Optimal Departures from Marginal Cost Prices for Local Public Services

In: Paul Downing (ed.), Local Service Pricing Policies and Their Effect on Urban Spatial Structure, Vancouver, B.C., Canada: University of British Columbia Press, (with G. E. Mumy), 1977

29 Pages Posted: 15 Nov 2012

See all articles by Steve H. Hanke

Steve H. Hanke

Johns Hopkins University - Department of Economics

Gene Elwood Mumy

Ohio State University (OSU) - Economics

Date Written: 1977

Abstract

For approximately the past forty years, it has been fashionable among those studying public commodities to scorn the Balkanization of their production and distribution. Economists have been noteworthy in this regard. They have based their advocacy for the control and provision of public services upon the notion that economies of i scale in production require centralization. In addition to their arguments for metropolitanism, they have presented standard economic arguments for setting the prices of a public services at their marginal costs. The dominant normative view has been straightforward: centralize the provision of public goods and equate their prices to marginal costs. These prescriptions lead to prices that are higher as one moves further from a system’s load centre into less densely settled areas. The implications for urban spatial structure are clear: prices in central cities that are densely settled and close to load centres will be lower than those for the suburbs. Hence, the central provision of goods and services, priced at marginal cost, will tend to encourage dense development close to a system’s load centre.

Keywords: Steve Hanke, Optimal Departures Marginal Cost Prices, Local Public Services

Suggested Citation

Hanke, Steve H. and Mumy, Gene Elwood, Optimal Departures from Marginal Cost Prices for Local Public Services (1977). In: Paul Downing (ed.), Local Service Pricing Policies and Their Effect on Urban Spatial Structure, Vancouver, B.C., Canada: University of British Columbia Press, (with G. E. Mumy), 1977. Available at SSRN: https://ssrn.com/abstract=2176540

Steve H. Hanke (Contact Author)

Johns Hopkins University - Department of Economics ( email )

3400 Charles Street
Baltimore, MD 21218-2685
United States
410-516-7183 (Phone)
410-516-8996 (Fax)

Gene Elwood Mumy

Ohio State University (OSU) - Economics ( email )

410 Arps Hall
1945 N. High St.
Columbus, OH 43210-1172
United States

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