Economics

This page is for discussion of economic aspects of OSE projects.

Scaling of Cities

It is well known in the field of economic geography that multiple sociological measures, such as income, increase per capita with city size approximately 15% with each doubling of population. See, for example, Bettencourt (2010). For an Open Source Village project to be attractive it must overcome the general scaling with size effect of cities. There are two cases to consider:

1. A Village project is set up as a separate location outside the economic boundary of a city. In this case the local efficiencies, such as clustering of housing, reduction of transportation costs, and lower living costs, need to exceed the income difference from a larger city. Bettencourt shows the economically relevant radius in the US is 200km. Places further apart than that do not affect each other on sociological measures. Therefore for determining the income difference to overcome, take the size of the largest city within 200km vs the size of the village project.
2. A Village project is set up within the economic boundary of an existing city. This would either be a distinct location on the scale of a residential subdivision, with people gathered together, or spread out in different locations within the city area, but interacting with each other. By being within the economic boundary of an existing city you presumably get the benefits of city scaling. Thus the village project only has to be marginally more efficient to be attractive.

Economic boundary refers to the area that interacts with itself around a city, such as city center plus suburbs. This is different and generally larger than the legal boundary of a city.

Possible OSE Efficiencies

• Lower cost of living - Although rural living generally has lower incomes than city living, if expenses are lowered more than income, for example by making your own items at lower cost, then that is an attractive solution.
• Modern technology - If the level of technology within a village project is more efficient than average, that is an advantage.
• Clustering - This is the efficiency from physical proximity and shared items within the Village versus normal. For example, in standard suburban living, each person has a set of yard tools. In a village cluster, less common tools can be shared, so lowering the total cost of owning and storing them.
• Overhead - When you buy something in the normal manner there are various overhead costs such as profits to the seller, interest if financed, shipping costs, sales taxes, and income taxes on the money you earned to pay for it. If you make something yourself these overhead costs can be reduced. If the cost to make it yourself is less, or at least not increased as much as the overhead savings, on the whole that is the better choice.