Land Use and Urban Form

The Consumption Theory of Land Rent

Grant Ian Thrall

• Publisher: Taylor & Francis
• Year: 2017
• eBook ISBN: 9781351677967
• Edition: 1
• Topic: Social Sciences
• Subtopic: Human Geography
• Index: Social Sciences

Originally published in 1987. The Consumption Theory of Land Rent or CTLR is a comprehensive model of the urban landscape developed by Grant Ian Thrall. Working from the basic idea that the same underlying processes account for the spatial structure of all places, Thrall shows how CTLR can be used as a tool to explain and predict the long-term consequences of policy decisions by governments, such as introducing light rail rapid transit, or parameter changes in the economy, such as a general rise in real income.

Thrall's methodology for the analysis of land rent and land use in a significant research accomplishment and a major analytical tool for students and professionals within city planning, regional science, urban geography, and urban economics.

PART I

Foundations of the Consumption Theory of Land Rent (CTLR)

1

Introduction

1.1 Introduction

The Consumption Theory of Land Rent (CTLR) is a model of an ideal urban landscape. It is ideal not in the sense that it is the best place to live, rather the CTLR is an idea of an urban landscape. This ideal environment is less complicated and more uniform than the “real” places that you and I inhabit. At the same time, it should not be mistaken for a nonvaluable landscape because it lacks those complexities that make each of our own environments unique and memorable. There are four reasons why an understanding of the abstract or ideal landscape should precede the direct description of particular places.

First, whose environment should be described: yours, mine, someone else’s? The CTLR describes features that are common to all urban landscapes regardless of where they are. The cost of such abstraction is the loss of the particular.

Second, the noise of the real world often distracts us, so that we do not see what is important and instead focus upon the trivial. The challenge of the mapmaker or cartographer can provide a good analogy to this. A map is an abstraction of reality; maps depict ideal landscapes. Much of this book is concerned with the creation of maps of ideal urban landscapes. To the traveler wishing to go from place A to B, the location of fire hydrants is unimportant. The inclusion of such detail on the map may clutter the map to the extent that the map becomes of little use to the traveler. But to the fireman or insurance actuary, the location of fire hydrants is of great importance. The cartographer decides which features on the real landscape to abstract out of the map, and which to include. The decision of the cartographer is based upon what from past experience and even guesswork is likely to be important to the map user at that time. Critiques of the finished map may argue that certain real-world features be restored to the ideal landscape of the map. On a map that is well designed, this should present no great difficulty; the general surface or map template will not change.

Similarly, the CTLR ideal landscape initially is simple; the simplicity makes it easy to understand for the person first encountering its ideal landscape. Afterwards, layer by layer, greater real-world complexities are to be added to the simple landscape. The final CTLR landscape can be, like our real-world landscape, quite complex. The fundamental processes responsible for the creation of the complex landscapes will then be understood.

Third, I hold as a basic tenet that the processes that can be attributed to creating the spatial structure of each place are the same. These processes will be analyzed in this book. Therefore, the reader who completes this book will understand the basic processes behind the creation of the urban landscape. The weighting of the components of the processes may differ between places, but the fundamental underlying processes are the same and can be described. The CTLR describes the underlying process. By understanding the fundamental processes that account for the urban form of all places, the reason why a particular place has its unique form can be explained. The CTLR model can explain and predict what the outcome will be if the individual weights of the underlying components that make up the process are changed. For example, what will happen to the urban landscape if a light rail rapid transit system is installed? A model that can explain and predict can be used to plan.

Fourth, the ideal CTLR environment is as close to a laboratory setting society should or is likely to let us get to experimentation with the landscape. The CTLR is a tool that can be used to predict what the outcome will be if certain events occur or various policies are implemented. The credibility of the CTLR model is strengthened as the environment changes in a manner corresponding to what is predicted by the CTLR. Moreover, if planners consider that a certain outcome is desirable, then the CTLR model can be used to determine what policies can be instituted to obtain these results, and what the indirect and often unintended consequences of the policy are likely to be.

1.2 Mathematical land rent theory versus the CTLR

The following discussion is provided to contrast the CTLR with the work of others in mathematical land rent theory. The reader without a knowledge of calculus or advanced microeconomics may pass over the following material and proceed to Chapter 2; it is not necessary to understand the material in the remainder of the chapter to understand the CTLR. Readers with a background in calculus and advanced microeconomics are, in addition to this section referred to the introductions to the calculus approach to land rent theory by Mills and MacKinnon (1973), Anas and Dendrinos (1976), Richardson (1977), Henderson (1977), and Dendrinos with Mullally (1985).

1.2.1 The commercial sector

There is no question, at least in the mind of this spatial theorist, that the monumental work of Johann Heinrich Von Thünen (1821) presaged by nearly a century and a half the developments of modern mathematical land rent theory.

Von Thünen’s arguments began by assuming a plane devoid of all features save for a central market. There were two important actors: landusers and landowners. The criteria to the landowner was to maximize the return from the land. The landuser who received the right to produce on the land was the one who was willing and able to pay the highest rent.

The landuser’s decision as to how much to bid for the right to use the land was based upon the following considerations. First, how much was the market price of the good. Second, what was the cost of producing the good. Included in the cost of production was a requirement that the landuser receive a certain minimum wage, like an opportunity cost; otherwise there would be no reason to farm the land. Land was assumed to be equally fertile; however, differing technologies could be employed in the production of the crops depending upon where the firm was relative to the city center. Third, the most important to us, once the crop was harvested, it had to be transported to market. If all land was everywhere equally fertile, then the rent bid to produce a particular crop using a specific technology would differ only between locations by the amount it cost the landuser to get the good to market and thereby receive revenues from the sale.

To sum up, in Von Thünun’s model, rent can be thought of as total revenues from selling the product at the market less the cost of producing the harvest and less the cost of transporting the produce to the market. Rent curves are formed about the central market, the rate of descent of each rent function depending upon the cost of transporting the good to market; the absolute magnitude of the bid rent depending upon the cost of production, the market price, the crop yield, and the freight rate. The end-result was that Von Thünen’s model produced a theoretical landscape of concentric land use patterns about the central market; the most intensive land use occurs near to the market, gradually becoming more extensive with increasing distance from the city center. Walter Isard (1956) used Von Thünen’s model as an analog to describe concentric patterns of land use about the city center, with land rent and intensity declining with increasing distance from the city center.

The nature of the Von Thünen model properly limited it to the production sector: landowners and landusers sought to maximize returns at each location. Not all land uses in the city can be considered to be strictly production oriented.

1.2.2 The household sector

The limitations of applying the Von Thünen model to the urban landscape began to be overcome with the contribution of William Alonso (1964) (in writing his Ph.D. dissertation under the direction of Walter Isard at the University of Pennsylvania). Alonso’s landscape was akin to that of Von Thünen, in that the city lay on a plain devoid of man-made features; the city ha...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Introduction to the Reissue of Land Use and Urban Form
• Dedication
• Table of Contents
• List of figures
• List of tables
• Preface
• Part I: Foundations of the Consumption Theory of Land Rent (CTLR)
• 1 Introduction
• 2 Foundations
• 3 Further specification of the CTLR model
• 4 Income
• Part II: Transportation Systems
• 5 Transportation cost
• 6 Transportation effort
• 7 Transportation nodes
• Part III: Government Revenue
• 8 Tax expenditure overview
• 9 Income tax, interest rates, and mortgage interest deductions
• 10 Sales tax
• 11 Property tax
• Part IV: Government Services
• 12 Planning
• 13 Public goods and externalities
• Part V: Multilevel Decision-making
• 14 Housing
• 15 Postscript
• Glossary
• Bibliography
• Index