The environmental costs of modernism: an assessment of Canadian cities

Cities, Vol. 16, No. 5, pp. 301–313, 1999 1999 Elsevier Science Ltd. All rights reservedPergamon

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PII: S0264-2751(99)00028-1

The environmental costs ofmodernism

An assessment of Canadian cities

Igor VojnovicDepartment of Geography, Texas A&M University, College Station, TX, USA

In the modern era, resource-intensive consumption practices and human-activity patterns haveemerged as one of the defining elements of the North American city. This paper examinesthe extent to which the incorrect pricing of private and public urban goods have shaped thecharacteristics of these consumption practices, with a particular emphasis placed on Canadiancities. The work will also examine the extent to which distortions in the pricing mechanismhave facilitated low-density development patterns. For instance, if consumers were asked tobear the correct cost of providing single-family detached housing in the outskirts of cities,along with the necessary infrastructure, a new cost would be associated with any bundle ofhousing service which might make homebuyers reconsider their demand for land-extensive,non-contiguous developments. Beyond the distortions in urban form, however, this paper willshow that the under-pricing of urban commodities has produced both inequities and inef-ficiencies in consumption practices and human activities in general. 1999 Elsevier ScienceLtd. All rights reserved

Keywords:Environment, Costs, Sprawl, Canada

IntroductionIt has been recognized since the 1950s that there areconsiderable resource efficiency advantages to pro-moting compact development patterns over low-den-sity, spread developments. It is expected that thebenefits of such initiatives would be most significantin newer North American cities, such as Houston,Phoenix, and Denver, which maintain communitydensity figures at about 2000 persons per square kilo-meter (ppsqkm). The first studies revealing theincreased efficiency of higher-density developmentsincluded research by Wheaton and Schussheim(1955), Isard and Coughlin (1957) and John Kain’sUrban Form and the Costs of Urban Services(1967).All three works had demonstrated that low-densitydevelopment patterns had higher associated costs withthe provision of linear infrastructure than did higher-density developments.1 A celebrated research docu-

1An extensive review of US literature on the topic is provided byJames Frank’sThe Costs of Alternative Development Patterns(Frank, 1989).

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ment supporting this claim in the 1970s was The RealEstate Research Corporation’sThe Costs of Sprawl(1974). The authors of the report compared six hypo-thetical new suburban communities, each accommo-dating 10 000 dwelling units, and concluded that therewere significant resource savings associated with thehigher-density community (at 4695 dwelling units persquare kilometer) over the low-density sprawl com-munity (at 865 dwelling units per square kilometer).The higher-density community required: 44% lesscapital investment; 11% less operating costs in theprovision of community services; 45% less energy;and generated 45% less air pollution (Real EstateResearch Corporation, 1974).

In Canada, almost a decade later, these figures weresupported by Ontario Ministry of Municipal Affair’spublication Urban Development Standards. Theauthors of the report revealed that by reducing subdiv-ision lot sizes to an average of 6.4 m3 30.5 m –while still maintaining single-family housing units,but integrating detached, semi-detached, and rowhouse dwellings – communities could reduce the capi-

The environmental costs of modernism: I Vojnovic

tal energy requirements in proposed subdivisions byroughly 45%. The study also revealed that significantbenefits would also be obtained with increases inoperating energy savings, which would be realized inthe provision of services such as street lighting, streetmaintenance, and water pumping. In the 1990s, theGreater Toronto AreaUrban Structures ConceptStudy(1990), Canada Mortgage and Housing Corpor-ation’s Infrastructure Costs Associated with Conven-tional and Alternative Development Patterns(CanadaMortgage and Housing Corporation, 1995) and NealIrwin’s GTA Urban Structure Concept StudyRevisited(1995) all came to similar conclusions. Allthree studies confirmed the relationship between low-density developments and the increased consumptionof capital energy, operating energy, and land.

This paper will review the extent to which theunder-pricing of urban goods and services has facili-tated inefficient and inequitable consumption prac-tices within Canadian cities. The article will also dem-onstrate that by encouraging correct pricinginitiatives, particularly of single-family detachedhousing and complementary linear infrastructure,urban centers will have a greater propensity todevelop at higher densities. Municipal service under-pricing is an especially difficult issue to deal withbecause of the peculiar characteristics of public goodsand services. For instance, the existence of a govern-ment subsidy in the provision of a service is not initself evidence of under-pricing. In certain cases, sub-sidies will be required to ensure equity and efficiencywithin an urban system.

The North American suburbThe rowhouse characterized many developments inNorth American cities and towns before 1840. It wasconsidered very flexible and efficient, and was thedominant design model in Europe for roughly 500years. The design dates back to the Middle Ages andis found in various forms within 17th century Dutchtowns, Baroque Paris, Georgian London, and the Vic-torian industrial city. The combination of inadequaterapid transportation and high real-energy costsencouraged compact urban forms with mixed landuses so that the physical separation between activitieswould be reduced, and cooling and heating require-ments lowered. The rowhouse model was dis-tinguished by street-oriented, attached housing unitson small lots. The ground floor was often occupiedby retail, commerce or manufacturing, while theupper floors accommodated residential dwellings(Kostof, 1991; Rybczynski, 1991; Waterhouse, 1993;Hall, 1996).

The compact form of early-19th century cities pro-moted heterogeneous, socio-economic neighborhoodsand communities. The width and size of the row-house, or floor level, usually determined socio-econ-omic status. For instance, the ground floor was usuallycommercial; the second floor occupied large dwell-

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ings with high ceilings, and was known as thegrandapartment; while the upper floors contained cheaper,smaller residences and rooms with lower ceilings andless architectural detail. In America this socio-econ-omic mix within neighborhoods existed until the mid-19th century. However, the increase of immigrantsand industries into the inner cities during industrializ-ation began to strain the already inadequate provisionof urban services. The cities became congested aspeople and industries concentrated in cities with littlepublic control of new development or redevelopment.For the upper-income groups the conditions of thecity became intolerable, and suburban developmentbecame the sensible alternative. However, the late-19th and early-20th century suburban developmentsin North America faced both energy and technologicalconstraints, and as a result were much more compactthan those developments after World War II. Den-sities of the early suburbs, such as Chicago’s River-side (1869) and Forest Hills Gardens outside Manhat-tan (1913), averaged more than 7400 ppsqkm.

It has been argued that the introduction of anaffordable automobile and the decrease in real energyprices during the 20th century encouraged lower-den-sity development patterns. Other variables facilitatingland extensive developments included increases inreal incomes, the introduction of zoning by-laws, andthe eight-hour workday, which enabled workers tocommute over longer distances. The variable that isof particular interest to this paper is the under-pricingof private and public, urban goods and services. Itwill be argued that the under-pricing of urban goodsand services, including public infrastructure, hasfacilitated low-density developments. The extent ofthis under-pricing accelerated suburbanization by nolonger limiting it to solely upper-income earners. Dur-ing the 20th century, suburbanization became charac-teristic of the middle-income class, and in some cases,lower-income groups as well. Since 1949 onwardsthere have been one million housing units built annu-ally in the US. Roughly 80% of these units were sin-gle-family detached houses. As of 1980, 65% of thehousing in the US was in the form of single-familyhousing in the suburbs (Duany and Plater-Zyberk,1991, p 7).

Although many earlier examples exist, suburbandevelopment in Canada began in earnest in 1952 withthe construction of E.P. Taylor’s Don Mills – in NorthYork, a suburb of Toronto – where the average lotwidth for a single-family residence was set at 18.3 mby its designer Macklin Hancock. Don Mills not onlyset the standard for all other suburban developmentsin Canada, but was considered the “single greatestinfluence on the planning of Canadian cities in thiscentury” (Gerecke, 1991, p 33). In general, the pro-vision of housing services was more land-extensivein the post-war period, which was also translated intolower area densities. Pre-war residential develop-ments in the Toronto region averaged around5000 ppsqkm, while the densities in the post-war per-


iod were maintained at figures as low as2000 ppsqkm.

Cities and towns promoting spread suburban devel-opment patterns, characterized by low communitydensities and segregation of land uses, were creatingresource-intensive and environmentally unfriendlyland-use and activity patterns. The increased separ-ation between activities in these cities generated a cor-responding increase in infrastructure requirements, anincrease in the level of new land consumption, agreater demand for vehicular transportation betweenactivities, and, in particular, a greater reliance on theprivate automobile. The urban lifestyles created bythese new development configurations encouragedgreater energy use, whether in the form of capitalenergy expenditures (such as roads, water lines, sew-age mains, and sidewalks) or operating energy expen-ditures (street cleaning, snow removal, street lighting,and transportation requirements). Planners and archi-tects were aware of the inefficiencies of these devel-opment patterns, but perceived advantages in theamenity and safety of residential areas were con-sidered more important. As a result, the environmen-tally destructive patterns of Canadian cities intensi-fied, with increases in the level of pollution, wastedischarge, the destruction of natural areas by develop-ment, and the degradation of wildlife habitats. Studiesrevealing the inefficiencies and the environmentallydestructive patterns of current suburban developmentsbegan to receive serious attention for the first timeduring the energy crisis of the early 1970s, but theurban spread model continued to prevail as the stan-dard. For instance, the Province of Ontario continuedto approve low-density developments in the early1970s while it actually “feared that it might not beable to service this kind of development, and worriedabout how alternatives might be put in place” (Sewell,1993, p 208).

Optimal resource allocation and resourceconsumptionOptimal resource allocation is concerned with achiev-ing the most appropriate allocation of resourcesamong alternative uses, so that social well-being canbe maximized with the minimum use of resourceinputs. Optimizing resource allocation recognizes thatimprovements in the standard of living will not onlybe attained through the increase in quantity ofresources used, but in the efficiency of their use.Improving economic efficiency, therefore, can allowfor similar human-activity patterns to be maintainedwhile lowering the consumption of natural capitalstocks. The most pressing issue within this context isthe pricing of private and public goods and servicesaccording to their replacement value. Appropriatepricing would involve the incorporation of costs ofall natural resource inputs, plus any social costs exter-nal to the market, into the monetary evaluation ofhuman activities. Currently, however, most environ-

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mental goods and services are not priced, a fact thatpromotes both lower levels of economic productivityand the continued degradation of the natural ecology(Pigou, 1948; Pearce and Turner, 1991; Baumol andOates, 1993; Vojnovic, 1995; Foster, 1997; Tol,1999).

The importance of under-pricing and its relation-ship to over-consumption of the under-priced good orservice is an association that has been recognized byenvironmental and welfare economists for some time.Most environmental economists see the problem ofunder-pricing as the most significant factor contribu-ting to environmental degradation. As indicated by theWorld Bank, “the true value of many environmentalgoods and services is not paid for by those who usethem”, and that these market characteristics inevitablylead to the over-consumption of the under-pricedenvironmental resources (World Bank, 1992, p 36).The World Bank also notes that in cases whereenvironmental goods and services are priced accord-ing to their “true value … there is no sign of excessivescarcity” (World Bank, 1992, p 36). This problem, infact, as noted by Jean-Philippe Barde and KennethButton, has been recognized by welfare economistssince the early-20th century:

Traditionally, dating back to the work of Pigou (1920)there has been a tendency to treat environmentaldegradation as stemming from certain types ofinherent failures in the market process. In effect, itwas argued that many environmental considerationsare external to the market mechanism. This is becausemany natural resources, such as clean air, water,peace and quiet, have no legal property rightsassigned to them and hence are not bought and soldas other items are. This lack of price means that thereis an automatic tendency to over consume such thingsas clean water, unpolluted air, etc. (Barde and Button,1990, pp 11–12).

By pricing resources more correctly, therefore, moreefficient consumption patterns would be generatedthat would ensure greater levels of environmentalpreservation and social welfare.

Appropriate pricing within urban economies

Encouraging correct pricing becomes an especiallyimportant consideration within the urban context,since “market failures … [which] embrace the con-ventional environmental questions of appropriateeffluent levels, noise controls, safety considerations,aesthetics, etc … are generally agreed to be wide-spread in most urban economies” (Button and Pearce,1989, p 144). Modern cities, especially in NorthAmerica, are filled with irrational pricing mech-anisms. The under-pricing of urban commodities hasnot only encouraged rapid urbanization in most cities,but it has also developed metropolitan regions that areless efficient in their consumption of energy, materialand land. The under-pricing of private and public


goods and services within urban centers has encour-aged a supra-optimal demand for urban commodities,which in turn has resulted in severe resource exploi-tation. The effects of the supra-optimal levels ofresource consumption in Canadian cities have beenwell illustrated by Rees in his discussion of a com-munity’s ecological footprint and the import ofresource requirements.

The natural capacity requirements of a city, whichis the aggregate land necessary to support a givenpopulation indefinitely, depends on the population’smaterial standard of living (Rees, 1992). In otherwords, the natural capacity requirements will dependon the city’s need for food, fuel, waste-processingcapacity and all the other resources necessary to sup-port a particular material standard that a populationis accustomed to. This aggregate area can be con-sidered a community’stotal ecological footprint, asopposed to the footprint of the city’s built environ-ment or the associated political boundary. Because ofthe high level of resource consumption in NorthAmerica, it can be assumed that the ecological foot-print will be considerably larger than the physicalurban footprint. For instance, in Rees’ calculation ofthe natural capacity requirements of Lower FraserValley, British Columbia (BC), the 1.7 million peoplein this region required “conservatively, 8.3 millionhectares of land in continuous production” (Rees,1992, p 126). This is a land area 20 times the size ofLower Fraser Valley. Rees goes on to argue that, “[i]fthe entire world population of 5.2 billion consumedproductive land at the rate of our Fraser Valleyexample, the total requirement would be 25.5 billionhectares” (Rees, 1992, p 129). This is a land massthat is roughly three times the size of all productivecroplands, pastures and forests available on Earth.

By encouraging the incorporation of social andenvironmental costs external to the market in the priceof urban commodities, cities would not only improvethe efficiency of certain functions – such as transpor-tation, heating and cooling of buildings, and water andsewage management – but would also foster naturalecological benefits with respect to decreased landconsumption and improved natural habitat preser-vation. In fact, if private and public urban commodi-ties were priced more correctly, many of the detri-mental urban activities, including rapid urbanization,would likely disappear. However, the improvementsin efficiency would result from increases in prices ofmost urban commodities. A fundamental changewould thus need to be made in the lifestyle of mostCanadians, which would affect the purchase of dailygoods and luxuries, the nature of housing and comp-lementary services, transportation patterns, and mostother aspects of daily life.

Particularly with respect to the correct pricing oflinear infrastructure, which will be discussed in sub-sequent sections of this paper, urban forms wouldhave a propensity to intensify to a more compact andefficient pattern of development. The progression of

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cities to a more compact form would be generated bythe increased cost associated with linear infrastructureprovision, and also the increased cost of urban goodsand services resulting from the new approaches inpricing. Therefore, the propensity towards higher den-sities would be driven mainly by market forces oncethe correct pricing initiatives are introduced. Thereare conceivable scenarios, however, under which thisrelationship might not hold. For instance, certain con-sumers, upper-income earners specifically, may main-tain a preference for housing in low-density develop-ments and be willing to pay for it. This means thatincreases in the price of urban goods may not neces-sarily encourage more compact developments in allmarkets. Nonetheless, on the whole, more compactdevelopments would be encouraged by the new pric-ing initiatives.

Determining the correct pricing of urbangoods and servicesIn recognition that it is very difficult for the privatemarket to determine the correct monetary value of allthe urban goods and services, a number of economictools can be introduced by the public sector to accom-modate the proposed pricing initiatives. By imposingenvironmental charges, charges on particular humanactivities creating ecological problems, such as priv-ate automobile use, and user charges, levies on theuse of collective goods and services, such as publicinfrastructure, communities can improve on currentpricing practices. Deciding the optimal environmentalcharge that would lead to the appropriate pricing ofprivate and public goods and services within urbancenters is an extremely complex and expensive pro-cess (Button and Pearce, 1989; Pearce and Turner,1991; Baumol and Oates, 1993; Vojnovic, 1995; Fos-ter, 1997). However, ignoring the problem andallowing economic inefficiencies to persist while cur-rent environmental and social stresses intensify – thepopular option among current governments – is achoice that should clearly be reassessed. The answerto this problem can, potentially, be found in thebilling practice. Government bodies can begin to mar-ginally increase the price of urban goods and servicesthat they are certain are under-priced, by politicallyacceptable amounts. Prices can continue to increaseuntil it is felt that a reasonable charge has beenreached. A more specific proposal will be made laterin the paper regarding municipal services.

For instance, user charges can be utilized to providemarginal increases in the price of public goods thatare under-priced, such as urban infrastructure.Environmental charges can be the tool used toincrease the price of environmental services in theprivate sector, for example, private automobile use.Municipal governments can then monitor the effectsof these price increases on local markets to see howthey react. If consumption patterns were improvedwith the initial price adjustments, and social welfare


had increased, then a second round of price increasescould be initiated, and so on. Realistically, an opti-mum price would be difficult to establish because ofthe dynamics within the markets. Even if an optimumprice was established, it would likely be appropriatefor only a very short period. However, the process ofmarginally adjusting changes, by politically accept-able amounts, would guarantee greater equity andefficiency within urban regions, and in the overall useof resources.

The above discussion of under-pricing of urbancommodities introduces an interesting variable in thestudy of urban economics. In this literature, pro-ponents of low-density developments insist thatspread development patterns are in fact efficient(Fujita, 1976; Peiser, 1989; Gordon and Richardson,1996, 1997). Some contend that even if an urbanregion is not growing rapidly, urban land prices at thefringe might still be high enough to make only high-density developments cost effective – but the marketmight not support the demand for these developments.As a result, developers take advantage of land parcelsaway from the urban fringe (non-contiguous parcels)and build at lower densities in order to meet the rela-tively low demand for new housing. Eventually, whendemand for new housing is high enough, developerswill purchase the more expensive land at the urbanfringe and build at higher densities. In the interim,however, sprawl exists. What these authors do nottake into account is the possibility of under-priced lin-ear infrastructure – and urban goods and services ingeneral. This under-pricing of private and publicurban goods would facilitate developers taking advan-tage of cheaper parcels of land at distances muchfurther than would be the case if they had to bear thecorrect cost of infrastructure, and if consumers had topay the correct cost of using the automobile to reachperipheral destinations. In addition, because of therelatively cheaper price of land in the outskirts of cit-ies, homebuyers would have a greater incentive to buylarger parcels of land.

Physical flows within urban regions andtheir costsIf municipalities are to advance towards a moreappropriate pricing scheme for urban goods and ser-vices within cities, an important consideration wouldbe the assessment and evaluation of physical flowsgenerated by human activities within urban centers.Cities generate significant waste by-products that areusually not accounted for in any evaluation of physi-cal or financial flows of an urban system. Forinstance, the pollutant emissions from private andpublic transportation services within cities are physi-cal flows that do have financial costs associated withthem. Some of these costs are apparent in health care,where studies have shown relationships between vol-atile organic compound (VOC) concentrations andacute respiratory diseases and cancer, and in damage

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to vegetation and wildlife from sulfur oxide and nitro-gen oxide emissions. However, in most urban systemsthe cost of these physical flows is not accounted forin the price of the car, gasoline, or road use.

The external cost of private and public transpor-tation has been an issue of growing importance, parti-cularly in the latter half of the 20th century. The dropin real energy prices in the mid-1980s – which hasencouraged transportation-intensive activities – andthe increasing concern over the ability of indus-trialized countries to reduce pollutant emissions, arejust two of the variables that have heightened theimportance of evaluating environmental impacts ofcombustion engine vehicles (Andersonet al, 1996;Ewing, 1997; Heil and Wodon, 1997; Tol, 1999; Pin-dyck, 1999).2

A comprehensive understanding of the physicalflows within cities would enable planners or policyanalysts to make decisions that are more reflective ofexisting conditions – enabling greater precision in thepricing of urban commodities by internalizing exter-nalities. Untreated municipal wastewater discharge isperhaps the classic example that illustrates the poten-tial problems of ignoring physical flows generated byurban systems. Since the 19th century, urban regionshave concentrated great efforts at improving humanhealth. Unfortunately, many of the advances came atthe expense of environmental well-being. Because ofthe untreated wastewater discharge, the introductionof piped water and sewer systems to combat diseasepolluted bodies of water, air, and soil. Since the com-plete physical flows of human activities were notaccounted for, the wastewater discharge created seri-ous environmental aberrations but did not impose anyimmediately recognizable costs or losses (Gordon,1990, p 15). In addition, the environmental deterio-ration caused by these sanitation decisions ultimatelylimited the degree to which the quality of publichealth within cities was improved. The costs of thesedecisions, evident in terms of both environmental andsocial harm, became apparent when more comprehen-sive environmental assessments were completed.

Correct pricing initiatives: water provision,waste disposal, and private automobile use

Most municipalities in Canada do not fully recoverwater provision costs, or include the price of wateritself in the municipal water charge. This is true evenin municipalities that consider water a scarceresource. The very idea of charging for the wateritself, in fact, is unfamiliar to many. We need torecognize, however, that while water is never usedup, after its use it is never returned to the environmentin exactly the same form it was received. Also, during

2While real petroleum prices increased substantially between 1973and 1981, they dropped off by the mid-1980 to real prices not muchhigher than during the 1960s – besides the brief price spikes experi-enced in 1990 and during the Gulf War.


the time in which it is diverted to a given human use,it is not available for alternative uses. Municipal watercharges in Canada also rarely cover the full servicecosts of providing water to the consumers. Due to theunder-pricing of water and its provision, there is littleeconomic incentive within urban centers to promoteefficient consumption patterns of this resource. Thisresults in over-consumption of water by both residen-tial and commercial users. In the commercial sector,for instance, 303 l of water is used in the productionof a single soft drinks can, and 683 l of water in theproduction of a single newspaper (Fowler, 1992, p30). Furthermore, the Government of Canada con-tends that “[t]he revenue shortfall resulting from con-sumers paying less than the full cost of water servicescan discourage municipalities from undertakinginvestments in facilities to treat wastewater”, therebyproducing serious environmental and social harm withthe raw discharge (Environment Canada, 1992, p 46).

France and Germany, on the other hand, are notonly recovering the full costs of water provision, buthave also introduced user and effluent charges torecover the external costs of municipal water use. Theextensive user and pollution charges that they haveintroduced maintain the price of providing1000 gallons of water at about $10.00 (City ofToronto, 1990, pp 9–10). This price is significantlyhigher than the average charge in Canada. In fact, thecost of water provision to an average German orFrench consumer is roughly three times higher thanthe charge to a City of Toronto resident (City ofToronto, 1990, pp 9–10). As expected, the non-pric-ing of water, and the under-pricing of its provision,leads to over-use – with the average consumption percapita per day in Canadian municipalities averagingroughly 350 l. In comparison, the average consump-tion per capita per day in French and German citiesis maintained at about 150 l (City of Toronto, 1990,p 10).

In addition to the efficiency considerations, thereare also numerous equity implications of currentbilling practices. This topic, however, leads us into amuch more subtle analysis of charges. Many charges,such as water charges in the City of Toronto, arebased on an average cost-pricing mechanism. Thereare some minor variations – based on such factors asthe number of fixtures in a household – but, in gen-eral, the cost distinction that this produces in theactual charge is minor. In the early 1990s, conver-sions to metered accounts were made available, buton a voluntary basis. In addition, because of a generallack of knowledge of the implications of this pricingmechanism, very few consumers actually convertedto metered accounts. In 1990, out of roughly 286 000households in the City of Toronto, there were onlyabout 25 000 metered accounts. With this flat-ratebilling practice, customers essentially pay a fixedprice regardless of the amount of water they consume.As a result, users have no economic incentive tomonitor their levels of water consumption. Alterna-

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tively, charges that are more capable of reflecting thefull costs of water provision (charges based directlyon consumption) give consumers an incentive not toover-use the service. As indicated by Tate andLacelle, “[t]he principal disadvantage of flat rate pric-ing is that it results in higher water use than volume-based pricing because the price of an additionalamount of water is zero” (Tate and Lacelle, 1992, p6). Water consumption patterns among municipalitieswithin Metro Toronto demonstrate the importance ofpricing according to the levels of consumption. In1990 all municipalities within Metro, except for mostCity of Toronto households and a small percentageof households in Etobicoke, were on meteredaccounts. As expected, the lack of an appropriate usercharge to promote efficiency in the City of Torontoand Etobicoke generated per capita water consump-tion patterns that were substantially higher than thosein the rest of Metro, see Fig. 1. In fact, the waterconsumption levels in the City of Toronto were morethan double the Canadian average. The average con-sumption per capita per day for a City of Torontoresident was at 786 l (City of Toronto, 1990, p 9).

The equity implications of such a billing practiceare seen in its most ridiculous form with subsidiesfrom people that consume less to people that consumemore. As recognized by Bird in the 1970s, “lowerincome consumers subsidize upper income con-sumers” (Bird, 1976, p 120). The pricing mechanismin the City of Toronto maintained these types ofregressive pricing practices, where the water con-sumption patterns of large- or upper-income house-holds – which might have large lawns to sprinkle andmultiple cars to wash – were subsidized by smallerhouseholds and lower-income residents. In the Cityof Toronto in 1990 this subsidy could have been ashigh as $30 million, while more conservative esti-mates place it at roughly $10 million (Vojnovic, 1992,p 15). Thus, if customers were charged in accordancewith consumption, both equity and efficiency wouldhave been promoted. Improvements in economicefficiency would have been realized as informationregarding the true price of water was provided to con-sumers, and those using more water were chargedmore.

With regard to the efficiency implications of waterprovision, there are also higher marginal costs asso-ciated with pumping water to low-density suburbsthan to the inner city. If appropriately evaluated, the“correct marginal-cost pricing of these urban serviceswould result in higher rates being charged in theseareas, rather than the same rates, as is now the usualpractice” (Bird and Slack, 1983, p 91; Bird, 1976).Since marginal-cost pricing is not incorporated intocurrent pricing mechanisms, there are no incentivesfor homebuyers to reconsider their demand for tra-ditional spread subdivision development patterns inthe outskirts. The problem is further compounded bythe fact that developers are not levied an appropriatecharge for the provision of infrastructure in new


Figure 1 Water consumption per capita in former Metropolitan Toronto (1991). Data from Municipality of MetropolitanToronto (1991).

developments. Government bodies usually find thatmarginal cost pricing of hard infrastructure is veryexpensive to undertake, as it would have to be doneon a site-by-site basis. As a result, most governmentslevy a uniform charge across their jurisdiction, whichdoes not reflect the full cost of infrastructure pro-vision, and encourages a supra-optimal demand forthe infrastructure. The under-pricing of infrastructureinvites spread building configurations within subdiv-isions and non-contiguous developments. Developers,and homebuyers who maintain the demand for tra-ditional subdivisions, have no economic incentive torefrain from building houses on large lots or leap-frogging.

Waste disposalCanadian municipalities are also confronted withsimilar resource misallocation problems with munici-

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pal waste disposal. Waste charges in many munici-palities of Canada are inadequate to cover the fullcosts of municipal waste management. In the caseswhere the full costs of waste collection and disposalare recovered, marginal cost pricing – pricing thatwould establish a direct relation between the volumeof waste generated by an individual household andwhat the household is charged for waste disposal – isnot employed. Households, as a result, have very littleeconomic incentive to reduce the amount of wastethey generate. In addition, in cases where munici-palities are not recovering the full costs of garbagecollection and disposal, municipalities may be forcedto dispose of their municipal waste by methods thatmay be considered environmentally hazardous. Theintroduction of marginal cost pricing, on the otherhand, through tools such as user charges, wouldimprove the efficiency of waste management in most


Canadian municipalities. User charges would allowmunicipalities that are not currently recovering thefull costs of garbage collection and disposal to do so.In addition, they would provide economic incentivesto households to reduce the garbage generated, andpromote the recycling and reuse of many goods thatwould normally be considered waste.

The private automobilePerhaps the classic case of under-pricing in NorthAmerican cities is associated with the private auto-mobile. It has been argued that if the social costs ofautomobile use were appropriately evaluated, theprice of the car, or gasoline per litre, would increaseroughly nine-fold. For instance, it has been calculatedthat Los Angeles subsidizes “55% of the workforcedriving to work daily … between $56 to $74 millionannually in free parking alone” (Roseland, 1992, p 4;Fowler, 1992). In fact, the average US householdspends more money on the car than on food, withaverage automobile and related expenditures account-ing for 25% of household income (Roseland, 1992, p107). Similar patterns of automobile use are alsoapparent in Canada. In the 1989–90 fiscal year theOntario subsidy for road construction and mainte-nance alone was over $1 billion (Pollution Probe,1991, p 61). Pollution Probe claims that when the realsocial costs of the private automobile are calculated,the Ontario subsidy is really over $8 billion (PollutionProbe, 1991, p 61).

The Canadian Urban Institute supports similar fig-ures. In 1990 the Institute indicated that if the socialcosts of the private automobile are to be recoveredin Canada, an extra charge of 65 cents per passengerkilometer should be levied on automobile users. If agasoline tax is used to recover this cost, the price ofgasoline would increase to roughly $5.00 per litre(Roseland, 1992, p 80). The supra-optimal use of theprivate automobile resulting from under-pricing iswell illustrated in the GTA, with expenditures on thecar per household equaling roughly $10 000 annuallyin 1990 (Gilbert, 1991, p 28). In 1986, out of 488 900households in the outer suburbs of the GTA, the areawith the lowest urban densities in the Toronto region,only 1% were without an automobile, and 64% of thehouseholds had two or more cars. In the inner sub-urbs, with 434 900 households, only 15% did not owna vehicle, while 40% of the households had two ormore cars (Gilbert, 1991, p 5).

Extreme reliance on the private automobile has notonly encouraged the outward spread of Canadian cit-ies, but also it has increased the levels of associatedresource consumption and environmental degradation.In comparison, the lower dependence on the car inEurope is considered to be a critical variable in facilit-ating more compact urban forms in the post WorldWar II period – where the distances “urban Europeanstravel to work and on daily errands are 50% shorteron average than similar trips in North America”(Brown and Jacobson, 1987, p 19). Therefore, encour-

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aging appropriate pricing of private transportationwould generate an alternative use of availableresources that would affect both consumption patternsand development configurations. For instance, afterthe Federal Government in Ottawa increased its park-ing rates for federal employees, there was “a 23 percent reduction in employees driving to work, a 16per cent increase in transit ridership among federalemployees, and an increase in average vehicle occu-pancy from 1.33 to 1.41 passengers” (Roseland, 1992,p 94).

The benefits that would accrue from the new con-sumption patterns would be realized at a number ofdifferent levels. First, the increase in the price of priv-ate automobile use would encourage a shift to alterna-tive modes of transportation, such as public transit,walking and cycling, thereby increasing levels ofenvironmental preservation. A 1990 study by the Can-adian Urban Transit Association has indicated that“[s]hifting just 5% of the peak period car trips to tran-sit in the GTA [Greater Toronto Area] would resultin savings of more than 150 000 trips and more than1 570 000 vehicle kilometers per working day”(Paehlke, 1991, pp 12–13). Examining the benefits ofreduced emissions alone, 3.6 tonnes of volatileorganic compounds (VOCs), 3.1 tonnes of nitrogenoxides (NOx), and 4226 tonnes of carbon dioxide(CO2) would be eliminated each working day. Theannual impacts of this 5% peak period shift,“assuming 250 working days, … would [result in thereduction of] more than 900 tonnes of VOCs,775 tonnes of NOx, and one million tonnes of CO2”(Paehlke, 1991, pp 12–13).

Second, the shift away from the car, and to alterna-tive modes of transportation, would also encouragemore compact forms of development, in order tomake public transit, walking and cycling more effec-tive and efficient transportation alternatives. Withoutan affordable automobile, post-World War II, Canad-ian suburban designs would no longer be feasible.Suburban developments might take on a form similarto that of the streetcar suburbs, such as Riverside orForest Hills Gardens. Since the residents of these sub-urbs relied on the streetcar, walking and cycling fortransportation, the developments were more compact,with densities roughly four times greater than theaverage current suburb in North America(Rybczynski, 1991, p 72). The added advantages ofthe more compact development patterns would berealized with decreases in energy requirements forheating and cooling of buildings, transportation, andwater and sewage provision within cities.

In the more current Canadian context, the relation-ship between higher densities and the use of alterna-tive modes of transportation has been demonstratedin a recent City of Toronto study. The researchrevealed that approximately 28% of all trips by peopleliving in the Toronto central area, where densities arehighest in the Toronto region, were made by walkingor cycling (Irwin, 1995, p 5). In the inner suburbs,


about 10 to 11% of all trips were made by walkingand cycling, while in the outer suburbs, an area withthe lowest area densities in the region, only 8 to 9%of trips were made by these two transportation modes.

Finally, benefits of promoting alternative modes oftransportation to the private car would also be realizedto households as the money saved on the automobileand related expenditures would be available for other,and perhaps more socially beneficial uses – given thatan efficient and attractive public transit system isavailable. For a lower-income household that does notown property, an increase in income of 25% mightmake the purchase of a dwelling more accessible, awiser investment than a private automobile.

The nature of the built form: an assessmentof alternativesA variety of built forms are available for any givenpopulation depending on the desired community den-sity and pattern of development. For instance, anurban center that is characterized by a relatively highcommunity density, and a compact development pat-tern, will require less land to accommodate the samenumber of people than will a low-density, less-com-pact built form. This relationship was recentlyexplored by the British Columbia Round Table on theEnvironment and the Economy (1994), which exam-ined the total area of land needed in the Province bythe year 2021 to house a projected population of 5.3million people. If the development patterns and areadensities in British Columbia averaged 3.4 people pergross hectare, which is the current density of the Cityof Kelowna, BC, a total of 479 000 hectares of landwould be needed to house the expected population of5.3 million. An additional 240 000 hectares would berequired for “other urban functions”, bringing thetotal area of land devoted to urban use to a figure of719 000 hectares (British Columbia Round Table onthe Environment and the Economy, 1994, p 42).

Alternatively, if the average area densities anddevelopment patterns in British Columbia followedthe development patterns in the Cities of Victoria orVancouver, where current densities average 45 peopleper gross hectare, only 37 000 hectares of land wouldbe required for housing. An additional19 000 hectares would be needed for other urbanfunctions, bringing the total area of land devoted tourban use to 56 000 hectares – a figure less than 10%of the land requirements under the low-density scen-ario (British Columbia Round Table on the Environ-ment and the Economy, 1994, p 42).

Research in Ontario projecting the growth andurbanization trends in the Greater Toronto Area cameto similar conclusions, although the study also illus-trated the monetary cost savings associated withdevelopments characterized by greater levels of inten-sification. TheGreater Toronto Area (GTA) UrbanStructures Concept Studyexamined the amount ofnew land that will be required within the GTA to

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accommodate an expected population of 6 millionpeople by the year 2021 under three different densityassumptions. The figures for the expected additionalurban land requirements for the GTA ranged fromroughly 350 km2 for the Central Model, whichemphasizes intensification in the existing built-upareas, to 900 km2 if the Spread Model is retained, thestatus quo development option emphasizing currentdevelopment patterns (IBI Group, 1990, pp 38–39;Irwin, 1995, p 1).

Besides issues of land consumption and theresulting natural habitat preservation, the IBI studyrevealed that the more compact development alsogenerated capital infrastructure cost savings,operating public works savings, and reductions in theexternality impacts of private automobile use. Forinstance, it has been estimated that adopting the cen-tral model over the current sprawl development pat-tern can save the GTA a total of approximately $10billion over a 25 year period in infrastructure costsalone (Irwin, 1995, p 9). In addition, over the 25 yearperiod, transportation operating cost savings in com-bination with reductions in external costs associatedwith automobile use would amount to about $4 billion(Irwin, 1995, p 10). The estimates of the externalautomobile costs (based on calculations of externalcosts of automobile emissions, publicly borne healthcare, policing costs of automobile accidents, costs ofcongestion, and land dedicated for automobile use)equaled a total of $0.1812 per vehicle kilometer.

Reducing land consumed for direct urban pur-poses – that is, the space actually taken up by build-ings, highways, parking lots, and other man-madestructures – can be seen to provide two kinds ofenvironmental benefit. There is, naturally, a trade-offbetween the two and the relative emphasis on one orthe other will depend on the particular urban region.In the first case a benefit occurs from reducing thesize of the urban perimeter over what it otherwisewould have been. This decreases the encroachmenton rural land, allowing relatively more space to beused for agricultural or for environmental preservesof one kind or another.

The role of planners in this process would be tosuccessfully accommodate a growing population intoan urban perimeter that would be expanding at a scalemuch slower than we have been used to. To this end,intensification would be a useful practice. Intensifi-cation into currently developed areas can take theform of conversions of single-family housing intomulti-family units, new buildings “infilling” openspaces and parking lots, and the redevelopment oflow-density land parcels into higher-density develop-ments.

In the second case, increasing the density of landused for direct urban purposes would also provideplanners an opportunity to integrate urban and naturallandscapes (river valleys, for example) within theoverall urban perimeter. This sort of benefit is perhapsnot as well understood, and thus deserves some


additional explanation. Post-war, low-density, spreadsuburban development patterns in Canada encouragedlarge structures and large lots that simply obliteratedthe natural heritage, while more compact cities areable to preserve important components of the naturalecosystem by encouraging compact development pat-terns that are sited around and between importantnatural habitats.

The preserved natural environment within urbancenters can take on productive functions, such as “toimpound storm water to reduce its impact on thelarger environment; … to create diverse wildlife habi-tats by protecting and creating wetlands, forestland,and natural and manmade corridors; and to see urbanland for its biological usefulness in the renovation ofwaste water” (Gordon, 1990, p 18). Potentially, thisnew role for the natural ecology could reduce the needfor human-made infrastructure, and could alsoincrease the proximity of urban centers to areas offood production. Substantial energy savings would beassociated with both conditions. Current planningpractices in Canada, however, tend to preserve verylittle of the natural environment after developmentand, as a result, communities characterized by urbanspread cannot utilize many of the potential benefitsthat the natural ecology can provide. As noted by theRoyal Commission on the Future of the TorontoWaterfront, “[i]n many land-use plans, natural areasand open spaces are often cynically described asSLOAP: Space Left Over After Planning” (RoyalCommission on the Future of the Toronto Waterfront,1992, p 78).

Housing and linear infrastructuresubsidization and its impact on urban formThe subsidization of the housing service (the single-family homes and the associated infrastructure) arevariables that not only shaped urban development pat-terns, but these are variables that also promoted theresource-intensive consumption practices of modernCanadian cities. From the very first case of publicintervention in the private housing market in Canada,soon after the 1917 munitions explosion in Halifax(Nova Scotia), government involvement has emphas-ized the housing of the Canadian population in single-family homes. This direct subsidization of single-fam-ily housing throughout the 20th century played animportant role in shaping the modern urban footprint.

The 1917 Halifax explosion destroyed the Rich-mond neighborhood, approximately two square kilo-meters, and killed about 2000 people. To replace thedestroyed housing stock, the Canadian governmenthired Thomas Adams, a British planner who, beforecoming to Canada, worked with the Garden CityAssociation. He was involved in the construction ofLetchworth, a suburban community outside London,that was one of the early attempts to create EbenezerHoward’s vision of a community of homes in thegarden. Like the garden suburb initiatives in Britain,

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Adam’s neighborhood in Halifax (the Hydrostone)emphasized single-family homes, curvilinear streets,and greenery.

Since this first Federal government initiative,numerous policies and programs subsidizinghomeownership were implemented to ensure thatCanadians could afford the purchase of a single-fam-ily home. The 1919 Housing Loan program dedicated$25 million of Federal funding to the subsidization of6200 single-family homes. A decade-and-a-half later,the Dominion Housing Act (1935) established a $10million fund to ensure mortgages and reduced interestrates. As with most direct housing subsidization pro-grams that do not discriminate by income levels, themost significant benefactors of the Dominion HousingAct (DHA) were upper-income groups who were cap-able of purchasing a house. As argued by JohnBacher, the Dominion Housing Act had simplystrengthened “the mortgage market for buildinghomes that could be only afforded by the top 20 per-cent of the households in national income” (Bacher,1993, p 64). In 1938, the Dominion Housing Act wasreplaced by the National Housing Act (NHA), thelegislation that currently regulates public involvementin the Canadian housing market, including the subsid-ization of single-family homes.

The history of the NHA, and its amendments, didnot differ all that extensively from prior Canadianfederal housing policies. The programs under theNHA were largely based on assisting Canadians real-ize homeownership through ongoing direct federalmortgage loans and various other ownership grantsand programs. As argued by Albert Rose, “[a]s simpleas this may seem, housing policy in Canada has beenmore evident in the field of mortgage financing ofhomeownership than in any other respect” (Rose,1980, p 5). He goes on to note that under the NHA:

Every effort was made to provide adequate suppliesof mortgage money, to manipulate the interest rate,and to set forth appropriate terms to encourage homeownership. Not only was the mortgage money madeavailable through the National Housing Act at rateslower than those prevailing in the money markets, butdown-payments were successively reduced as loanamounts increased (Rose, 1980, p 35).

As it might be expected, these programs generatedconsiderable inequities, as the various homeown-ership subsidies were, and still are, largely directed atthe income segment that can already afford to buyhousing. The US Congress has indicated that a similarpattern of inequitable and inefficient subsidizationalso exists in the United States. The US federalgovernment subsidizes the private costs of homeown-ership through the federal tax code, which includes“deductions of mortgage loan interest, capital gainstax deferment, and property tax payments” (US Con-gress, 1995, p 200). In 1995, the projected federalsubsidy for homeowners was $83.2 billion. In com-parison, the federal government subsidy to public


housing and rental assistance was only $24.9 billion(US Congress, 1995, p 200). In addition, as theauthors of the report argue, “not only do homeownersreceive more benefits than renters, but high-incomeowners receive more than low- and moderate-incomeowners” (US Congress, 1995, p 200). In 1993, forinstance, 38.9% of homeowner subsidies were distrib-uted among households with annual incomes of morethan $100 000. Therefore, this small upper-incomegrouping, representing only 5% of the US population,received $32.4 billion in subsidies – more federalhousing aid than all the renters in the United States.More specifically to the concerns of subsidizing sub-urban developments, the US Congress indicates that“most of the homeowner subsidy goes to those in thesuburbs, where homeownership rates far exceed thosein the central city, and houses are generally moreexpensive” (US Congress, 1995, p 200).

Subsidizing linear infrastructureThe under-pricing of linear infrastructure in the NorthAmerican context is of particular interest in the studyof urban form (Vojnovic, 1994; Blais, 1996; Ewing,1997). The correct pricing of linear infrastructure willentail a particularly complex policy initiative becauseit involves public goods – goods that will normallybe under-supplied by the private market because oftheir peculiar characteristics of non-excludability andnon-rivalness. It is generally recognized that privatemarket failures can lead to socially sub-optimal sup-plies of public goods and services, and thus publicsector intervention, usually in the form of subsidies,is justified in the provision of these goods. Simply,in certain instances, members of a community willneed public support with the provision of certain ser-vices – including water, sewage and roads. Thus, ifit is shown that the government does not recover thecosts of linear infrastructure provision to the public,the resulting conclusion should not be that public sub-sidies must be removed from the provision of theseservices, but rather that these services should bepriced in consideration of both efficiency and equity.One dilemma is in that the poor might not have thefinancial means to pay for services that might be con-sidered basic and necessary in the current politicalenvironment. As a result of inadequate incomes, cer-tain user groups will require subsidies. For instance,if the lower-income groups do not have the financialmeans to pay for water or sewage provision, do weexempt them from this service, despite the health haz-ards to them and the larger public? The pursuit of asocially optimal allocation of resources thus becomesparticularly important in dealing with the peculiaritiesof public goods.

The above discussion on public goods leads us intoa second problem associated with public sector inter-vention, and the pricing of public goods and services.Within the framework of welfare economics, the opti-mal level of provision of a public good is determinedby the preferences of the citizens within that parti-

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cular jurisdiction for that public good. Hence, verydecisive conclusions can be made with respect to theappropriate charge and the appropriate level ofmunicipal service provision. However, charges forpublic goods and services have generally been basedon simple cost-recovery charges, with no efficiencyor equity considerations. This has in some casesresulted in the inefficiency of public goods and ser-vice provision generated by supply-side forces, a vari-able that is rarely considered.

Generally, the emphasis in assessing pricing tech-niques in promoting economic efficiency has beendirected at demand-side considerations of publicgoods consumption. It is argued that promoting anappropriate charge for municipal services – forinstance, encouraging marginal cost pricing with usercharges – will generate efficient consumption patternsof the service. Since the user will face increasingcosts with every unit of output of the service con-sumed, the consumer will have an economic incentivenot to over-use the service. Simply, the more of thepublic service that the person uses, the higher theassociated costs. Demand for local services could thusbe restricted if higher costs were imposed withincreased levels of consumption. The emphasis ondemand-side considerations of public service con-sumption has tended to dominate discussions ofefficiency largely because many municipal serviceshave no extra monetary costs associated with theirincreased consumption. As a result, economic inef-ficiencies in municipal service consumption are con-sidered to be widespread since people have no econ-omic incentive to monitor their levels of publicservice use. The case of average cost water pricing inthe City of Toronto illustrates the point.

The supply-side influences on public service pro-vision are seldom considered in the traditional dis-cussions of encouraging efficiencies in the use ofmunicipal services. The administrators who supplylocal services, however, inevitably have an importantrole in ensuring the efficient levels of provision andconsumption of these public amenities. There mightbe cases in which political actors and bureaucracieshave interests in ensuring that inefficiencies persistwith the provision of municipal services. For instance,the over-supply of physical services by a politicalofficial might be undertaken as a way of providingevidence of his or her physical accomplishments.Roads, schools and water and sewage mains are con-crete examples of the success of a government cur-rently in office. Alternatively, the theory of self-serv-ing bureaucrats, whose interests are directed towardsexpanding the bureaucracy and guaranteeing jobs andpromotions in their department, is another variablethat must be taken into consideration. Bureaucraticdecisions in determining the supply of roads is a clearexample of not only abuses by the bureaucracy, butalso the importance of the induced-demand phenom-enon in the bureaucratic process. Roads andexpressways are provided in full knowledge that they


will once again be filled to capacity. Nonetheless,with the provision of this additional infrastructuremore road maintenance and greater expenditures willbe required, increasing the department budget, salar-ies, and staff, as well as the importance of the depart-ment among other bureaucratic bodies within the jur-isdiction. Hence, increases in municipal charges,without appropriate supply-side controls, might be amethod for ensuring that more funds are made avail-able to administrators controlling the supply of localservices, thereby allowing the bureaucracy to furtherincrease the provision of the public service and thesize of their department.

The above discussion should demonstrate the needfor a more rational mechanism to determine whenmunicipal services should, and when they should not,be subsidized. Encouraging correct pricing initiativesof municipal services, including linear infrastructure,cannot be based on cost recovery in accounting state-ments alone. Such policy decisions, while currentlypopular in many Canadian provinces, tend to be parti-cularly harmful to lower-income groups. Instead, arational mechanism must be established that canexplicitly consider equity and efficiency implicationsof particular policy initiatives.

ConclusionIn this article, I have argued that by encouraging cor-rect pricing initiatives for urban private and publicgoods and services, new subdivisions would have agreater propensity towards more compact andefficient patterns of development. This progressiontowards greater compactness of new developmentswould be generated by the increased prices that theconsumers would have to pay for the private and pub-lic urban goods and services resulting from the newapproaches in pricing. For example, if homebuyersare asked to bear the full cost of providing hard linearinfrastructure to non-contiguous developments, a newprice would be associated with any bundle of housingservices, which might make consumers reconsider thedemand for post-war, spread development patterns.Simply, the expected price increase would force manyhomebuyers to change their expectations about thenature of housing that they can afford. Therefore, bypricing urban commodities more correctly – advanc-ing towards an optimal allocation of resources –municipalities will not only encourage more efficientand equitable consumption practices, but they willalso generate a more compact and resource efficienturban footprint. The benefits associated with the morecompact urban form, however, would be realized inthe longer term as the new urban footprint evolves.

The main problem with correctly pricing linearinfrastructure, and public services in general, isdetermining when subsidies are, and when they arenot, necessary. The existence of subsidies alone is notadequate evidence to demonstrate that linear infra-structure is under-priced. While revoking grants has

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become a popular urban policy position in many Can-adian provinces, it is an agenda that is particularlyharmful to lower-income groups. Because of inad-equate incomes, certain user groups will require sub-sidies. Instead of simply canceling grants, urban ana-lysts must develop a rational framework to determinewhen subsidies are, and when the are not, necessaryin the provision of linear infrastructure, and otherpublic services.

Acknowledgements

I am very grateful to Professors Carl Amrhein andAlan Waterhouse for their comments on my draftpaper. I would also like to thank Professor AndrewKirby and the anonymous reviewers for their con-structive criticisms of the manuscript. Finally, I owemuch gratitude to the Social Science and HumanitiesResearch Council of Canada for the doctoral fellow-ship that had funded my studies.

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