Spatial public goods. II : Applications

This paper is the second part of a two-part series. Part 1 was about how the spatial diffusion process of a public good interacts with a theory of distributive justice to produce an optimal urban form. The terminology and ideas of Part 1 are assumed to be known. This paper begins by applying the framework of Part 1 to develop a classification of spatial public goods, and to order existing literature on the basis of this classification. In addition to clubs, urban contact fields, pure and local public goods, the first section discusses a new model of spatial public good — the agora. The second section examines the problem of allocating land between private and public use in the case of transportation and agora models. The third section deals with certain aspects of optimal public finance which is known in the literature as the Mohring paradox. It is seen that optimal taxes on the use of land do not, in general, match the optimal level of public investment. In this sense, some public projects should operate under deficit while some others should generate a surplus. Generating a surplus or deficit at the optimum crucially depends on the nature of returns to scale in the maintenance of a given environmental quality. Finally, section four displays a number of aggregate relationships which express a balance between costs and benefits of an optimal agglomeration. Costs include urban transportation while benefits include the surplus value of urban production. It is seen that the nature of such balance will be determined by the shape of the city and the technology of transportation