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An Introduction to Urban Governance

The introduction is intended as an introductory statement of urban


governance. It addresses the theoretical and methodological
foundations for urban governance as well as applications of these
foundations to solving real world urban governance problems. The
introduction is therefore divided into three parts: Theories,
Methodologies, and Applications. In the Theories part, we explain
the theoretical foundation for urban governance. In particular, we
depict how cities work in terms of the complexity and economic
approaches to urban development, and how we can management
cities through plans, governance, regulations, and administration.
In the Methodologies part, we first introduce the complexity
approach to explaining how cities work and based on this
introduction, we then introduce analytical methods that can help
city managers to cope with various urban problems, including
decision analysis, policy analysis, and planning analysis. We
consider city modeling as an effective way of not only
understanding and gaining insights into the urban development
process, but also providing a powerful tool to analyze how urban
phenomena emerge. In addition, based on such understanding, a
general discussion of planning support systems is provided as a
basis for further developing possible technologies for city managers
to cope with various urban problems. With the theoretical and
methodological foundations introduced in Parts 1 and 2, in Part 3,
Applications, we demonstrate how the ideas derived from these
foundations can be used to deal with urban issues, spatial or nonspatial. These issues are selected so that they cover the most
important application areas related to urban socio-spatial processes.
Together they provide a coherent set of concrete examples of how
cities should be planned, governed, regulated, and administrated.

Table of Contents
Part 1: Theories
1 Urbanization and Urban governance

2
3
4
5
6
7

Scope of Urban governance and Related Fields


How Cities Work: Property Rights and Complexity
Planning Cities
Governing Cities
Regulating Cities
Administrating Cities

Part 2: Methodologies
8
9
10
11
12
13

Cities and Complexity


Decision Analysis
Policy Analysis
Planning Analysis
City Modeling and Analysis
Planning Support Systems

Part 3: Applications
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34

Transportation
Land Use
Sanitary and Infrastructure
Building and Constructing
City Design and Landscape Architecture
Real Estate and Housing
City Renewal and Regeneration
Ecological Environment
City Disaster Management
Slums and Homelessness
City Finance
Crime
Social Welfare
Education
City Institutions
Governmental Organization and Administration
Information City and Technology
Globalization and City Competitiveness
Global Climate Change and Energy
Comparative Studies
Conclusions

Part 1: Theories
For any discipline to thrive, a sound theoretical foundation is a must.
This part of the introduction provides such a foundation for the
discipline of urban governance. A theory is an explanation of a
particular phenomenon. For example, a theory can be constructed
to depict a particular phenomenon using mathematical models,
verbal arguments, computer simulations, and psychological
experiments. Regardless of its format, it must convey a coherent

set of ideas that would not be observable through our common


sense reasoning. We can observe how the bodies move in the
world, but only through Newtonian mechanics can we explain why
they interact in such a way that we can make sense of these
movements. A theory of explanation can help us to predict what will
happen and take appropriate preventive actions ahead of time. If
we know how the bodies interact through gravity in the world, we
know how to construct buildings and even design aircrafts that can
fly.
Theories in urban governance function as both explanations and
justifications for two sets of phenomena: cities and management.
Explanations for cities beg objective expositions how cities do work,
while those for management target at depicting how decisions are
made regarding urban issues. Justifications imply value judgments
and are subjective in nature. Justifications for cities prescribe
subjectively how cities should work, while those for management
focus on how decisions should be framed and made. Explanations
and justifications for urban governance can be framed as four sets
of theories as shown in Table 1.
Table 1 A Typology of Theories for Urban governance
cities
management
explanations
How do cities work?
How are plans and decisions
made?
justifications
How should cities work?
How should plans and
decisions be made?
Management broadly defined here includes planning, governing,
regulating, and administrating cities. Planning is narrowed defined
as making multiple, linked decisions in face of uncertainties;
governance means making and taking collective decisions and
actions; regulations delineate rights in making decisions; and
administration focuses on making daily decisions, routine or
irregular, in organizational setting. The four modes of actions, that
is, plans, governance, regulations, and administration, in urban
governance constitute the activities carried out by city managers in
dealing with physical and non-physical issues in cities. A useful,
effective set of theories of urban governance must cover the four
research questions as depicted in Table 1. More specifically, they
should provide a thorough understanding of how cities do and
should work as well as how city managers do and should make
decisions and take actions accordingly through plans, governance,
regulations, and administration.
1. Urbanization and Urban governance
How do cities come about and how they function once exist? There
is no definite answer yet, but we are just beginning to understand

and answer the long-lasting question. Evidence shows that large


metropolitans tend to get larger, and more and more people tend to
reside in cities rather than rural areas worldwide. The question of
the emergence of cities is equivalent to the question of how cities
grow. Increasing returns are the key factor. Put simply, increasing
returns argue that the greater the number of persons adopting a
particular technology, the more advantage for the newcomers to
use that technology. If we replace the technology with location, we
can say that the more persons residing in a particular location, the
more advantage for the newcomers to reside in that location. In
other words, with an increasing incoming population moving in, a
city becomes more attractive due to improvement of services in
public facilities and job opportunities. This phenomenon
immediately leads to the question of whether there is an optimal
size for cities. This question remains yet fully unanswered.
In complex systems, which cities are no doubt an example, sizes
matter, as manifested by the axiom of More is different. Living in
large cities is different from living in small ones, simply because
cities are composed of interacting agents and the sizes of the
amounts of agents and the intensities of the interactions between
them give rise to qualitative changes in the physical and nonphysical settings in cities. Large cities, such as Beijing and
Shanghai, provide more job opportunities and public facilities, such
as transit systems, are more accessible than smaller cities, such as
Hangzhou. However, large cities cause more severe urban ills, such
as air and water pollution and traffic congestion. Whether a
particular size of cities is desirable depends, therefore, on pros and
cons of living there, that is, the tradeoffs between gains and losses
in living cities with different sizes. Because these gains and losses
are difficult to measure precisely, the optimal size of cities is difficult
to decide.
What is peculiar about city sizes is that there is regularity. Not only
are large cities fewer than smaller ones, but also that if we take the
logarithmic scales of the ranks and sizes of cities and plot these
cities in a plane, they would show as a straight line. This is called
the well-known rank-size rule. The rank-size rule of cities is robust
in time and space. It exists in cities with histories of thousands of
years and persists in many countries.
Cities are complex systems that are difficult to tame, but this
difficulty enhances the usefulness of urban governance in face of
complexity, rather than undermining it. The crux is that only when
we have found the deep regularities of how cities function by
theorizing, such as the rank-size rule, can we start to think about
how to make rational choice in complex systems, such as cities, in
order to survive, even better, to thrive. This introduction is targeted

at such theorizing practice in hope of dealing with real urban issues


based on a sound theoretical basis.
2. Scope of Urban governance and Related Fields
Urban governance is an interdisciplinary field and concerned with
understanding how urban phenomena come about and what we can
do about them. These phenomena can be roughly divided into
physical and non-physical components. The physical component is
something that can be visually perceived with a focus on urban
morphology. Traditionally, it includes, but is not limited to,
land/urban development, real estate investment, infrastructure
construction, and ecological systems. As to the non-physical
component, it has to do with structural constraints within which
people behave, including, but not limited to, economic structure,
sociological structure, political structure, and regulatory structure.
The physical and non-physical components interact through people,
or more technically agents, exchanging information and taking
actions, so that the city can be viewed as a whole. Urban
governance is concerned with both the physical and non-physical
phenomena and seeks appropriate ways to deal with issues that
emerge from the workings of cities.
Four modes of taking actions are considered: regulations, plans,
governance, and administration, with different focuses. Regulations
focus on rights; plans on decisions in relation to interdependence,
irreversibility, indivisibility, and imperfect foresight, and governance
on collective actions. More specifically, regulations deal with
identification of rights within which one is allowed to take actions.
Issues such as evolution, origin, and delineation of rights are
considered. Plans as manifested as policies, visions, strategies,
designs, and agendas are made to craft decision making in the face
of interdependent, irreversible, and indivisible decisions with
imperfect foresight. The urban development process is
characterized by the four Is, and thus plans are effective in
coordinating decisions under such circumstances. Governance is
concerned with collective actions, both formal and informal. Formal
collective actions include actions taken by local governments and
informal ones those taken by citizens through participation.
Administration focuses on making daily decisions, routine or
contingent, in organizational settings. Urban governance focuses on
both physical and non-physical components of cities, and therefore,
all four modes of actions, i. e., regulations, plans, governance, and
administration are important in order to improve human settlement.
Urban governance is identified as a scientific pursuit to explore in
depth and completeness of how to improve cities by addressing four
fundamental research questions scientifically, or four Hs: 1) How do
cities work? 2) How should cities work? 3) How are plans and

decisions made? and 4) How should plans and decisions be made?


Together, the four research questions lead to the ultimate question
of how to make rational choice in complex systems, including cities.
Two disciplines are closely related to urban governance: urban
planning and public administration. The former focuses on the
physical aspects of cities, whereas the latter on the non-physical
aspects. Urban governance should deal with both the physical and
non-physical aspects of cities through scientific approaches.
3. How Cities Work: Property Rights and Complexity
Cities function in a complex way with numerous actors interacting in
and evolving with physical and non-physical settings. There is no
satisfactory theory yet to explain all aspects of urban activities, but
the property rights approach together with complexity theory
provides a promising perspective to understand how cities work.
The physical settings of cities are the outcome of interacting land
development decisions, whereas the non-physical, or institutional,
settings, are the outcome of collective actions on regulations, formal
and informal. The physical and institutional settings interact with
each other and agents behave in these constraints to maximize
property rights. Property rights are costly to delineate and the
physical and institutional settings can be perceived as such
delineation with some property rights left in the public domain.
Economic agents are motivated to acquire these property rights left
in the public domain. For example, why do cities grow along transit
lines? A property rights approach would argue that transit
development creates additional property rights of accessibility and
in adjacent land, developers construct buildings exactly to acquire
these property rights left in the public domain. In essence, the
physical forms of cities reflect to some extent the spatial distribution
of property rights.
Complexity theory deals with complex systems that are far from
equilibrium. Cities are complex systems and, because of
interdependence, irreversibility, indivisibility, and imperfect
foresight, they are far from equilibrium as traditionally perceived by
urban economists. To understand how cities work, the traditional
economic theory focusing on equilibrium analysis is insufficient, a
new way of looking at cities is needed that can cope with both
phenomena in the equilibrium and far from equilibrium states. The
main question complexity theory intends to address is: Whether
complex systems with seemingly chaotic processes behave in a
predetermined, regular ways. Many evidences to this date show
that cities do follow some principles to function, such as the ranksize rule depicted earlier. The implication is that a general covering
law of urban development might not be possible, what we need
might be a set of theories explaining different aspects of the
workings of cities in order to make appropriate decisions to guide

urban development.
A third theme of the introduction in developing the theoretical
foundation for urban governance is related to rationality. In
particular, we argue for a reconsideration of the meanings of
rationality and propose a new way of defining it: framed rationality.
Framed rationality does not refute the traditional standard of
rationality of maximization of subjective expected utility. It simply
recognizes the fact that the utility maximization principle can be
valid only in particular frames. With the conceptions of property
rights, complexity, and framed rationality, we argue that cities work
by agents interacting with each other to maximize their utilities in
particular frames, constrained by physical and institutional settings,
in order to acquire property rights left in the public domain.
4. Planning Cities
Urban planning has a long history at least for one hundred years.
Though the scope of planning education and research becomes
larger, the emphasis on physical design of cities remains as a
central topic in the discipline. Urban planning can mean many
things, from site planning to globalization, and the term is being
used with many connotations. Urban planning defined here is
simply making plans in order to influence or even guide urban
development. Plans are defined narrowly here as multiple, linked
decisions. Evidence shows that when faced with uncertainties, it is
to the decision makers benefits to consider more than one decision
in relation to others, rather than make these decisions
independently, as argued by the strategy of divide and conquer.
There are two fundamental reasons of why cities need plans. On the
one hand, making plans is particularly useful when the system
under consideration is complex, rather than simple. Complexity
means that the elements in the system are connected with each
other in a clustered, rather than random, way. Cities are complex
systems; therefore, making plans is useful in dealing with urban
issues. On the other hand, as argued by Hopkins (2001) depicted
earlier in this introduction, plans are most effective when decisions
are interdependent, irreversible, indivisible, and with imperfect
foresight.
Unlike governance and regulations that focus on actions and rights,
plans provide information only. Once publicized, they show the
intentions of the planner as to when and where to take what actions.
Plans can be formal documents and informal ideas residing in the
decision makers head. Owners of plans share the contents
strategically. In cities, many actors make plans, including
developers, public officials, voluntary groups, and local
governments. Plans for urban planning can be conceived as public,

but they could yield benefits to local governments if these plans are
secret, as exemplified in most cities in China. The traditional view
of a single plan for the development of the city under consideration
should be replaced by a web of plans that interact with each other
because evidence shows that the latter conception about plans is
closer to reality. The physical setting of cities and the web of plans
for urban development interact with each other, again in a complex
way.
Urban planning should be perceived in a broader context for city
managers. Not only is planning concerned with both physical and
institutional settings in cities, planning should also be explained and
prescribed in relation to governance and regulations. We must
make clear the distinction between plans, governance, and
regulations and understand how they complement each other and
make cities a better place to live. For example, we could plan for
collective actions and regulations, and we could also regulate how
to plans. Plans can be made both external and internal to
organizational settings, so administrative behavior is also closely
related to planning. In short, city managers must learn when to plan
for urban development and socio-spatial processes in order to take
appropriate actions accordingly, recognizing that plans are only one
limited way of improving human settlement.
5. Governing Cities
As argued earlier, agents in cities are motivated to acquire the
property rights left in the public domain. In particular, most of these
property rights are collective goods, or common pool resources.
Collective choices and actions must be made and taken regarding
how to make use of them, the essence of city governance. City
governance thus begs mechanism design through which collective
choices can be made regarding collective goods provisions and
common pool resources allocation. On the one hand, collective
goods provision requires commitment from the participating parties.
This can best be demonstrated by a two-person prisoners dilemma.
Each of the two players can either cooperate or defect without
knowing which strategy the other player would adopt. When one
player cooperates and the other defects, the former will lose a
significant amount of payoff, while the latter will gain. Both players
are motivated to defect, and the Nash equilibrium of the game is for
both players to defect. However, if both players cooperate, they
would be better off than if both of them defect, thus a dilemma.
One way to make sure that both would cooperate is through
commitment. Collective goods provision is like the prisoners
dilemma game in that each participant is likely to defect, that is,
adopt the free-riding strategy without contributing to the provision,
and thus the amount of collective goods is usually insufficient if no
coercive actions are taken.

On the other hand, common pool resources allocation requires an


appropriate mechanism through which these resources are
effectively and efficiently allocated to the affected actors. There are
traditionally three modes of allocation of such resources:
governments, contracts, and markets. Common pool resources
could be allocated by local governments in that local governments
acquire all such resources and allocate them to the actors to
enhance efficient us of such resources. This mode of allocation
causes high administrative costs of managing common pool
resources. Some argue that common pool resources should be
allocated through market mechanisms, but this mode of allocation
would incur high transaction costs. Alternatively, common pool
resources could be allocated through contracts that are designed
collectively by the affected actors. This mode is said to be most
desirable because it would have merits of both the allocation modes
by governments and markets.
A final issue concerning city governance is related to social choice.
The well-known impossibility theorem originally proposed by Arrow
(1965) renders any mechanism of social choice as violating
democratic principles, but under some designs, such as a two-party
system of representative government, indirect voting through
legislators would yield the outcomes of social choices consistent
with those derived from direct voting from the actors. City
managers must understand alternative ways of making decisions
and taking actions collectively regarding provision of collective
goods and allocation common pool resources, recognizing however
that we live in an imperfect world where no mechanism of social
choice fulfill the principle of democracy.
6. Regulating Cities
Regulations identify rights which confine the range of choices the
actors in cities can make. There are two fundamental reasons for
need of regulations. On the one hand, setting regulations
circumscribes individual actors freedom to enhance collective
efficiency. If the gain of collective benefits derived from regulations
outperform the loss of individual actors freedom of choosing,
people are motivated to regulate themselves. On the other hand,
setting regulations reduce transaction costs in market. Regulations
delineate property rights, albeit incompletely, so that transaction
cost due to incomplete delineation of rights during any exchange
can be reduced. Zoning is a land use regulation by identifying land
use rights to particular land, and it reduces transaction cost of
information gathering in land market if the developer knows which
use is designated in a parcel of land under consideration.
Regulations are a formal type of institutions of enforceable nature;

therefore, regulations constitute partially the institutional settings of


cities, along with the physical ones. Like informal institutions, such
as cultural norms, regulations evolve with cities, meaning that they
are not static, but change over time as cities grow. Due to the
costly delineation of property rights, regulations can never clearly
specify the range of permissible rights and need be administrated.
Due to the same reason, once set, regulations usually render some
property rights left in the public domain for the actors to acquire.
Enacting building code is a case in point. Though building code
specifies the standard of design and structure for housing and office
constructions, there is always leeway in which the contractor could
gain by lowering the construction cost.
Regulations are different from plans in that they are enforceable and
directly affect the actors behaviors, while plans change these
behaviors by providing information. Therefore, in some sense,
regulations are irreversible, and plans are not. Both regulations and
plans face interdependence, indivisibility, and imperfect foresight.
Effective regulations lead to desired outcome, but this is difficult
because actions (setting regulations) usually lead to uncertain
outcomes due to imperfect foresight. Therefore, the technique of
designing systems of regulations requires prediction of regulated
behaviors, which are usually strategic in response to selected
regulations and can be analyzed through game theory.
City managers must appreciate the usefulness of regulations in
shaping how cities work in a broad context in relation to plans and
governance. In particular, regulations, plans, and governance
interact with each other, shaping and being shaped by the physical
and institutional settings within cities. On the one hand, plans and
governance need enforceable regulations to achieve desired
outcomes. Regulations as actions are thought through and taken
collectively by plans and governance. Together, they form the basis
of the managerial skills for city managers to deal with complex
urban issues.
7. Administrating Cities
Plans, governance, and regulations usually take place in
organizational settings, which are complex systems with much
smaller sizes than cities. An organization can be perceived as four
independent streams of elements interact chaotically with each
other within pre-specified constraints: problems, solutions, decision
makers, and decision situations. Solutions may exist before
problems emerge. Decision makers take part in and leave particular
decision situations. Decisions may be made with no problems to
bear on. In some extent, plans, governance, and regulations are
decisions related to urban development and made in such chaotic,
organizational settings. Organizational administration is concerned

with how to make such daily decisions appropriately when faced


with uncertainty and complexity.
The traditional view that organizations optimize and administrative
behavior is in order is being challenged. The fact that local
governments do not provide optimized services, rather they opt for
votes, is not new to us. Public officials do not pursue public
interests; rather they seek private or personal interests. In the
urban governance context, a city manager acts as the principal in
representation of the interests of his constituencies, or agents. This
principal-agent relationship creates difficulties in urban governance
administration similar to the representative government acts in
representation of his constituencies. Unlike firms where the owners
are the residual claimers, no one owns local governments as the
residual claimers. As a result, the administrative process in local
governments is more like what garbage can model depicts than as
traditional view of optimizing firms.
In the stream of opportunities, the administrative behavior should
be different from that as traditionally perceived. In particular, the
city manger as an administrator should look for opportunities
actively to make something happen. For example, solutions may be
made available long before problems and decision situations, or
opportunities, come about. In such a chaotic, uncertain
administrative process, making plans would yield benefits, if
decision situations and their outcomes are interdependent,
irreversible, indivisible, and with imperfect foresight.
Organizations complement with plans in that both coordinate
decisions to reduce uncertainties. Like regulations, organizations
are structured to streamline decisions, but they are more apt to
changes than regulations. In order to make effective decisions in
relation to plans, governance, and regulations, city managers must
understand how organizations work and constantly seek
opportunities where solutions find themselves. Innovative
techniques for making multiple, linked decisions, that is, making
plans in the organizational context are also useful. Organizations
are the microcosm of cities, both being complex systems, but with
much different sizes. Sizes of complex systems matter, so do
managerial skills for these systems. Skills for managing cities are
thus different from those for administration. For large, complex
systems, city managers need to seek tipping points in order to make
changes.
Part 2 Methodologies
Methodologies are designs of methods to analyze and deal with
particular problems. They are different from theories in that
theories explain phenomena, while methodologies target at solving
problems. Theories provide the underlying understanding of

particular phenomena based on which methods of dealing with


these phenomena are derived.
The recurring theme of the introduction is that cities are complex
systems and complexity theory provides a useful framework for
explaining how cities work. Section 8 discusses in depth the
relationship between cities and complexity as a starting point for the
ensuing discussions of the methodologies in urban governance. We
do not aim at providing a general, covering law of how urban issues
can be dealt with, because such law would be too abstract to be
useful in solving real world problems. Alternatively, in Part 2 we
address a set of analytic tools that are commonly used and related
to our theme that cities are complex systems. They include, but are
not limited to, decision analysis, policy analysis, planning analysis,
city modeling and analysis, and planning support system.
Decision analysis aims at making single, independent decisions
usually involves one decision maker. It is the simplest analytic
framework of choice theory that pervades many disciplines,
including, but not limited to, economics and operations research.
The merit of decision analysis is that it makes crystal clear how a
rational decision maker should think through preferences and
uncertainties in order to choose the best alternative to maximize his
or her utility. The logic is water tight, but the application of such
logic is difficult in reality where complexity and uncertainty reign,
rather than simplicity. Regardless, it is worth introducing decision
analysis simply because it is a solid foundation from which other
methodologies are built.
Policy analysis is similar to decision analysis in that it also argues for
rational choice, but in a broader context. Policy analysis tends to be
messier and qualitative oriented; therefore it has a wider range of
applications and commonly used in the field of public
administration. According our definition of plans, planning analysis
focuses on making multiple, linked decisions that involve multiple
actors. It is much more demanding than decision analysis in terms
of cognitive and computational efforts. Decision analysis, policy
analysis, and planning analysis together provide the structural
framework for the problem solving methodologies of urban
governance. City modeling and analysis links the ontology of urban
development to observed phenomena and through the structural
framework, provides a systematic way of analyzing and dealing with
urban issues. Planning support system puts together the structural
framework as well as city modeling and analysis onto a
computational platform, as a set of automated planning tools based
on which city managers can understand and cope with various
urban issues. The crux of these methodologies is logic, without
which city managers would be lost in the sea of methods.
8. Cities and Complexity

Cities are composed of physical and institutional settings in which


numerous actors interact through information exchange to acquire
property rights, mostly left in the public domain. Cities are thus
complex systems characterized at least by emergence and selforganization. Emergence means two things. On the one hand,
simple rules based on which the actors interact create complex
outcomes. On the other hand, these complex outcomes tend to selforganize themselves from which simple rules emerge. Regardless,
collectivity emerges from individuality and the former cannot be
deduced directly and is qualitatively different from the latter. The
behavioral rules for land development are simple in that developers
maximize their utilities by acquiring property rights associated with
the land under consideration and mostly left in the public domain.
However, the interaction among developers shapes complex urban
settings, physical and institutional, that defy any existing measures
to depict precisely.
We are just beginning to look at cities in a new way of complexity.
Different from the traditional top-down approach, the complexity
approach looks at cities from the bottom up. It starts with the
individual actors by imposing simple, interactive rules for these
actors, and then looks at what collective patterns would emerge
from such interaction. This new way of looking at cities has
significant impact on how we should plan, govern, and regulate, that
is, manage cities. The traditional, top-down approach to cities
assumes an average actor ignoring differences among the actors
and perceives the rules governing urban development as given. The
complexity, bottom-up approach to cities takes into account the
idiosyncratic characters of the actors and considers the rules on
which urban development relies as emergent. The traditional, top
down approach prompted an idealized way of managing cities by
seeking a covering-law-like comprehensive rationality to make plans
for urban development. Like decision analysis, this perfect
rationality is beautiful in theory, but when put into use, it
encounters difficulties. The complexity, bottom-up approach implies
a less ambitious way of managing cities by looking for a coherent
set of theories and methods in explaining cities and dealing with
urban issues. Instead of looking for a theory of everything, the
complexity, bottom-up approach seeks theories of things.
At crossroad of the paradigm shift in sciences in general, and city
theories in particular, city managers must keep looking for new
ways of looking at cities, while recognizing the merits of the
traditional approach, such as city economics. New theories prompt
new real world applications. We need innovative, effective ways of
planning, governing, and regulating cities that are derived from new
discoveries of how cities work. Network science, cellular automata,
agent-based modeling, and fractal geometry, to name just a few,

are such new discoveries of how cities work. We have a long way to
go from these new theories to applications, but they shed useful
lights into how we can deal with complexity.
9. Decision Analysis
Decision analysis is an interdisciplinary field that focuses on how to
make appropriate decisions in face of uncertainties, drawing on
work in, among others, economics, operations research, system
analysis, and psychology. Decision analysis has become a
specialized field with its own institutions and journals. It aims at
helping decision makers to frame decision situations and select the
best actions according to solid, rational procedures. Traditionally,
there are three camps of decision theories: descriptive, normative,
and prescriptive. Descriptive decision theories purport to explain
how people actually do make decisions. Normative decision
theories aim at constructing the theoretical foundation for depicting
how people should make decisions. Prescriptive theories intend to
help people to make decisions conforming to normative the
normative standard of rationality. The standard of rationality that
makes the distinction between descriptive, normative, and
prescriptive decision theories is the subjective expected utility (SEU)
model. The SEU model stipulates that the rational decision maker
choose the best alternative in order to maximize his or her expected
utility. Though the SEU model provides a sound theoretical basis for
normative decision theories, it has been invalidated by numerous
psychological experiments, and thus others suggest variants of the
SEU model in describing how people do make decision, including
prospect theory and bounded rationality.
We argue that the traditional distinction between descriptive,
normative, and prescriptive decision theories enhances rather than
dispels the confusion about our understanding of rationality. In this
introduction, we propose an alternative view of rationality, called
framed rationality. Rather than refuting the SEU model, we argue
that that model is universally valid, but only subject to particular
frames. Put differently, people in making decisions are rational
depending on how the problems are framed. Therefore, the
distinction between descriptive and normative perspectives of
explaining behaviors is unnecessary because they interpret
observed behaviors from different frames. We cannot conclude that
if the decision makers choice violates the normative standard, he or
she is not rational. He or she may still be rational in his or her
frames of understanding the problems faced and act accordingly.
Experiments show that framed rationality is valid in that drawing on
the elicitation questions used in prospect theory, preference
reversals can be explained by the SEU model.
Decision making is a central task for city managers, so they must

understand the underlying logic of how people make decisions, not


only to improve their decision making skills but also to understand
the decision situations in which people interact. Decision analysis is
a useful theoretical framework to make sense of rational choice
behavior, but when faced with complexity, decision analysis has
limitations. Rationality is a long-lasting question not yet fully
answered, but framed rationality as proposed in the introduction
sheds new light into our understanding of rationality and effective
decision making tools can be derived from such understanding.
10. Policy Analysis
Policy analysis can be viewed as applications of decision analysis to
make real world public policies. If decision analysis is the hard,
deductive logic of making such policies, then policy analysis is the
soft, empirical process of making these policies. Policy analysis is
therefore messier and more qualitative oriented than decision
analysis. Policy analysis is an art in that the policy maker needs to
make clear decision situations and frame the policies in an
appropriate way so that useful decision models can be applied to
the situations under consideration.
Policy analysis draws on a wide range of decision tools to deal with
real world situations, including, among others, linearly
programming, cost-benefit analysis, multi-attribute decision making,
and decision analysis. Different from planning analysis that focuses
on multiple, linked decisions, policy analysis emphasizes single
decisions, but sometimes in a very broad context. Different from
decision analysis that can be applied to personal decisions, policy
analysis aims at making policies in the public sector that affect a
wide range of actors. Thus the issues faced by the policy maker are
usually much more complex than the decision maker who intends to
apply decision analysis to solve the problems he or she is
concerned. Policies must take into account broader issues related to
the society, such as social welfare, justice, equity, and esthetics.
Policy analysis is concerned with a wide range of issues related to
cities, regions, states, and international affairs, from the public
sector perspective. It is one of the core areas in public
administration, a field that pursues excellence in managing public
affairs. Policy analysis applied in urban governance can fill the gap
between decision analysis dealing with simple problems and
planning analysis coping with complex problems in that policy
analysis applies the logic of both to a wide range of real world urban
issues.
Policies, if narrowly defined as rules to follow by actions, can serve
as one of five mechanisms through which plans function, that is,
agendas, visions, policies, designs, and strategies. In other words,

policies are decision processes through which plans influence urban


development. Though understanding the logic of making decisions
and plans is a must for effective city managers, how to seek
opportunities to apply the logic to deal with real world urban issues
is another challenge that city managers must face. Bargaining and
negotiation of policies are quite common in the public arena.
City managers should know how to make effective urban policies,
not just by the logic of decision analysis and planning analysis, but
gain insight into how the three methodologies work together to
make rational choices in complex systems of interest. Decision
analysis focuses on making single decisions, planning analysis on
making multiple, linked decisions, and policy analysis on applying
the underlying logic of decisions and plans to a seemingly chaotic,
complex urban processes.
11. Planning Analysis
Making plans, or planning, is precisely defined in this introduction as
making multiple, linked decisions. Different from decision analysis
that focuses on making single, independent decisions, planning
analysis looks into ways of making more than one decisions that are
linked to each other. The presumption is that making multiple,
linked decisions yields more benefit than making these decisions
independently. Though this presumption has not been proved
deductively and empirically, numerical examples show that the
presumption works. For example, in land development, considering
both housing and infrastructure decisions at the same time yields
higher net benefit to the developer; in the inventory approach to
urban growth boundaries, making linked expansion decisions in time
as manifested by the event-driven system gives rise to lower total
cost than making these decisions independent in time as the timedriven system. It is highly plausible that making multiple, linked
decisions in time and space would yield higher payoffs than making
these decisions independently. In addition, city managers are faced
with a complexity of urban development. The traditional choice
theory emphasizing on making single decisions is insufficient in
dealing with such complexity. What is needed is a way of exploring
the relationship between multiple decisions with multiple actors,
problems, solutions, and decision situations.
One approach to making multiple, linked decisions in face of
uncertainty is Decision Network. Decision Network is derived from
garbage can model, the strategic choice approach, and decision tree
by focuses on contexts, relationship, and sequence of decisions.
There are four elements in a decision network: problems, solutions,
decision makers, and decision situations. Problems, solutions, and
decision makers are associated with decision situations given
certain structural constraints. For example, city managers, urban

planners, and the mayor have different authorities in attending


which decision situations to make decisions. Expansions of urban
growth boundaries and transit systems as problems are discussed in
different decision situations. The structural constraints imply the
relationship between the elements in the decision network.
Problems give rise to negative effects, whereas solutions and
decision makers positive effects. Given the decision network of
depicting the context, relationship, and sequence of decisions, and
the measurement of the negative and positive effects, Decision
Network requires the city manager to find an optimal solution to the
network problem in order to maximize the overall positive effects.
City managers must learn to make multiple, linked decisions in face
of complexity and uncertainty. The traditional choice theory of
making single, independent decisions based on which decision
analysis and policy analysis are developed is insufficient. Making
multiple, linked decisions viewed as a design problem of
determining which problem, solution, or decision maker should be
related to which decision situation is insufficient in dealing with
complexity. Decision Network should be developed in such a way
that it can deal with complexity as strategies.
12. Urban Modeling and Analysis
Modeling is a way of understanding the ontology of phenomena
under consideration. Without modeling, we are unable to represent
and communicate ideas about the phenomena of interest; thus
models themselves are languages for communication. City
modeling has a long history and can be traced as early as 1960s.
Models about cities are constructs of explaining how cities work,
whether through mathematics, graphics, computer simulations, or
structured experiments. Models about cities are useful if they yield
insights into what actions we should take to prevent something from
happening. If we anticipate population growth at particular
locations in particular time, we should build sufficient infrastructure
to serve that population before they come about. City modeling
thus is related not only to explaining but also to forecasting.
The approach to city modeling evolves from graphics, through
mathematics, to computer experiments. Graphic city models, as
manifested in urban design, are iconic models that represent how
cities actually look like into the future by graphics. Mathematical
city models, as manifested in urban economics, mainly follow the
economic approach to market systems by constructing
mathematical equations to depict the workings of cities through, for
example, land rents and transportation costs. Computer
experiments, as manifested in complexity theory, look deep inside
cities for how individual actors behave and interact, and construct
computer simulations to explore into policy implications in order for

city managers to take appropriate actions ahead of time.


City models are useful if they can represent the essence of how
cities work. All city models suffer from simplicity because no models
can represent completely how cities work. City modeling to some
extent is like story-telling. Good city models should cover the
essential elements of cities and depict their relationship at least in a
realistic way. With the advance of the computing technology, city
modeling now can be run on a computer with the city manager
playing god of the city system, manipulating the parameters of the
system, and observing what would happen.
Numerous computer simulations and experiments now have been
conducted to emulate how cities work. Evidence has shown that
underlying the seemingly chaotic process of urban development lies
the deep, collective regularity of city structures, physical or
institutional. We are just beginning to uncover these deep
regularities and seek their implications regarding how cities should
be managed. City managers must be acquainted with various
modeling techniques, be they graphic, mathematical, or
computational, and make use of these models in urban governance
practice. Without city modeling, we might lose sight of what
appropriate actions to take by delving too deep into idiosyncratic
happenings. Constructing useful city models may help us to not
only understand how the world works, but also how we should
respond to it.
13. Planning Support Systems
Planning support system is an idealized computer system for
helping city managers to make plans for urban development and
take appropriate actions. No such system exists for daily use in real
cities, but the idea of planning support system has been developed
for at least 25 years. In essence, a planning support system is to
incorporate the methodologies for urban governance we introduced
so far onto a computer platform. Simply put, it includes at least a
database system, a city modeling system, and a planning tools
system. The database system includes the most updated data
about the city under consideration, including, but not limited to,
population, land use, transportation, housing, real estate, and
environment. The data can be physically scattered among and
managed by various government units, but integrated through the
internet, such as a data warehouse system. The database system
itself provides the most recent data about the city in various
conditions in order for the city manager to monitor urban affairs and
take appropriate daily actions. In particular, the database system
should include relevant plans that are created by various entities, be
they transportation, land use, infrastructure, and housing. The idea
is that using these plans the city manager would realize the

implication of actions in relation to these plans.


The city modeling system captures the urban process of the city of
interest in order to answer the what-if type of questions. For
example, what effects would a construction of new highway be on
local land use patterns? To answer this question, we need to model
the urban development process using the techniques depicted in
the previous section, change the spatial, socio-economic
configurations of the city system caused by the construction of
highway, and see what happens. The city modeling can be done
through agent-based modeling in that the spatial interaction of
developers, the local government, landowners, households, and
firms is taken into account explicitly. The planning tools system
provides a set of tools derived from decision analysis, policy
analysis, and planning analysis as to what actions to take, given the
answers to the what-if type of questions. If the highway
construction would result in deteriorated downtown development,
should the city manager propose alternative routes and
interchanges of the highway, or should there be a new city center in
place of the old downtown? Regardless, the database, city
modeling, and planning tools systems should be closely coupled in a
planning support system so that the output from one system may
serve as the input of another.
City managers must acquaint themselves with the cutting-edge of
computation technology in order to manage cities in a timely
fashion. Though the idea of planning support system has not be
fully explored in practice, with the increasing need of accurate,
timely decisions, the system provides a promising platform where
the methodologies depicted here can be integrated efficiently. In
particular, with the advance of the internet technology, public
participation would be made easier through a planning support
system.
Part 3: Applications
This part of applications provides a set of application areas based on
the theories and methodologies depicted in Part 1 and Part 2. Each
application area is introduced by the general considerations of
managing the subsystem in relation to urban governance, with
conclusions at the end.
14. Transportation
This section introduces general considerations of managing city
transportation.
15. Land Use
This section introduces general considerations of managing city land
use.

16. Sanitary and Infrastructure


This section introduces general considerations of managing city
sanitary and infrastructure systems.
17. Building and Constructing
This section introduces general considerations of managing city
building and constructing projects.
18. Urban Design and Landscape Architecture
This section introduces general design principles for city design and
landscape architecture in urban governance.
19. Real Estate and Housing
This section introduces general principles for making real estate
investment and housing policies in urban governance.
20. Urban Renewal and Regeneration
This section introduces general considerations of managing city
renewal and regeneration in urban governance.
21. Ecological Environment
This section introduces general principles of ecological and
environmental planning in urban governance.
22. City Disaster Management
This section introduces general principles of managing city
disastrous events in urban governance.
23. Slums and Homelessness
This section focuses on slums and homelessness to eliminate
poverty in urban governance.
24. City Finance
This section introduces how city finance systems work and how to
manage them.
25. Crime
This section introduces city crimes and how to prevent them from
happening.
26. Social Welfare
This section introduces general considerations of how to make social
welfare policies in urban governance.
27. Education
This section introduces the education systems and how to manage
them in urban governance.
28. City Institutions

This section introduces various city institutions and how they


interact with the physical settings in urban governance.
29. Governmental Organization and Administration
This section introduces the working of governmental organizations
and administrative behaviors take place in these organizations.
30. Information City and Technology
This section introduces the notion of information city and how
technology affects urban development.
31. Globalization and City Competitiveness
This section introduces the trend of globalization and general
principles of enhancing city competitiveness.
32. Global Climate Change and Energy
This section introduces the effects of global climate change on cities
and discusses energy policies regarding the global climate change.
33. Comparative Studies
This section conducts comparative studies regarding urban
governance in different cultural and socio-economic settings.
34. Conclusions
This section concludes.