Activity analysis models in regional development planning

The descriptive sections of the paper refer to an activity analysis model, using linear programming, developed by Stanford Research Institute under contract with the United States Department of Agriculture, Since a five-county trading area in south central Kentucky was used as a case study, the model is referred to in this paper as “the Kentucky model.” See R. Spiegelman, E. Baum, and L. Talbert,Application of Activity Analysis to Regional Development Planning, Technical Bulletin No. 1339, (Washington, D.C.: United States Department of Agriculture, 1965). The most direct antecedents of this model are: Alan S. Manne, “Key Sectors of the Mexican Economy, 1960–1970,” in A. Manne and H. Markowitz, eds.,Studies in Process Analysis, Cowles Foundation Monograph 18, (New York: John Wiley & Sons, Inc., 1963); and H. B. Chenery and K. S. Kretchmer, “Resource Allocation for Economic Development,”Econometrica, XXIV, (October, 1956), pp. 365–99.Google Scholar

See for example: Stephen A. Marglin, “The Social Rate of Discount and the Optimal Rate of Investment,”Quarterly Journal of Economics, LXXVII, (1963).Google Scholar

For further discussion of this point see G. Papanek and M. Qureshi, “The Use of Accounting Prices in Planning,” inOrganization Planning and Programming for Economic Development, United States Papers for United Nations Conference in Science Technology and Development, VIII, (Washington, D.C.: United States Government Printing Office, 1962).Google Scholar

Charles Leven, “Establishing Goals for Regional Economic Development,”Journal of the American Institute of Planners (May, 1964), pp. 100–10.Google Scholar

J. Sandee,A Demonstration Planning Model for India, Indian Statistical Series No. 7, (Calcutta: Statistical Publishing Society, 1960).Google Scholar

Robert Dorfman,Application of Linear Programming to the Theory of the Firm, (University of California Press, 1951).Google Scholar

Such additional profits are the result of “pecuniary external economies.” See Tibor Scitovsky, “Two Concepts of External Economies,”Journal of Political Economy, LXII, (April, 1954), pp. 143–51. According to Scitovsky, expansion of industry A gives rise to profits: (1) in an industry that produces a factor used in industry A, (2) in an industry whose product is complementary in use to the product of industry A, (3) in an industry whose product is a substitute for a factor used in industry A, or (4) in an industry whose product is consumed by persons whose incomes are raised by the expansion of industry A, p. 149.Google Scholar

See Spiegelman,op. cit., Table 11, p. 48.Google Scholar

Cf. P. A. Samuelson, “The Pure Theory of Public Expenditure,”The Review of Economics and Statistics, XXXVI, (November, 1954); and J. Margolis, “A Comment on the Pure Theory of Public Expenditires,” Ibid., XXXVII, (November, 1955).Google Scholar

Recent work indicates that only a small proportion of local services may face declining marginal cost curves. See W. Hirsch, “Expenditure Implications of Metropolitan Growth and Consolidation,”Review of Economics and Statistics, XLI, (August, 1959), pp 232–41.Google Scholar