Sustainability and Public Choice: A Theoretical Essay on Urban Performance Indicators

Liveable, endurable, and governable cities are sustained by a delicate balance of laws and policies that protect the interests of individuals, households, and firms at the same time as meeting the collective consumption needs of existing and future citizens. A general equilibrium model is developed in order to articulate some of the important theoretical features of this problem of urban management. Central to the model is the idea that sustainable policies and actions have themselves to be sustainable and that this is possible only if they reflect the preferences of citizens. Starting from a household utility-maximisation problem the model yields an equilibrium urban public goods matrix, designated the urban management matrix Γ*, which may be viewed as a socially efficient urban management objective function. It contains quantities of environmental goods, social infrastructure, and regulative services that are socially optimal in the sense that any deviation from them will make some citizens worse off. These are used to derive a set of urban system performance indicators that represent a realistic specification of a sustainable city from the current perspective of citizens. The degree of environmental sustainability implicit in the indicators depends on the preferences of existing citizens for prudent collective action. The indicators represent the optimal prescription of sustainable-city policies for present application. If pro-sustainability education and propaganda are successful in changing preferences over time, then a comparative static use of the model charts a socially and politically sustainable path towards longer term environmental sustainability. The essay is a theoretical one intended to explore the nature of collective and individual consumption trade-offs in a sustainable city.