The use and value of any tract or parcel of land within a metropolis (city center and suburbs) is affected more by the use and value of other tracts or parcels of land than it is by what takes place on the tract itself. The modern metropolis is vastly complex, with multitudinous economic, social, political, and spatial interrelationships among its various parts. The individual has wide latitude to arrange his personal life within this complex, including the right to locate where he chooses, within his capacity to pay for location. But his job, his dwelling, his purchases, his play activities, and many other aspects of modern life involve other people -- as a rule, relatively large numbers of other people -- and also involve many different parcels of land in many different locations. Value which accrues to land is created by these manifold and complex interactions in land use. The purpose of this chapter is to describe some of these interrelations and interdependencies and to relate them to the matter of growing suburbs.
An externality in economic values arises when the actions of one person or group bring costs or values to another, costs which the person initiating the actions does not have to bear or values which he is unable to capture. Interdependencies in economic values may be considered as simply a generalized example of externalities. The latter have typically considered the relation between two individuals or two groups, whereas the interdependencies might be extended to include all groups affected by, or affecting, the individual concerned, as far as his land use activities are concerned.1 In this chapter, references to externalities apply to interdependencies as well, except where the contrary is specifically noted.
Externality is often illustrated by the case of a factory pouring out smoke, which creates damage and inconvenience to others. Another common example has been____________________