[Manish Jain]

Threshold analysis :
The application of threshold analysis gained significance due to failure of physical planning in Poland. It was used to determine policies for spatial development  in post war reconstruction.
It attempts to rationalize and control the process of growth. Another aspect was close association of economics and urban planning.
It is a technique that is applied to process of formulation and comparing alternative strategies for development of towns.
Therefore this has been made integral part of structure plan in UK.

Concept of thresholds and threshold costs :
Threshold theory is based on the observation that towns encounter limitations to their expansion due to physical features, existing land use , and technology of infrastructure.

There is observation that physical growth of towns is not smoothly continuous but proceeds in stages marked by successive limitations which have been called as thresholds. These thresholds are not insurmountable but can be overcome only at additional( some times very High) development investments known as threshold costs. 

Thus it can be inferred that capital investment cost for the expansion  of a town will change over time disproportionately to increasing number of inhabitants and will reflect periods when additional lump sum must be spent to open successive areas for further development.

In general the costs necessary to locate new inhabitant  in a town (Ct=total cost) are at least two fold.
1) Normal cost (Cn): These costs are connected with given locations of construction necessary to accommodate new inhabitants and would have to be spent in any case. These costs are dependent on type and density of dwellings, site servicing and development and the cost of material, labour, etc.
2) Additional cost (Ca): These cost result from existing conditions and characteristics of given
The diagram below illustrates these type of costs. It is clear that the need to over come  a given threshold may result in  a violent rise in additional costs Ca.



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The overstepping of the threshold limitation i.e. completion of all investments necessary to open new land for town expansion, results in a decline  in these costs. The peak points on the cost curve are in fact one of the ways in which thresholds can be presented.

Threshold costs may be categorised into those which must be spent before the land is made suitable for development( e.g. a bridge , or access road) 
Second type which are spread over the whole period of development ( such as cost connected with building on land with low bearing capacity )
 
Method of threshold analysis


Stage 1. 
Delineation of area to be surveyed (should be as far as possible homogeneous)


Stage 2: 
Analysis of factors affecting town development 
A) Physiographic suitability of land for urban development, such as Natural features are slopes, woodlands, swamps etc. whether land is suitable for development.
B) The possible extension of public utility and transportation systems. Main relevant infrastructure may be water supply, power etc.

The hindrances may  be forest lands, heritage areas,  
Land available for development without extra cost, Existing urban structure where there is blighted areas, undeveloped areas in built up areas, such areas are available for immediate development.



Analysis of decentralised patterns : 
Frequently and expanding town eventually comes up against so expensive threshold limitation that further expansion seems endangered. In this case it is better to have satelite towns  in decentralised form 

Application to Regional Planning : 
A) When alternative  locations of some significant investment are to be decided within a region. This analysis will give costs connected at different locations.
B) It will indicate where industry and services  may be located in the region.
It will act as a tool to indicate regional distribution of growth which would give relatively minimal costs and to select regional growth points on a rational and economically sound basis. 

Application in Urban growth : 
Threshold Analysis operates in an urban growth situation in which there exists an increase in demand for public services: these services are assumed to exhibit no externalities either positive or negative. The nature of growth or its stimuli are not considered. Malisz  documents four general problem areas for development: 

(1) the diversity of the natural environment
(2) the existing land use pattern
(3) the technology of the existing infrastructure systems
(4) the inertia represented by the existing structural units of the urban area. 

Limitations of threshold analysis

• It should not be taken as comprehensive tool for economic evaluation of planning solutions as it is primarily concerned with threshold costs rather than total costs.
• Threshold analysis dose not take benefits into account.
• Costs estimates are rough being done at the strategic stages of planning .

[mridula jain]

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.

[Mili Jain]

Applications

By isolating the cheapest areas and assessing the costs of developing them the physical planner and the economist have considerable common ground since the threshold can equally well be expressed as a line on a map or a step on a cost curve. The economist would make use of this method because it can throw light on the problem of the efficient use of scarce resources. The practical planner may regard it independently of the economic significance as a tool for the objective appraisal of possi- bilities for development by discovering and quantifying the alternatives.

The obstacles to full co-operation, however, are by no means demolished. Threshold analysis is an economically rational one but there is little advantage in optimising decisions in a series of small areas. By presenting comparable alternatives the method continually points up improvements necessary  in the planning system. The planning area must be large enough to enable a meaningful choice to be made of the most efficient solutions. Otherwise the many constraints set by administrative and other planning criteria so restrict the alternatives that the role of the economist must be extremely limited. The attempt to designate areas most relevant for planning decisions
raises a danger of sparking off a further instalment of the debate 'what is a region?' One may, however, distinguish two types of development situations which will typically arise and the implications of the planning choices arising from them. 
(a) With a given employment structure, there is a choice of where housing and auxiliary service will be provided. The alternatives in this case will arise in the area which may be regarded as the local labour market, that is the area within which workers will normally seek employment. 
(b) Where employment distribution has not yet been determined to any considerable extent, the area of possible development is much wider. 

Threshold analysis may be applied to discovering the cheapest sites for industry but more often in this type of locational decision the special requirements of certain types of industry may override the choice indicated by the cheapest initial investment. Many planning authorities, especially in Development Areas would hesitate to quibble with a major incoming industrialist. But if it were possible to discover the costs of developing alternative areas either for the industry itself or for accompanying housing development, this information could help de- termine the 'growth points' of the region. However, when the area of review is as wide as a region, the relative importance of threshold analysis is limited by the number of other considerations.

The analysis, therefore, can help define the development potential of a single local area, a town or town group. It can also provide a basis for regional planning in indicating which urban groupings are capable of taking a major expansion of population. If the local surveys were comprehensive enough (i.e. not limited by arbitrary administrative division). and standardised, then the local planning process would throw up the in- formation which will help determine regional policy. The information will provide data upon which to base further reviews of development plans. Since by using this method the basis of present decisions is explicit, it will contribute towards greater flexibility in long term planning. In the long-term an investigation of thresholds and the investment needed to open up substantial new areas will be an important contribution to in- tegrating the requirements of local development into the national budget- ary process. Development can be phased to avoid an excessive b public expenditure and construction resources. Taking this line of thought a little further, planning authorities may be required to submit proposed capital budgets with their development plans. The integration of these requirements related to the capital resources available for local authority use would help determine a practical time scale for the development proposals.