challenges for these countries as their economies grow will be to manage the growth of the great cities that will

arise.

If cities offer economic advantages that are a form of economies of scale, then why don’t all or most people live in

one giant city? At some point, agglomeration economies must turn into diseconomies. For example, traffic

congestion may reach a point where the gains from being geographically nearby are counterbalanced by how long it
takes to travel. High densities of people, cars, and factories can mean more garbage and air and water pollution.

Facilities like parks or museums may become overcrowded. There may be economies of scale for negative activities

like crime, because high densities of people and businesses, combined with the greater impersonality of cities,

make it easier for illegal activities as well as legal ones. The future of cities, both in the United States and in other
180 7 • Production, Costs, and Industry Structure
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