Introduction to Urban Economics and Urbanization Trends

Urban economics is the study of space and location, situated at the intersection of economics and geography.
Traditional economics assumes markets are dimensionless points where production and consumption occur in the same place; urban economics prioritizes the impact of space.
Two fundamental questions drive the field:
- Why do firms and households locate where they do?
- How does this location choice affect human well-being?

Spatial distribution of human settlement is highly unequal.
Globally, more than $50\%$ of the population resides in urban areas occupying less than $3\%$ of Earth's land area.
In the United States, over $80\%$ of Americans live in cities on roughly $3\%\text{--}4\%$ of the land.

Urban Area (2020 US Census Bureau): A densely settled core containing at least $5000$ people or $2000$ housing units (threshold decreased from $2500$ in $2010$ ).
Rural Area: Any territory, housing, or population not classified as urban.
Metropolitan Statistical Area (MSA): A US government (OMB) designation for regions with at least one urbanized area of $50,000$ or more inhabitants, including surrounding counties with close economic ties. MSAs often include both urban and rural components.

Age: Rural median age is $43$ ; urban is $36$ .
Dependency Ratio: Rural areas have $72$ dependents per $100$ working-age people, compared to $57$ in urban areas.
Homeownership: Rural rate is $84\%$ , while urban is $58\%$ .
Education: $23\%$ of rural adults hold a BA/BS or higher degree, compared to $38\%$ of urban adults.
Health: Urban areas exhibit higher life expectancy (approximately $2$ additional years), better health services, and lower rates of smoking and obesity.

Urbanization is the population shift from villages to cities, typically following an S-shaped curve (slow takeoff, rapid acceleration, leveling off at $75\%\text{--}80\%$ \text{ urban}).
Historical Milestones:
- $1900$ : $15\%$ \text{ of global population lived in cities}.
- $2007\text{--}2008$ : Global urban population surpassed the rural population for the first time.
- $2050$ : Projected $70\%$ \text{ urban residency globally}.
Economic Drivers:
- Pre-industrial: Defense and basic trade; size limited by rural food surplus.
- Industrial Revolution: Steam engine and centralized manufacturing created rapid growth.
- 20th Century: Internal combustion engine and automobiles led to decentralization and the rise of suburbs.

Urbanization is stabilizing in the West while accelerating in Africa and Asia.
India, China, and Nigeria are projected to account for over one-third of urban growth by $2050$ .
Rise of the Megacity ( $>10$ million people):
- $1950$ : $1$ (New York City).
- $1970$ : $3$ (Tokyo, New York City, Osaka).
- $2025$ : Over $30$ megacities globally.

The Great Divergence: High-skill industries (finance, biotech, tech) thrive on knowledge spillovers in dense cities, widening the urban-rural divide.
15-Minute City: A planning trend emphasizing walkable neighborhoods where daily needs are accessible within a short walk.
Sustainability: Cities are increasingly using AI and digital solutions for public transit and energy efficiency to reduce carbon footprints.
Policy Shift: Rigid zoning laws are being replaced by flexible, mixed-use land regulations.