School of Policy, Planning, and Development

University of Southern California

PPD 358

Urban and Regional Economics (Lec 79014R)

Fall 2002

Course Description

Class	Instructor	Contact
Tuesdays & Thursdays	Eric J. HEIKKILA, Associate Professor	heikkila@usc.edu
10:00 – 11:50pm	http://www-rcf.usc.edu/~heikkila/	1-213-821-1037 (or x11037)

Purpose:

This course is motivated by and builds on over a decade of experience I have had teaching economics to both graduate and undergraduate students of planning. It also reflects my own background as one who is trained formally in economics and who works professionally and academically in planning. The central purpose of the course is to help train planners who are able to formulate credible answers to the question, "How would an economist analyze this issue?", while retaining a planning perspective.

The wonderful thing about planning is its rich inclusionary approach to social issues. Planners as a profession acknowledge the importance of architecture, community, culture, economics, engineering, environmental sciences, geography, history, politics, quantitative methods, sociology and many other perspectives on the planning experience. Planning is broad. The wonderful thing about economics, especially the neoclassical approach to microeconomics, is its rigorous and axiomatic approach to a certain class of problems using a well developed paradigm of applied optimization theory. Economics is disciplined. At its best, planning draws on the discipline of economics and other specialized fields and provides an integrating framework for these disparate perspectives. At its worst, planning becomes an unsatisfactory mish‑mash resulting in a superficial dabbling in fields that planning practitioners do not truly understand.

This places the instructor of economics courses for planning students in somewhat of a quandry. Should one concentrate on teaching the principles of economic reasoning or should one focus instead on its applications and hope that students will infer from those applications what the essential elements are? Or, should one try to combine both aspects in a single course, despite the limited exposure students will have either to first principles or to meaningful applications? I pursue the latter strategy in this course, and in the accompanying textbook. This is accomplished by infusing first principles of economic reasoning in an exposition of their application to a set of topics that is likely to be of direct interest to planners; including land use zoning, urban structure, housing, traffic congestion, public goods, regional economies, cost‑benefit analysis, entitlements and institutions.

Objectives:

By the end of the semester you should be able to reason in economic terms about planning-related issues. More specifically, you will be expected to be able to:

• Translate easily between total, marginal, and average values for specified economic functions;
• Convert between the asset values of stocks and the rental values of corresponding flows using present value principles;
• Demonstrate a clear understanding of the significance of and distinction between equilibrium and optimum outcomes;
• Describe the relative merits of markets, zoning, and other planning tools for allocating scarce land among competing alternative uses;
• Assess housing issues in the context of housing’s dual role as a physical stock and as the source of a flow of accomodation services;
• Address issues of sprawl, and urban structure more generally, from an economic perspective;
• Articulate how a quasi-market equilibrium results as residents of a metropolitan region “vote with their feet” to select which municipality to live in;
• Evaluate the relative merits of four alternative policy options regarding traffic congestion: (i) do nothing, (ii) decrease demand, (iii) increase capacity, and (iv) congestion tolls;
• Explain how economic base models, Keynesian multipliers, location quotients, and input-output models are used to analysze regional economic issues;
• Show how cost-benefit analysis can be used to evaluate planning projects, with an emphasis on the role of shadow prices in such analyses.

Required Texts and Readings:

One text book has been ordered for purchase in the University Bookstore:

Eric J. Heikkila, 2000, Economics of Planning, CUPR Press, Center for Urban Policy Research, Rutgers University.

I am also making an electronic version of the text available for registered students through Blackboard (http://learn.usc.edu). Any additional required readings will be made available to you in a course reader format.

Course Format:

The class meets twice a week in a basic lecture format. Generally I allocate two lectures for each of the major topics to be addressed. The course is tightly structured around the principal text. Because I am the author of that text (which has been adapted in university classrooms around the country and abroad), you will find that the lectures and readings reinforce each other nicely. In addition, I set aside time for each of you to make one short in-class presentation during the semester. These presentations will provide a regular means by which the economic concepts and principles from the lectures are applied directly to contemporary planning issues.

Course requirements:

Requirements:

1. Participation – Attendance will be recorded promptly at the beginning of each class, and I except you to attend regularly and punctually. Your are expected to contribute to class discussions in a manner that enhances the learning experience for your fellow students, and so your in-class contributions will be judged on the basis of both quality and quantity.
2. Quiz – The initial chapter (on “Thinking Tools”) provides some core concepts that are used throughout the remainder of the course. Accordingly, you will be given a quiz to ensure that you have properly digested that material before proceeding.
3. Assignments – The assignments will be a key focus of your own activity throughout the semester. For each one, you will be asked on a regular basis (about once every two weeks) to apply key concepts from the currently assigned chapter to newspaper reports about contemporary planning issues. This provide an essential link between theory and practice.
4. Midterm exams – Two midterm exams will give you the chance to demonstrate that you have fully digested the readings and lecture contents. The emphasis here will be on the theoretical concepts themselves.
5. In-class presentations – Each of you will be required to prepare one in-class presentation based on your work on one of the assignments. (So, there are six assignments, but you will be presenting for only one of them). The content of the presentation will be essentially the same as the content of your corresponding assignment, but you will package it in a Powerpoint format.
6. Final exam – The final exam will cover material from the entire semester and is therefore the strongest single indicator of what you learned.

Grading:

Your course grade will be calculated as follows:

1	Participation (attendance 5%; discussion 5%)	10.0%
2	Quiz (thinking tools)	7.5%
3	Assignments (five @ 6%)	30.0%
4	Midterm exams (two @ 12.5%)	25.0%
5	In-class presentation	7.5%
6	Final exam	20.0%
	Total	100%

Course outline and corresponding readings:

· Thinking tools – Heikkila, chapter 1

· Land use zoning – Heikkila, chapters 2

· Housing – Heikkila, chapter 3

· Urban structure – Heikkila, chapter 4

· Public goods and public choice – Heikkila, chapter 5

· Traffic congestion – Heikkila, chapter 6

· Regional economies – McCann[1], chapter 4

· Cost-benefit analysis – Heikkila, chapter 8

You are expected to read the assigned readings before each class[2], and your in-class discussion should make it evident that you have done so.

Class schedule:

Please refer to the “Schedule of Topics” that I have prepared as a separate attachment to this syllabus.

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[1] Philip McCann, Urban and Regional Economics, Oxford University Press, 2001.

[2] I make an exception for the first class – but only for the first class!