are two concepts with which the economist approaches such a problem, the notions of opportunity cost and of the margin. The idea of opportunity cost follows from the fundamental problem of economics, defined as the allocation of limited resources to satisfy greater wants; it is simply that, in order to undertake one course of action, alternatives or other opportunities will have to be foregone. When deciding the desirable layout or standard for an area of new development it is very easy to forget that the resources must be withdrawn from other forms of production. We cannot, however, ignore the fact that efficiency in urban development will make possible greater production of other goods. The second concept, that of the margin, is a further consequence of the aim of economics to optimise. In consumption we all buy very much the same goods but in order to satisfy our individual tastes, each person will buy a bit more of one good and a bit less of another. Similarly, in the production process efficiency can be altered by differing combinations of land, labour and capital. Threshold analysis is an attempt to identify the margin in urban development by establishing that a town or region can expand in one area more cheaply than in another alternative area and at what point the costs of expansion become disproportionately higher. In order to accommodate the increased rate of population growth and redistribution, most urban areas will have to expand in the future. It will be necessary, however, to isolate the existing and new areas which are suitable for major expansion. An important determinant of this choice will be the relative costs of de- velopment as measured by threshold analysis.
J. T. HUGHES and J. KOZLOWSKI
Economics and planning are interrelated on two planes. Firstly, planning decisions are shaped by and in turn shape economic activity in an area. It is impossible to ignore such important variables as travel to work, shopping, income levels and growth of employment in determining the physical pattern of development
The planning process will influence directly or indirectly investment decisions which account for a large part of national resource
Threshold analysis has been developed primarily by physical planners but, it will be argued, incorporates an analysis which is 'economic' in character. By considering
alternative forms of development its approach to a planning problem has much in common with that of the economist and thus aids economic analysis of that problem
This allocation problem may be resolve
(a) goal formulation - in what terms we define 'best'
(b) how do we achieve the allocation decide in (a) as best
The main basis for the development of threshold theory was the simple observation that towns encounter some physical limitations to their spatial growth due either to topography, or to their public utility networks and existing land uses. These limitations, a common phenomenon in the growth of human settlements, may be called the THRESHOLDS of urban development.
Their main characteristic is that they are not irremediable, but can be overcome only at a high cost in capital investment. In some cases these costs may be disproportionate to the 'normal' investment costs necessary for any town growth but in all cases the initial costs will mean that the cost per head to population will rise. In other words, a threshold may have two types of impact on costs. It always involves a sharp rise as capital expenditures are required to open up new areas. But, secondly, it may represent the need to use new higher-cost land for the town's development, for example by using land which is more steeply sloping or with poor load-bearing qualities.
Threshold analysis easily develops into a study of the problem of development costs. Capital investment costs necessary for town expansion change with time and are dependent on the relation between the town's growth and the successive threshold lines limiting its further development. In general the costs necessary to locate a new inhabitant in a town (Ci) are at least twofold: costs not connected with given location of investments necessary to accommodate new inhabitants, which can be called 'normal costs' (Cn); and costs heavily dependent upon existing conditions and characteristics of given land (Ct). Thus, Ci = Cn+Ct, The costs defined as Ct, ('abnormal development costs') will fall generally into four categories:
(i) costs of essential land improvements (for building purposes), or additional construction costs connected with the topographical characteristics of the analysed area.
(ii) costs of acquisition of land (including the market price, and various compensation costs) which must be paid to open the land for urban development.
(iii) costs of equipping the land with the main public utility networks (including both the lines and the work of resources).
(iv) costs of new communication routes necessary to make given areas accessible.
(v) cost associated with altering existing land uses.
Costs may also be categorised by the moment of time when the costs must be incurred. One type is those which must be spent before the land is suitable for development (water, sewage networks, roads, etc). The second type may be spread over the whole period of development (i.e. costs connected with building on land with low load bearing capacity of soil). The relationship of this division to overhead and direct costs is obvious. The timing of these costs and the work associated with them will have repercussions for the programming of investment.
It is clear that the need to overcome a given threshold line will result in a rise in investment costs (Ct). The overstepping of the threshold, i.e. completing of all investments necessary to open new land for town ex- pansion, results in a decline in those costs. The inflexion points on the costs curve are in fact another way of presenting the thresholds. Thus the notion of "Threshold Costs' may be defined as the costs necessary to over- come the threshold line limiting physcial development
The Economist's Approach
It has been shown that threshold analysis like economic analysis is concerned with the problem of efficiency, the optimum use of resources. Since, however, so many unquantifiable elements enter into planning decisions, it is inevitable that the role of the economist must be restricted. If we assume that the value judgments of the planner are fixed, threshold analysis is a means of discovering the most efficient way in which to effect his proposals. It is also possible by using the technique to demonstrate the economic consequences of changing these judgments. But as an operational tool its concern is with the 'production' conditions, that is the best way of fulfilling previously formulated goals.
There are two concepts with which the economist approaches such a problem, the notions of opportunity cost and of the margin. The idea of opportunity cost follows from the fundamental problem of economics, defined as the allocation of limited resources to satisfy greater wants; it is simply that, in order to undertake one course of action, alternatives or other opportunities will have to be foregone. When deciding the desirable layout or standard for an area of new development it is very easy to forget that the resources must be withdrawn from other forms of production. We cannot, however, ignore the fact that efficiency in urban development will make possible greater production of other goods. The second concept, that of the margin, is a further consequence of the aim of economics to optimise. In consumption we all buy very much the same goods but in order to satisfy our individual tastes, each person will buy a bit more of one good and a bit less of another. Similarly, in the production process efficiency can be altered by differing combinations of land, labour and capital. Threshold analysis is an attempt to identify the margin in urban development by establishing that a town or region can expand in one area more cheaply than in another alternative area and at what point the costs of expansion become disproportionately higher. In order to accommodate the increased rate of population growth and redistribution, most urban areas will have to expand in the future. It will be necessary, however, to isolate the existing and new areas which are suitable for major expansion. An important determinant of this choice will be the relative costs of de- velopment as measured by threshold analysis.