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Ecological Economics 40 (2002) 217 – 233


City management and urban environmental indicators

Kenneth Button *
The School of Public Policy, George Mason University, Mail Stop 3C6, Fairfax, VA 22030-4444, USA


Cities are complex and dynamic entities. They are also nodes in spatial economic, social and political geographical
networks. They are focal points for many of the concerns that underlay current debates about sustainable
development. The aim of this paper is to focus on the local environmental effects of urbanization and to consider
ways in which they may be effectively treated within the confines of an isolated city context and more generally when
urban areas are seen as part of a wider economic system. Particular attention is focused on information systems of
all types and on feedback mechanisms (including automatic mechanisms) which help, in particular, the integration of
economic and environmental considerations at the urban level. The underlying question being posed is that of
deciding on the role that urban indicators (both economic and environmental) can play in assisting to improve the
management of cities. The points made are general and conceptual rather than being of a quantitative and empirical
nature. There is no effort to try and provide comment on the existing indicators which various urban actors use in
their efforts to manage urban affairs. © 2002 Elsevier Science B.V. All rights reserved.

Keywords: Urban development; City management; Feedback mechanism

1. Introduction change and evolution of urban structures makes

static analysis difficult and equilibrium concepts
Cities never have been, and never will be static almost irrelevant other than as counterfactuals in
entities. Indeed, one of the reasons for their very policy evaluation exercises.
existence is the internal communications networks From a policy perspective, the interactions be-
that they provide for those living and producing tween changing economic, environmental and so-
in urban areas. These networks, by supplying and cial parameters makes it difficult to track issues
disseminating information about new technolo- and to develop both short-term reactive initiatives
gies, products, lifestyles and opportunities, or longer-term strategic plans. To be able to deal
provide the dynamics through which cities, and with short-term difficulties it is generally impor-
often national economies, evolve. This continual tant to have early indications of the problems
and, in particular, turning points in on-going
* Tel.: + 1-703-993-4647; fax: + 1-703-993-2284. trends. In both the short- and longer-term, poli-
E-mail address: (K. Button). cies require understanding of the inherent inter-

0921-8009/02/$ - see front matter © 2002 Elsevier Science B.V. All rights reserved.
PII: S 0 9 2 1 -8 0 0 9 (0 1 )0 0 2 5 5 - 5
218 K. Button / Ecological Economics 40 (2002) 217 – 233

linkages and structures that affect city develop- larly difficult to think of the urban environment
ment and to appreciate where intervention is de- within the context of sustainable development as,
sirable and where there are self-correcting loops. for instance, defined by the Brundtland Report
This paper is concerned mainly with the types on (World Commission on Economic Development,
indicators that can be helpful in this process 1987). In this case, sustainable development is
within the context of economic, environmental generally treated in temporal rather than geo-
and social interactions.1 For ease of exposition, graphical terms and is concerned with inter gener-
the focus is primarily on the economic and envi- ation effects.3 This poses problems.
ronmental dimensions. It also takes the view that It is quite sensible to talk at the global level of
much can be learned from more traditional ap- meeting economic development and other aspira-
proaches to some of these topics and that, in tions within a set of constraints consistent with
particular, there are important parallels in welfare those required to meet sustainable environmental
economics that are sometimes forgotten. conditions, but this is difficult at any other geo-
The paper initially looks at the concept of graphical levels. In particular, there may be any
sustainable development from a narrow geograph- number of spatial development paths, any one of
ical perspective of a city. It draws parallels be- which may be consistent with global sustainable
tween the way that efforts at refining sustainable development — the selection comes down to ques-
development policies are moving at the city level tions of how one defines distribution rather than
and the more traditional notions of welfare eco- efficiency. Indeed, this is to some extent illustrated
nomics. It then moves to consider issues of spatial at a more macro level by the on-going ‘North –
responsibility; this influences not only the types of South’ debate. The openness of economies, the
economic and environmental indicators that are
migration of people and the spatial transferability
germane to effecting a sustainable urban strategy,
of the worse environmental impacts of many ac-
but uses to which they may be put. The nature of
tivities makes the notion of any unique idea of
economic indicators, and their desirable attributes
‘local’ sustainable development almost
at the urban level, is considered along with poten-
tially useful indicators. Particular attention is paid
There are also the broader issues of what con-
to the nature and role of feedback mechanisms
stitutes sustainable development. The Brundtland
that need to be considered in order for useful
Report embodies a biblical vagueness in this con-
indicators to emerge.
text. It is essentially concerned with the world’s
poor (‘…to which over-riding priority should be
given’), but at the same time accepts dynamic
2. Cities and sustainable development change (‘…sustainable development is not a fixed
state of harmony, but rather a process of change
The idea of sustainable development, involving in which the exploitation of resources, the orienta-
environmental, economic and social consider- tion of technological development, and institu-
ations, places a central role in the ways that many tional change are made consistent with future as
policies are now defined.2 The inherent dynamism well as present needs’4). To attain these goals the
of cities, however, combined with extensive inter- Commission argues for ‘…more rapid economic
urban spatial economic linkages, makes it particu- growth in both industrial and developing coun-

The papers concern themselves mainly with cities in the 3
Specifically, the idea in the Brundtland Report that, ‘Sus-
industrial world. In fact many of the really serious issues are in tainable development is development that meets the needs of
lower income countries; see Burgess et al. (1997), Atkinson et the present without compromising the ability of future genera-
al. (1999), Polèse and Stren (2000). tions to meet their own needs’.
2 4
A discussion of some of the problems of defining sustain- This would seem to have a welfare economics interpreta-
able development is contained in Rees (1998). tion that the social discount rate is zero.
K. Button / Ecological Economics 40 (2002) 217 – 233 219

tries’, with the expectation that ‘…a 5- to 10-fold The economic/environmental/social welfare tril-
increase in world industrial output can be antici- ogy concept has a second limitation. Urban
pated by the time the world population stabilizes economies are complex entities that do not exist in
some time in the next century’. a vacuum. In these terms, actions at the urban
Economic growth is, therefore, not only ex- level must always be put in the very much broader
pected but advocated by the Brundtland Report.5 context of their global impacts and implications.8
This runs counter to many views that economic Urban areas are major consumers of scarce re-
growth conflicts with environmental protection. sources and major generators of a wide range of
The Brundtland Report’s position is that eco- trans-boundary and global pollutants. Again,
nomic growth can be made consistent with longer- drawing the welfare economics parallel, there are
term ecological requirements, but is essentially to ‘second best’ considerations involved. Indeed, spa-
achieve the social and political stability that un- tially one of the concerns of geographers is the
derpins both. This has led to attempts to define spread of the urban footprint. The parallel welfare
sustainable development in a fashion akin to tradi- economics approach in this case would be to limit
tional welfare economics. In the context of a city, analysis to purely local phenomena.9 Cities do
this would mean a change is consistent with sus- focus specifically on some economic activities, and
tainable development if there are economic, envi- generate a wide range of social welfare benefits
ronmental, or social welfare improvements (often within the urban area — they would not exist if this
defined in terms of the distribution of welfare, but were not the case. Additionally, and of particular
also embodies concepts such as civil liberties) with immediate concern to urban administrations (But-
no diminution in the other parameters. This may ton, 1991a,b), urban areas generate a variety of
be thought of as the economic/environmental/so- local environmental costs which are borne by
cial welfare trilogy.6 The links to the concept of a those living and working in each city and areas
Pareto improvement is clearly visible. But as with immediately surrounding them.
a Pareto improvement, such changes would be Some local urban environmental effects are of
rare and scope for a policy based on achieving direct relevance to the question of sustainable
them extremely limited.7 The parallel welfare eco- development, but others have less direct implica-
nomic solution to this, the Hicks – Kaldor – Ski- tions that are not immediately apparent. While
tovsky compensation test, offers a pragmatic way noise, dirt, soil contamination and community
forward. It is the intellectual basis of cost – benefit severance have adverse local consequences for
analysis. If one moves in this direction then one urban areas, by influencing the pattern of eco-
can trade-off a diminution in economic income nomic activity (through such things as stimulat-
against a gain in environmental quality or a more ing firms to move to green-field sites and encour-
desirable income distribution provided that there aging the suburbanization of housing10) they have
is the potential to compensate for the losses. To do
this there is a need to quantify and evaluate. More
germane to this paper, given the dynamics of Cappello et al. (1999), for example, look at urban sustain-
urban structures, there is the need to be able to ability and wider policies regarding energy.
Strictly, the welfare approach would be to focus on activi-
foresee trends in advance that can either be con- ties involving using partial equilibrium analysis on sectors
tained or stimulated dependent on their nature. involving low demand and cost elasticities with agents outside
of the city.
In the urban context this is often called the ‘brown 10
There have been important changes in the urban struc-
agenda’; for a discussion see Stren and Poèse (2000). tures found in industrialized countries (Henderson and Mitra,
This, of course, ignores whether or not one can develop 1996). A number of interacting factors have contributed to
meaningful measures for these factors. this. It is in part due to the increase in service sector activities
For example, see Barkin (1997) for a discussion of how and to the greater importance of high value production, but it
increased economic efficiency may reduce overall social wel- also reflects developments in telematics (Nijkamp et al., 1996)
fare. A broader discussion of the various potential interactions and emerging patterns of travel demand (Salomon et al.,
is contained in White and Witney (1992). 1993).
220 K. Button / Ecological Economics 40 (2002) 217 – 233

longer-term impacts on global resource utilization quality of the local environment enters these
and on the trade-offs required to attain global firms’ production functions in the same way as the
sustainable development. Further, for technical more conventionally understood factors of
reasons there are interactions between local pollu- production.
tion matters and global sustainability. The reduc-
tion of lead in petrol reduces health problems
within the urban area, but it also reduces the 3. The question of spatial responsibilities
efficiency of combustion engines and increases
CO2 emissions. To define and to make effective use of urban
What follows is a brief discussion of some of economic and environmental indicators requires
the specifics of urban economies, to focus on these an appreciation of the institutional context in
local environmental effects of urbanization and to which they are developed. At the outset it is useful
consider ways in which they may be effectively to draw a dividing line between the respective
treated both within the confines of an isolated roles of local decision-makers and trans-urban
urban context and more generally when urban authorities. Urban areas, because of their concen-
areas are seen as part of a wider economic system. tration of population and productive capacity, are
Attention is focused on information systems of all inevitably major generators of both trans-
types and on feedback mechanisms (including au- boundary pollution (e.g. NOx ) and of global pol-
tomatic mechanisms) which help, in particular, lutants (e.g. CO2). Due to the interdependencies
the integration of economic and environmental involved (many have classic economic public good
considerations at the urban level. The underlying properties) and the breadth of geographical con-
question being posed is that of deciding on the cern, these are generally perceived as being of
role that urban indicators (economic and environ- wider policy significance and to be within the
mental) can play in assisting to improve the man- domain of international, national, or possibly, in
the case of transboundary matters, regional ad-
agement of urban areas. The points made are
ministrations (Blowers, 1992).
conceptual rather than being of a quantitative and
While transboundary and global environmental
empirical nature. There is no effort to try and
matters come logically within the domain of
provide comment on the existing indicators that
higher levels of government, there is nevertheless
urban actors use in managing their affairs.
an important need for both vertical and horizon-
A key point is that even at the micro level, the
tal integration of policy (Organisation for Eco-
link between enhanced urban economic perfor-
nomic Cooperation and Development, 1990). The
mance and the local environment may in many
vertical integration concerns direction from the
cases be positive. By enjoying a larger resource center regarding targets, and the provision of
base, cities can mitigate many of the problems of training and information services. Certainly, there
noise, fumes and dirt that tend to be endemic in may well be a case for leaving the detailed forms
poorer urban concentrations. Equally, the direc- of policy instruments adopted and the responsibil-
tion of causation can run the other way and, in ity for enforcement of some aspect of policy in
particular, in the context of modern high technol- these fields to urban authorities, but the overall
ogy sectors, a good urban environment is a neces- strategy and policy design is essentially a matter
sary prerequisite to attract investment and for larger administrations in most cases.12 Hori-
employment.11 In terms of economic theory, the zontal integration, especially relating to trans-
In particular, a good local environment is required to
attract and retain the key highly educated workers required in 12
This may be less valid in developing countries where the
such industries. There is also evidence of a more general kind dominance of a single urban area coupled with the greater
that urban wage levels are negatively correlated with local air effective control which the authorities in such an area can
quality, indicating that, other things being equal, location exercise may make it more efficient to handle these environ-
costs are lower for firms choosing sites in less polluted cities mental matters within the city administration.
(Cropper and Affiaga-Salanis, 1980).
221 K. Button / Ecological Economics 40 (2002) 217 – 233

boundary matters, is required simply to limit beg- boundaries, interface with other land uses, and
gar-thy-neighbor actions that can entail each it is important that border areas are suitably
community simply pushing the adverse effects of managed. An authority with powers crossing
socio-economic activities onto adjacent areas. boundaries or some other coordinating mecha-
Local environmental quality in terms of provid- nism is, therefore, important even when han-
ing acceptable (if not optimal) levels of noise dling local environmental issues. The problem
nuisance, low levels of atmospheric pollution and of urban sprawl is the most obvious case of this
safety, are more logically dealt with directly by type of problem.
urban administrations. The major distinction, • Many conventional economic activities, such as
from the analytical economic perspective, is that economic development programs, involve part-
while local environmental degradation is still a nership (albeit seldom on an equal footing)
negative externality, unlike global and transbor- between urban and central authorities. Effi-
der problems, the sources of the problems and the ciency in the combined management of the
actual costs of the externality are contained within local environment and economy would logi-
the city. In technical terms, it has many similar cally suggest similar partnerships in relevant
features to what are often called ‘club’ effects. environmental spheres. Given the commonality
The role of central government should not be of many of the local environmental problems
seen as being totally absent in these circum- found in cities, the most effective way to
stances. One can argue for involvement along the achieve this may well involve trans urban
following lines.13 agencies.
• There are common lessons to be learned across • Research into both improving the technical
urban areas regarding the most effective way to and managerial aspects of enhancing the over-
contain the types of environmental problems all performance of urban economies generally
found in urban areas, and central government enjoys economies of scale effects, and certainly
can serve an informational function in such at least part of it can usually be more effec-
cases. tively conducted by national or international
• While local environmental damage may be of agencies.
little direct and immediate concern to those These, and possibly other circumstances, ex-
outside of the urban area, many impacts are plain the spheres where authority external to an
extremely long lived. Since the city decision- urban area has important policy roles to play.
making processes may not adequately take ac- Urban authorities themselves, by being closer to
count of the interests of future inhabitants, the aspirations of those living in a city and, in
which may include migrants from elsewhere, a most cases, having the greater expertise in gather-
higher level decision-making unit may inter- ing information relating to the costs of alternative
vene to maximize temporal welfare. policy actions, have a natural advantage in han-
• There may be welfare gains in coordinated dling most local development and environmental
policies across urban areas. These may be in issues.14 The major practical difficulty is the coor-
the conventional form of economies of scale, or dination of economic development actions with
possible scale and experience, in adopting com- policies designed for environmental improvement.
mon technologies or practices or, in the case of While there are often institutional reasons, a ma-
mobile sources of pollution, applying uniform jor problem is that links between economic and
flexible policy instruments. environmental performance at the local level are
• Urban areas, while often easily defined by legal poorly understood. The difficulty is often less

The practicality of introducing many of these structures
depends upon the willingness of local authorities to sacrifice Greater centralization of authority could more appropri-
their autonomy and compromise their individual preference ately play a redistribution role to compensate environmental
sets for greater efficiency. losers.
K. Button / Ecological Economics 40 (2002) 217 – 233 221

theoretical than it is empirical. Indeed, while most framework upon which to base at least some
countries have developed sophisticated national economic indicators. The lack of suitable data
accounting procedures, urban economic accounts and the infrequency with which any data emerges
(especially relating to such things as inter-urban has impeded significant applications.
trade flows and income transfers) are still often At the macroeconomic level there are a number
very primitive. The situation regarding urban en- of widely used standard indicators of economic
vironmental quality is generally even worse, in performance, including Gross Domestic Product
part due to the comparatively recent interest (GDP), unemployment, capital investment, public
shown in the subject and in part due to technical sector borrowing and inflation level.15 There is
problems of measurement and evaluation. also increasing use made of the triple European
Union (EU) indicators of GDP, unemployment
and migration at the meso (regional) level to
4. Economic indicators allocate resources, for example, from the Struc-
tural Fund.16 While these indicators are often
Macro economists have been trying to develop useful in describing and offering forecasts of on-
useful macroeconomic indicators reflecting the going trends, they are notoriously deficient when
performance of national economies since the it comes to pinpointing watersheds and turning
1930s. The notion inherent in Keynesian econom- points. Many are essentially extrapolative in their
ics that it is possible to ‘fine-tune’ the economy to underpinnings.
prevent or dampen economic fluctuations depends At the urban level of aggregation the picture is
upon the ability to foresee when policy action is even less clear. While standard measures such as
required and the nature and magnitude of the local GDP and unemployment levels are often
intervention necessary. The development of Na-
used, they have their limitations. In particular,
tional Income Accounting reflects one aspect of
they ignore important intra-urban spatial varia-
this interest at the macro level.
tions. For example, looking back to the 1960s
Even at the national level economic indicators
aggregate indicators for many cities recorded rela-
have seldom preformed well. In some cases they
tively steady income growth, but this disguised
move in opposite directions, often as fundamental
important shifts in both the spatial composition
changes are taking place in the economy. For
of economic activity (from core to green field,
example, the steady increase in female participa-
peripheral sites) and shifts from manufacturing to
tion in the labor forces of many countries has
acted to increase household income, but is often service activities. Even the meso level indicators
correlated with slower increases in personal in- such as migration are often unhelpful at the urban
come. Consequently looking at hourly wage rates level without further sub-divisions by social class
may provide a poor guide to increases in the and occupation. The middle-classes serve a vital
aggregate purchasing power in an economy. In role in starting up new local businesses and an
other cases it takes time to gather the data — a indicator that shows zero migration in situations
notoriously difficult task for international trade
Concern with urban economies in this type of In his capacity as Chairman of the Federal Reserve in the
US, Alan Greenspan apparently consults a variety of eco-
context is considerably more recent. It expanded nomic indicators (Martin, 2000). One important series seems
after the almost universal decline in the inner city to be sales of paperboard. If these dipped, because they are so
economies of most industrialized countries in the important in packaging, it could be taken to mean that
1960s, and the increasing strains of excessive ur- economic activity was on the decrease.
ban congestion that have emerged in many devel- In the European context regional policy has not only been
reactive to existing economic problems but there has been a
oping countries since the 1970s. The creation of conscious effort to seek out regions where for structural
National Income Accounts and of national in- reasons it is anticipated economic problems may emerge in the
put – output models also provided an intellectual future.
K. Button / Ecological Economics 40 (2002) 217 – 233 223

where these groups are being replaced by un- ing prior guidance to trends at earlier points in
skilled labor hides important longer term, adverse the chain.
consequences for a city’s economy. Tied in with this forecasting function, any set of
Further, and returned to below, city economies indicators has underlying it some theory of what
are characterized by externalities (which may be causes environmental decay in cities and the ways
positive as well as negative) that are not fully in which key economic and political variables
reflected in conventional national income style interact. The indicators also provide guidance as
accountancy measures. While these are often di- to the validity of these theories. Our understand-
rectly correlated with the standard economic indi- ing of these issues has been expanding in recent
cators, there is simply a scalar effect and years, much of it stemming from a fuller apprecia-
important trends will still be reflected in leading tion of the links between economic and policy
indicators. Whenever this correlation breaks imperfections.
down, standard economic indicators reflect only In perfectly contestable economic markets,
part of overall development patterns. where, amongst other things, environmental costs
are fully internalized and information is perfect,
prices provide complete indicators of the costs of
5. Environmental indicators alternative actions and guidance to the impact of
policy change. In these idealized circumstances
When seeking good indicators of the state of there is no need for other environmental indica-
the urban environment, and to gain some insights tors to be developed. There are two important
both into future trends in environmental condi- circumstances, however, where this situation
tions and into the types of urban management breaks down and alternative types of indicators
strategy to be adopted, a number of crucial points become necessary.
need to be considered. The first stems from market imperfections
First, there are several interacting stages in the where, for a number of reasons, the market fails
chain between the causes of excessive environmen- to convey the correct signals regarding the costs
tal degradation and the ultimate impact. Take the of consumption and production. In the case of
very simple case of excessive urban traffic pollu- environmental goods the primary failing is gener-
tion. The base cause of the problem is that road ally that environmental resources are outside of
users are essentially receiving the wrong signal the market mechanism and hence external to the
from prices, regulations, and controls and in con- costing processes. The price of environmental
sequence undertake excessive numbers of trips, damage stemming from economic consumption
frequently by environmentally sub-optimal modes and production is thus indicated to be zero. But
and in inappropriately engineered vehicles. This in even if environmental factors are internal to the
turn produces the cocktail of local pollution and process, if they exhibit characteristics of a public
other forms of environmental damage which leads good nature (non-rivalness and non-excludability)
to the ultimate problems of ill-health, social dis- or if there are imperfections in market structures,
ruption, noise, etc. Of course, the chain is not such as monopoly influences, then incorrect cost
unique to transport and applies in general terms indicators can be generated. Further, even in the
to virtually all forms of urban activity — energy, absence of these problems, full information of the
waste disposal and so on. price of environmental degradation, because of
The need for indicators is ultimately to provide the transactions costs involved, may not be per-
guidelines as to the damage that is being done to fectly conveyed to those making decisions. Again
the urban environment and the links this has with the urban environment would not be treated opti-
economic activities. In practical terms, however, if mally in economic decision-making processes.
urban management policy is to be pro-active, These are all basically situations where the market
rather than simply be concerned with post, ad hoc fails to provide perfect indications of the implica-
clean-up measures, then indicators require provid- tions of utilizing environmental resources.
224 K. Button / Ecological Economics 40 (2002) 217 – 233

The second circumstance where markets fail to 6. Attributes of urban indicators

operate effectively is where there are government
intervention failures. These are situations where, At another level, irrespective of the broad cate-
if left to its own devices, the market would effec- gories of indicator being sought, there are general
tively indicate the costs of environmental damage characteristics of indicators that determines their
and resource consumption, but where official in- usefulness in assisting in urban management.18
terventions create distortions and thus prices devi- While different groups within the urban setting
ate from true social costs.17 In other instances may have specific requirements, there are a num-
such failures can occur when governments, ber of key criteria that need to be considered
through their actions, worsen existing market fail- when selecting environmental indicators.19
ures or provide inappropriate responses to such • Indicators should in general be relatively small
market failures. There are often very good reasons in number and reflect the important environ-
for government interventions in markets, for ex- mental trends of interest. Too many indicators,
ample, when they can genuinely effect reductions especially if they are not clearly linked to spe-
in market failures or when distribution criteria are cific environmental effects, can be confusing
deemed socially more important than narrowly and lead to potentially ambiguous signals being
defined efficiency considerations. Government in- sent to the policy makers. Also, several indica-
tervention failures occur when such interventions tors may be related to each other. Nevertheless,
do not take full account of the long-term environ- there may well be an advantage of having only
mental consequences involved or are simply coun- one or two indicators relating to each of the
ter-productive in their efforts to achieve specified key sectors of the urban economy (such as
social objectives. transport, refuse disposal and energy) where
Dependent upon which of these two main effects can be multi-dimensional.
causes of economic failure is deemed relevant, so • It is important that indicators are sensitive to
the type of urban indicator being sought may the prevailing underlying conditions to which
differ. For example, if market failure is seen as the they relate. Ideally, indicators should be good
main urban problem then measures reflecting fac- at reflecting turning points very rapidly and, if
tors such as industrial concentration, economic possible, offer forecasts of their possible occur-
rents, labor migration, investment and the nature
of local land markets may be seen as important. If
government intervention failure is felt to be the 18
There are a number of ways of looking at indicators. The
determining force then the scale of local govern- Organisation for Economic Cooperation and Development
ment expenditure, the share of the urban labor (1993), for example, divides environmental indicators into a
force in public sector employment or the extent of trichotomy of pressure, state, and response (the PSR model).
public ownership of urban land can be seen as key The idea being that human activities exert pressures on the
environment that change its nature or state and that there are
indicators. The underlying point to be emphasized societal responses through feedback loops. It is further devel-
is that to effectively manage the urban economy, oped in the context of transportation (Organisation for Eco-
urban indicators should reflect the key causal nomic Cooperation and Development, 1999). This type of
linkages rather than simply be an ad hoc set of framework is akin to that found in Button (1993), although
indices. the latter has a five-stage chain running: the basic cause of the
problem � the physical effects � the environmental effects �
the human impacts � remedial measures. Whichever way it is
looked at, there is the inevitable problem of defining the
transmission mechanisms between the stages if indicators at
any one stage are to be used to predict outcomes at a later
The Organisation for Economic Cooperation and Devel-
Button (1992a,b) offers a theoretical discussion of the opment (1993) advances three broad criteria regarding envi-
nature of market and intervention failures in the context of ronmental indicators: policy relevance and utility for users,
traffic growth. analytical soundness, and measurability.
K. Button / Ecological Economics 40 (2002) 217 – 233 225

rence. The degree of sensitivity, however, is within a particular urban area within a much
influenced by the time horizon over which the larger, dynamic perspective.
user of the indicator is interested, a point re- If the aim is to tackle shorter-term, more micro-
turned to below. based problems then the requirements placed on
• Linked to the above, the indicators, where indicators is somewhat different. They need to
possible, should provide a ‘lead’ function in the provide more reliable guidance to immediate
sense that changes in the trend of indicators events and, in particular, to ways in which policy
anticipate changes in the underlying environ- changes can influence the course of the events. In
mental condition of interest. Tied to this, infor- the sense that most short-term issues are sectoral
mation relating to the indicators should be or relate to one geographical part of any urban
relatively easy to collect so that the lag between area, they also normally need to be much more
information gathering and interpretation is focused in their orientation.
minimized. This may be particularly relevant in
the context of types of environmental degrada-
tion where there are significant threshold 7. Urban policy and feedbacks
• It is often useful if indicators are readily quan- By definition, within any systematic structure
tifiable, in other words, of an cardinal nature. there are feedback loops. These are automatic
While notions of upward and downward trends links in the system that bring about adjustments
can be insightful on occasions, orders of mag- to correct for various types of shock. To take a
nitude or detailed indices are of much more non-environmental example, if with other things
importance. being equal, the firms in the central business
• Indicators should, wherever possible, be consis- district of a city suffer a reduction in the demand
tent across urban areas. While there may be a for their services then the consequential fall in
strong case for local areas pursuing their own land prices would attract alternative employment
particular environmental strategies, uniformity and economic recovery would follow. Often these
of information provides useful guidance across feedback effects, are longer term than the direct
cities as to the impact of the various portfolios consequences of change, and may involve a vari-
of instruments that they favor. In economic ety of intermediate effects. Fig. 1 offers a simple
terms, consistency of information in these con- indicator of some of the links, both direct and
ditions has certain merit good attributes. feedback effects, that can be found in an urban
The decision on the form of indicator to adopt economy. Not only is it difficult to isolate the
often depends on the time horizon under consid- exact nature of feedback loops, but from a policy
eration. In turn, the time horizon depends upon perspective, successful interventions to influence
the motivation for the development of indicators. them requires knowledge of the time lags in-
If the objective is to ‘plan’ the longer-term devel- volved. It is not difficult to isolate key driving
opment of an urban area then the attributes of the forces in many cities (e.g. the presence of highly
indicator being sought are going to be different to skilled labor force or of a major administrative
those deemed important, say, if the objective is to core). One can then trace that to factors such as
contain short-term problems of nuisance. the nature of the local economy and even physical
If the aim is to ensure the longer-term develop- form of the city, and from this to develop ideas of
ment of an urban area then indicators need not how such things as mobility patterns may emerge.
reflect short-term fluctuations in local conditions, This in turn can be viewed as influencing the
but do need to provide robust general scenarios of environment of the urban area. Moving from this
the direction the city is moving. Cities, of course, schema to quantification is difficult and becomes
are not isolated entities but fit in a larger eco- even more so once a notion of dynamism and
nomic and ecological system and, therefore, these feedback loops are introduced. It is not only the
longer-term indicators must also place changes exact nature of, for example, how mobility feeds
226 K. Button / Ecological Economics 40 (2002) 217 – 233

Fig. 1. A representative of key linkages between social change and urban dynamics.

back on the economic development of the city lating recovery. There may also be legacy effects
that is difficult to specify, it is also the time path resulting from previous land-owners not bearing
that it takes. the full costs of the soil contamination and local
At this simplest of levels, and in terms of pollution associated with their production/con-
conventional micro-economics, feedback effects sumption activities. Even a move to a fully con-
come via the price mechanism — the fall in de- testable market would not, with these legacy costs
mand in the central area of a city being contained to be borne, result in revitalization of such areas.
by price adjustments in the market for land. This Given the reality of these imperfections there is
process of adjustment, however, is dependent a need for intervention to correct both the ongo-
upon all the conditions inherent in the notion of a ing distortions associated with imperfectly con-
perfectly contestable market. These market feed- testable markets and to remove the legacy effects
backs are, in practice, at best imperfect and, in of past imperfections. Equally, however, there is a
some circumstances and especially where property danger that market imperfections may in these
rights are inadequately allocated or there are im- circumstances be replaced by government inter-
portant scale effects, can prove to be perverse in vention failures. This may come about if the
their nature. For instance, and continuing with policy making, or the official administrative struc-
our earlier example, if there are major economies ture is captured by those whose activities are
of scale and scope then a reduction in demand for meant to be regulated. Such capture is quite possi-
the output of firms in a city center can result in a ble when groups within the urban economy have
spiral of circular-and-cumulative causation which resources to expend to argue their position or
speeds further economic decay rather than stimu- when they have control over important informa-
K. Button / Ecological Economics 40 (2002) 217 – 233 227

tion flows required in the intervention process.20 development cycle, and to consider which indica-
In these circumstances, there are grounds for sup- tors are the more useful during these various
porting the use of automatic feedback mecha- phases. It also offers guidelines as to the types of
nisms which are, in a way, the administrative policy instruments that can most usefully be de-
equivalent to price adjustments within a con- ployed at various points in the urban cycle, al-
testable framework. though this should not be interpreted to mean
The idea of intervention utilizing feedback sys- that the various instruments are redundant at
tems is also well established in macroeconomic other times. It is more a matter of intensity of use,
policy where the concept of automatic stabilizers and one objective in deciding upon the urban
was developed alongside that of Keynesian eco- indicators should be the extent to which they
nomics in the post-1945 period. Effectively, taxa- provide guidance as to this intensity of use.
tion policy would be used to contain excessive It should be seen that this approach differs
growth during rapid national economic growth from the more conventional static framework that
follows the Tinbergen philosophy of matching a
and the funds accumulated deployed in public
policy instrument with a policy target. The purist
works programs and given as unemployment pay
approach of matching targets and instruments is
to stimulate demand during subsequent reces-
particularly difficult at the urban level of policy
sions. Demonstrating how balanced budget multi-
making where there are significant interdependen-
pliers can be calculated across the trade cycle has
cies between the problems being addressed and
become a staple of macroeconomic courses. between the impacts of the policy instruments
Putting this type of approach into practice in being used. In this sense their effectiveness will
the urban setting poses several problems. At one depend very much on the wider circumstances in
level an idealized framework has been developed which they are deployed.
which brings together notions of how one might Urban growth (defined in terms of such things
link urban environmental problems, urban indica- as population, output, income, population density
tors and city policy management. This very much or some other relevant indicator) can be consid-
reflects the idea of a dynamic urban economy with ered to take a very general sigmoid pattern of
active public sector participation.21 cyclical development time. In effect, we are as-
The basic idea is that since urban economies are suming that the city goes through a succession of
dynamic and evolve over time, any feedback different phases not dissimilar in nature to most
mechanism should, like those deployed at the national economies (see Fig. 2). There is an initial
macroeconomic level, make use of surpluses slow growth phase as investment takes place and
gained during periods of economic growth to confidence grows. Once capacity is available and
compensate for periods of economic recession. demand begins expanding more rapidly so there is
There is, in practice, considerable evidence of a take-off, economic growth accelerates. After a
cycles in economic performance of this kind at the period, a plateau is reached, often followed by a
urban level. Employing this type of conceptual period of decline as confidence sags and existing
framework permits the introduction of temporal capacity in the urban economy makes investment
considerations into the discussion of local and in new capital or buildings unattractive. Later a
national policy instruments as tools in environ- new growth phase emerges.
mental policy. It offers a framework for examin- From an urban policy perspective this simple
ing the particular qualities which one is seeking in representation indicates two key policy problems
an urban indicator at various phases in the urban areas.
• First, from a narrow economic perspective (re-
garding such things as labor training, land use
20 allocation and public good provision) there is a
This is one reason for making information regarding
trends in key indicators available to the general public. need to develop indicators, and linked with
A detailed diagrammatic presentation of the underlying these, policy responses, to handle each stage in
ideas is to be found in Button and Pearce (1989a,b). the cycle.
228 K. Button / Ecological Economics 40 (2002) 217 – 233

Fig. 2. Links between economic, environmental and social welfare trends.

• Second, from an environmental perspective in land prices. The public policy response, in
there is the need to have indicators of the type addition to standard measures of ensuring land use
of degradation likely to be associated with each policy is keeping rent down, could in such circum-
phase. stances be aimed at improving labor quality and,
Working through a cycle, during a time of through such things as public/private joint ven-
economic recession the types of immediate envi- tures, handle the problems of legacy effects.
ronmental damage suffered by urban inhabitants Once an urban economy has been encouraged to
tend to diminish. Reduced economic activity cur- begin to grow, the initial danger is that the expan-
tails the demand for transport and for industrial sion will occur on land which, while financially
activity with resultant benefits in terms of lower cheap, may be environmentally sensitive and espe-
noise levels, less localized air pollution and reduc- cially at suburban areas rather than central loca-
tions in traffic intimidation. What is often associ- tions. Policies involving land-use planning
ated with low levels of economic activity is controls, zoning and differential land taxation can
deterioration in the fabric of the city as investment be deployed to internalize the environmental dis-
is limited. This can produce legacy effects both in tortions. Economic efficiency during this phase
terms of the quality of private infrastructure and may also be enhanced by the use of ‘bubbles’ and
the maintenance of public infrastructure. These similar quasi-market approaches.22
conditions also often discourage new firms from 22
The figure can also be used to relate social welfare consid-
entering the area even if there are significant falls erations to economic trends.
K. Button / Ecological Economics 40 (2002) 217 – 233 229

During the subsequent phase of rapid eco- Quite clearly, if one accepts this type of styl-
nomic expansion the policy problem is one con- ized approach there is a need for the public
taining the overheating of the urban economy authorities to have sets of indicators which
and to contain the local environmental damage reflect each stage in the cycle and which highlight
associated with increased economic activity. the extent to which policy portfolios should be
Careful monitoring combined with more inten- adjusted to correspond to the evolving situation.
sive use of flexible policy instruments, such as But linked with this, the non-public sector actors
local emissions charges, are relevant at this time. in the urban situation also require appropriate
Coupled with this, the higher level of economic information to adjust their stances. If they have
activity generates economic rent which can be appropriate indications of what is happening
transferred through fiscal measures, effectively then there are processes within the nature struc-
contingency taxation, to public authorities and ture of any urban economy that will activate
be placed in reserves to meet the needs of subse- automatic feedback mechanisms; a sort of indica-
quent downturns. tive planning mechanism.
Peaks in economic activities are generally char- The link between urban economic development
acterized by enhanced competition and efforts to and the state of the local environment is cer-
maintain market share through cost reduction. tainly still not fully understood. It also seems
The danger from the local environmental per- likely from what is known that the importance
spective is that at least part of any financial of particular local characteristics of a city means
savings are achieved at the expense of insufficient that generalizations across urban areas are often
protection of environmental resources. A inappropriate. Case study approaches may well
strengthening of both fiscal and command-and- provide more insights than more general statisti-
control instruments is thus important during this cal examinations of linkages. Nevertheless, there
phase of any cycle. do appear to be a number of automatic feedback
Finally, during a downturn in urban economic mechanisms that bring about adjustments in ur-
activity there is a tendency for the public author- ban economies as environmental and economic
ities, confronted by a reduced local (and possibly conditions change.24
national) revenue base to reduce expenditures. It Feedback mechanisms can take a variety of
is also the time that private sector companies forms. Some of these require individual, case-by-
cease to put resources into many aspects of ur- case actions brought about by policy makers and
ban environmental importance (e.g. the external are often in response to general movements in a
fabric of their buildings is neglected) which in key indicator of some kind, perhaps levels of
turn adds to the problems of stimulating local traffic congestion or hectares of derelict land. To
economic recovery. The public sector feedback adopt the jargon of Saville Row, tailoring these
mechanism would ideally be drawing on reserves may be seen as ‘bespoke-feedbacks’.25 Other
feedback mechanisms, however, are automatic.
built up during more prosperous times to stimu-
They require no particular action on the part of
late economic rejuvenation both directly (e.g. via
law makers, but rather reflect a system reaction
partnership schemes and public projects) and in-
to evolving conditions — an ‘off-the-peg’ policy
directly (e.g. through information dissemination
approach, to carry through the tailoring analogy.
and improving the urban physical environ-
An early analysis of feedback mechanisms in the ecosys-
tem are found in Holling (1986).
23 25
This idealized world ignores the tendency for capture of Here one can think of recent efforts to redesign urban
financial structures and there would be an inevitable tendency land-use patterns on environmental criteria (Spiekermann and
for reserves to become current expenditures on items of imme- Wegener, 1992; Breheny, 1992; Rickaby et al., 1992) or to
diate (political) necessity without suitable earmarking mecha- develop policies for ‘sustainable urban transport’ (Ruijgrok et
nisms. al., 1992; Newman and Kenworthy, 1989).
230 K. Button / Ecological Economics 40 (2002) 217 – 233

Of course, in practice feedbacks usually embrace a 7.2. Administrative

combination of influences and some of the poli-
cies outlined might well be of the bespoke kind Many urban activities are provided by public
while others are rather more off-the-peg. agencies that have a commitment to meet prede-
termined criteria. These criteria normally em-
While categorization has its limitations, one
might usefully consider some of the more impor- brace, implicitly if not directly, some26
notion of
tant types of feedback mechanisms under a num- maximizing long-term social welfare. While deci-
sions are seldom based on market principles, nor
ber of headings. What should be remembered,
do the prices charged for public services conform
however, is that many of these mechanisms are
strictly to those consistent with the environmental
inter-linked and in practice often work together to costs involved, the techniques adopted often ap-
generate synergy effects. proach a second best solution. In particular, tech-
niques such as cost – benefit analysis (in all its
7.1. Market guises) are widely used when deciding on urban
public investment and these embrace consider-
The market feedback mechanism represents the ation of many local environmental factors. A
classic economic idea that price is the appropriate major problem is that these quasi-market proce-
indicator. If environmental costs are fully inter- dures are far from perfectly developed to date.
nalized then there exists perfect feedback from Further, within the administrative structure there
environmental resource utilization to its cost. The are still generally problems of coordination of
price indicator requires that rights to environmen- functions and of allocation of responsibilities be-
tween those, for example, responsible for strict
tal exploitation (such as the right to use urban air)
financial matters and those with planning and
are completely allocated and, therefore, can be
environmental remits.
traded in markets. If the exploitation of the local
environment is excessive then its price rises and
7.3. Political
consumption is contained. In many cases, the
containment may come through migration from Democracies have a natural long-term feedback
the city rather than changed behavior within it. process through the local government machinery.
The mechanism provides for balance between If the urban environment is, in its broadest sense
conventional economic resource use and use of unsatisfactory, then elections will see a change of
environmental resources. In terms of dynamics, it local government. In the longer term, for instance,
also means that if material prosperity is increas- if an urban area is revitalized through some policy
ingly sought by urbanites so the costs of using actions then those attracted to the city will press
environmental resources rises. In doing this, how- for further reforms to protect and enhance their
ever, it stimulates the search for new technologies position. Even if it leaves some residents discon-
(in the widest sense) to conserve highly priced tent, following the Tiebout view of the world,
environmental attributes. In less abstract terms, if these people still have the option of voting with
the environment is priced and increasing pressures their feet and moving to cities where the eco-
are put this will create high prices for such things nomic/environmental mix is more to their liking.
as noise permits, land use and air pollution li- The power of the mechanism depends very much
censes, and then will stimulate an automatic reac- on the nature of the local political structure and
tion leading to economies on their use. To the degree of power exercised by urban as op-
posed to state or federal government.
maximize the efficiency of these feedback effects
there is the need to ensure that all relevant mar- 26
There are associated matters relating to the financing of
kets are contestable, that is, open to potential urban public expenditures and how this ties in with the use of
competition. The incomplete nature of most mar- economic instruments by urban authorities to contain environ-
kets limits their feedback role. mental degradation (Feitelson, 1992).
231 K. Button / Ecological Economics 40 (2002) 217 – 233

7.4. Legal productive administrative feedback often comes

about through the availability of shadow price
There are many legal, effectively command- indicators. In the case of transport this may in-
and-control instruments, which provide feedbacks volve such things as the costs of congestion, the
with urban areas. These can embrace laws requir- productive losses stemming from high accident
ing certain design standards to be adopted as new rates and the lost investment due to unreliable
buildings are completed, that there is appropriate delivery services. Essentially, the indicators are
transport access to premises, that designated areas reflective of quasi-prices. Legal feedback mecha-
of land are not violated and that safety standards nisms are more often activated by physical indica-
are conformed to. These legal feedbacks are often tors relating to such things as levels of low level
seen as mechanisms that contain urban economic ozone and the level of noise.
expansion within the boundaries of acceptable Social feedback is rather more difficult to access
environmental standards. While local urban by- because of its diverse nature. Most actions are
laws are often influential, the automatic element focused on specific issues (e.g. removing lead from
of the feedback process is frequently through the petrol) rather than aimed at the general condi-
impact of national legislation which helps to con- tions of the urban area. How topics of interest
tain possible spillover effects into other areas. emerge is under researched and poorly under-
stood. In terms of key indicators it would seem
important, if the feedback mechanism is to work
7.5. Social
effectively, that monopoly control of information
should be avoided. The nature of the feedback is
These feedbacks often take the form of public
almost by definition optimized through maximum
reaction and an upsurge of non-governmental
bodies. They do not normally stem from any
institutionalized or market-based framework, but
rather reflect grassroots disquiet over particular
8. Conclusions and issues to be addressed
issues.27 In this important sense, the feedback here
differs from other forms in that there is no sys-
No attempt has been made in this paper to
tematic way of analyzing. The feedback is cru-
define in any detail what particular variables or
cially dependent on information (including
indices should be adopted as urban indicators.
inaccurate information). For the feedback to be
That requires rather more detailed studies of what
productive, the information should be as complete
information is available at the urban level, how it
and unambiguous as possible to avoid exploita-
can be presented and by what means it can be
tion or capture of public opinion by particular
disseminated. Rather, the primary concern has
groups. Equally, education is important if the
been to provide an introductory examination of
information is to be understood and appropriate
how urban environmental indicators can fit into
conclusions drawn from it. Unfortunately, full
urban management, both in terms of their use by
information is not ubiquitous and education is
public agencies and by the wider body of people
often limited.
living and working in cities.
For each of these feedback mechanisms to be
Urban economies are complex entities embrac-
effective there is a need for particular types of
ing a variety of interactive forces. There are im-
urban indicators to be available. Markets clearly
portant links between the local environmental
need accurate price indicators. At other levels,
conditions pertaining within a city and the eco-
nomic performance of that city. While poor envi-
This type of feedback link was given particular emphasis ronmental conditions stemming from congestion,
in European Union discussions of urban environmental issues
(Commission of the European Communities, 1990) although
noise, dereliction and fumes may in some circum-
the extent that social feedback was seen as institutionalized in stances reflect low costs of production they may
the activities of non-governmental agencies is somewhat vague. equally well create labor and factor shortages,
K. Button / Ecological Economics 40 (2002) 217 – 233 231

especially in modern industries dependent on as a tool for stimulating urban renewal — the Glasgow
Canal. Urban Studies 26, 559 – 571.
skilled workers and individual entrepreneurial ini-
Cappello, R., Nijkamp, P., Pepping, G., 1999. Sustainable
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Cropper, M.L., Affiaga-Salanis, A.S., 1980. Inter city wage
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