UD3 - Economy

Classical Economics:

- Define Homo Economicus

- Define ‘Invisible Hand’

- What mainly drives the economy according to classical economics?

- Name 2 prominent ideologies within classical economics

• Homo Economicus = man acts rationally and maximizes its own utility

• Invisible Hand = invisible market force that brings a free market to equilibrium

• Competition drives economy

• Ideologies: Capitalism and Neoliberalism

Marx analyzes and criticizes capitalism:

• Define Commodification

• Define Monopolists

• Define Class-Struggle

• Commodification = process by which things are transformed into commodities, meaning they become objects of exchange and are valued primarily for their exchange value (market price) rather than their use value (utility)

• Monopolists = ‘inevitable’ result from competition in capitalist economies

• Class-struggle = conflict between bourgeosie (capitalists) and proletariat (labourers)

(1) Space and Economy:

Explain how these spatial-economic concepts translate to urban dynamics:

• Transport costs

• Urban and Rural

• Inter-Urban Trade

🔹Transport Costs

• Affects the location of industries, businesses, and housing. Lower transport costs can expand markets and allow for specialization, while high transport costs can isolate regions and reduce economic efficiency.

🔹Urban and Rural

• Urban and rural areas have different economic structures. Urban areas tend to have diversified, service-oriented economies, while rural areas often depend on agriculture or resource extraction.

🔹Inter-Urban Trade

• Trade between cities fosters regional economic integration and growth. Inter-urban connections (via roads, rail, digital networks) enhance the movement of goods, services, and ideas.

(2) Space and Economy:

Explain how these spatial-economic concepts translate to urban dynamics:

• Scale, Clusters, Economies of Agglomeration

• Economic Base-Analysis (Couch)

🔹Scale, Clusters, Economies of Agglomeration

• When firms and people cluster together, they benefit from lower costs and more innovation.

🔹Economic Base Analysis (Couch)

• A tool to understand what drives a local economy. It distinguishes between basic industries (export-focused, bring money in) and non-basic industries (support the local population).

(3) Space and Economy:

Explain how these spatial-economic concepts translate to urban dynamics:

• Land Market

• Residual Land Value

• Accessibility

🔹Land Market

• Land value influences urban form and economic location. High land prices can push certain activities out of city centers or lead to vertical development.

🔹Residual Land Value

• The value of land after deducting development costs; determines what kind of use is most profitable. Influences whether land is used for housing, offices, retail, etc.

🔹Accessibility as Determining Factor

• Easy access to transport, jobs, and services raises land values and attracts investment. Accessibility shapes urban growth and socio-economic patterns.

Supply and demand is mentioned as a driving factor for the urban economy, define these related concepts:

• Economic Cycle

• Creative destruction

• Structural changes in demand

• Economic Cycle = natural fluctuations in economic activity over time, influences investments, employment etc.

• Creative Destruction = old industries or technologies are replaced by new, more innovative ones, leading to economic growth but also to job losses and structural change

• Structural changes in demand = long-term shifts in what goods or services consumers want, often due to changes in demographics, technology, lifestyle, or values.

Explain these bullet points, related to ‘The Grand Narrative’ of urban economic transformation:

• Globalisation / Global Shift

• From industrialism, fordism, taylorism… to de-industrialisation, neo-fordism, cognitive-cultural capitalism, knowledge economy

• Globalisation = increasing interconnectedness of countries through trade, capital, people, and ideas, which has allowed companies to operate across borders and shift production to places with cheaper labor or fewer regulations.

  • Global Shift = relocation of economic activity—especially manufacturing—from developed countries (Global North) to developing countries (Global South). It reshapes cities as industries move out and new service-based activities emerge.

• ‘From … to …’ = illustrates how cities moved from industrial production to information, services, and culture.

Explain these driving forces of ‘The Grand Narrative’ :

• Free movement

• Large monopolies

• ‘Labour still important!’

• Free movement

  • People: Migration of labor (e.g. EU workers moving for jobs).

  • Capital: Companies invest globally.

  • Goods: Products are made in one place and sold worldwide.

• Large monopolies

  • Multinational corporations (like Amazon, Apple, Google) have huge market control, shaping urban economies and labor conditions.

    • They often centralize economic power and influence urban development (e.g., tech districts).

• ‘Labour still important!’

  • despite automation, human labor (especially skilled and creative work) remains central in the knowledge economy.

  • Also, low-paid service jobs (cleaners, couriers, delivery drivers) are essential in cities—but often undervalued.

Explain these concepts, related to liberalisation of trade:

• Free movement

• Footloose

• Deterritorialisation & Reterritorialisation

• Free movement

  • People: Migration of labor (e.g. EU workers moving for jobs).

  • Capital: Companies invest globally.

  • Goods: Products are made in one place and sold worldwide.

• Footloose

  • industry or company that is not tied to a specific location. It can relocate easily because it does not depend heavily on local resources, like raw materials or cheap land.

• Deterritorialisation & Reterritorialisation

  • Deterritorialisation = weakening of the connection between economic activity and geographic location.

  • Reterritorialisation = counter-trend to deterritorialisation—when new forms of territorial control, identity, or economic activity emergein response.

Explain ‘from following the market to making the market’

• Instead of waiting on existing market forces, big companies actively shape market conditions to attract investment, guide economic growth, or create new demand.

  • walmart used as example

Explain ‘competition between cities’

In today’s globalised, liberalised economy, cities compete with each other like businesses—to attract investment, jobs, talent, and innovation

• FDI, Labor, Tourism, Tech etc.

What does Splintering Urbanism (Graham & Marvin) refer to?

infrastructure and services in cities become unevenly developed, leading to fragmented urban spaces and social inequality.

What does ‘shrinking cities’ refer to, and how does it challenge the dominant narrative of city planning?

A shrinking city challenges the dominant narrative of urban growth. Instead of managing growth, planners must manage decline:

• deindustrialisation, suburbanization, ageing population, low birth rates, crises etc.