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1996
Les Bonnes Feuilles du PIRVILLES

Managing megacities

Le courrier du CNRS, n° 82, 1996, pp.174-176
Rémy Prud'homme

Texte intégral

1Alonso, in a seminal paper written in 1971 develops the following argument: urban benefits increase with city size in a less than proportional way. Urban costs increase with city size in a more than proportional way. There comes a point where urban costs are greater than urban benefits: this point defines an optimal size. Beyond that point, cities are too big.

2This view completely omits a key factor: urban management. Urban benefits and urban costs are not merely a function of city size. They are also a function of city management. It is true that certain, probably many, cities in the world are too big - relative to their managerial capabilities. But some of these “oversized” cities are in fact quite small. We all know cities of 100,000 or 200,000 inhabitants which are too large, just as we know of megacities which are under control, and are not too large. Because appropriate management can constantly shift the benefit and cost curves, and therefore the optimal city size, the concept of optimal city size is not very relevant. What counts is not the size of a city, but its management. As a matter of fact, moving the benefit curve upwards and the cost curve downwards could be defined as the main task of urban management.

Improving the productivity of megacities

3In practice, cities, and particularly megacities, are major sources of output, of productivity, of growth. The emphasis which is often placed on the costs associated with city size (costs which are rarely measured and often exaggerated) tends to hide the benefits which are also associated with city size. Calculations, made in particular in Paris, have shown that total productivity in megacities of developed countries is 20-40% higher than total productivity in the rest of the country. The same number of people, the same amount of private capital and of public capital tends to produce 20-40% more in a megacity than elsewhere.

4The reasons for this higher productivity are not well known. What is sure is that megacities are not richer because they are favoured by national budgets. The opposite is true (and quite desirable, at least up to a certain point): because they are richer, megacities contribute more or much more than their share of population to national budgets, and as a consequence, subsidize the rest of the country, at least by means of national budgets.

5What is likely, but not yet proven, is that megacities are more productive because they have larger effective labour markets, defined as the average number of workers who have access to enterprises in less than a given period of time, say 60 minutes. The larger the effective labour market, the greater the probability that a given enterprise located in the city will find the exact type of worker it needs, and the greater the probability that a given worker will find the exact type of job s/he is looking for; it can be hypothesized that it is this better match of skills and tasks that accounts for the higher productivity of cities with large effective labor markets.

6This means that the higher productivity of large cities is only potential, or virtual. The effective size of a labour market depends upon the overall size of the city, but also upon the relative location of jobs and homes, and above all upon the efficiency of the transportation system. If jobs and homes are poorly located, and/or if the transportation system breaks down, then the effective size of the labour market of even the most populated megacity will remain small. The megacity will just be the juxtaposition of five or ten independent small labour markets and will not have a high productivity

7This argument can probably be extended to other dimensions of megacity management. Megacities are more productive provided they are well managed. Their efficiency depends on the quality of their management. In other words, a small city poorly managed is bad, a large city poorly managed may be as good (or as bad) as a small city well managed, but a large city well managed is definitely best.

Good management requires good coordination

8Big cities are not too big, but they are probably more difficult to manage than smaller cities. Magnifying the positive externalities associated with a city and controlling the negative externalities which are also associated with it, is more complex in a 10 million people agglomeration than in a one million people agglomeration. That it is more complex does not mean that it cannot be done: there are also more human and financial resources to do it.

9Good management is a matter of people, but also of institutions. What institutional mechanisms or structures are most likely to promote or facilitate good management? The key concept here is that of coordination. In a large city there is a frighteningly large number of actors, dimensions, concerns, parties, institutions, interests, etc. This need for coordination increases very rapidly with city size. This necessary and difficult function can be discussed under three headings: internal coordination, vertical coordination, and horizontal coordination.

10An important and typical form of internal coordination concerns the relationships between the public and private sectors. Privatization is not a panacea. It is generally highly desirable, but only for some functions (provision of services, not decision-making) and under certain conditions. Because monopolies have to be created (for many public services), and because private monopolies can be as inefficient as public monopolies, privatized monopolies must be regulated. They must be granted in a competitive fashion. Concession contracts must include incentives to efficiency. In many cases, it may be necessary to grant subsidies to monopolies. All this makes regulation a very demanding task. Regulating correctly private monopolies is probably nearly as difficult as managing efficiently public monopolies. The cities and countries that can privatize efficiently are also, unfortunately, those that need it least!

11Coordination between elected officials and heads of NGOs (non governmental organizations) and CBOs (community-based organizations) is equally important and difficult. The feeling of mistrust, competition, or even the conflict that often exists between “formal” and “informal” representative mechanisms must be overcome and be replaced by mutual respect, understanding, and division of labour. Both types of actors and above all their common city have much to gain here.

The limits of decentralization

12Vertical coordination relates to relationships between the central government and the (many) local governments at the megacity level. Some ardent advocates of decentralization seem to believe that these relationships should be reduced to a minimum and that lower levels of governments should be given as many fiscal resources and responsibilities as possible, and left free to do as they wish. Such a position is untenable. Central government intervention is necessary because the central government is the only entity that can ensure macro-economic stability and (interpersonal as well as interregional) income redistribution in a country, and because it is often the most efficient provider of certain public goods and services.

13In addition, there is no doubt that taxes are much more difficult to decentralize than expenditures. In fact, there are few “decentralizable” taxes: property taxes, pollution fees, registration fees, perhaps motor vehicles taxes and some sales taxes. Most other taxes, including the “best” taxes in terms of yield and minimization of their distortionary effects, like the personal income tax or the value-added tax, cannot without damage be taken off the hands of the central government. This means that subsidies from the central to the local governments - a form of vertical coordination - are inescapable.

14Futhermore, a number of urban public services must be jointly provided by central and local governments, because both parties have legitimate, although different, reasons to be involved in the provision. A number of coordinating mechanisms, such as subsidies (including specific grants, with strings attached), constraints and mandates, authorizations, exchange of information, and consensus-building mechanisms (including the negotiation of “contracts”) can and must be utilized.

15Last but not least, comes horizontal coordination between the often numerous local governments that compose a megacity. It is important to realize that these many small entities have a very useful role to play, and that the simplistic consolidation of views occasionally entertained (let us have just one large megacity level governing entity) are unrealistic and undesirable. For sure, the existence of these small entities makes metropolitan management more complicated. Their usefulness is in conflict with the need for metropolitan intervention, which is of course also necessary. Coordination mechanisms are hence required. They include metropolitan-wide institutions, with either a general responsibility or specific functions (like water provision or transportation policy). They include also ad hoc groupings of small local governments into “syndicates”, contracting out, and various consensus-building mechanisms that can also bring in private actors, NGOs, CBOs, technicians, representatives of central government or agencies, etc. and contribute to internal coordination and to vertical coordination as well.

16Cities in general, and large cities in particular, are there to stay and to grow. Lamenting the evils of cities, or dreaming about their retrenchment, is sterile and reactionary. The task ahead is to improve the management of large cities in order to make their inhabitants enjoy fully the large benefits potentially associated with city size.

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Bibliographie

Alonso W., “The Economics of Urban Size”, Regional Science Association Papers , n°26, 68-83, 1971.

Prud'homme R., “The Dangers of Decentralization”, The World Bank Research Observer, vol. 10, n°2, 201-220, 1995.

Rousseau M.-P., Prud'homme R., Les avantages de la concentration parisienne , Paris, l'ŒIL-IAURIF, polyg. 22 p.1992.

Rousseau M.-P., “Les Parisiens sont surproductifs”, Études foncières, n°68, 13-18, 1995.

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Référence électronique

Rémy Prud'homme, « Managing megacities », Cybergeo: European Journal of Geography [En ligne], Dossiers, mis en ligne le 12 avril 1996, consulté le 18 mars 2024. URL : http://journals.openedition.org/cybergeo/305 ; DOI : https://doi.org/10.4000/cybergeo.305

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Auteur

Rémy Prud'homme

Professeur à l'Université Paris XII, directeur du Laboratoire de l'observation de l'économie et des institutions locales, ŒIL-IUP, Université Paris XII, 61, avenue du Général-de-Gaulle, 94010 Créteil Cedex.

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