MACROECONOMICS OF UNBALANCED GROWTH: THE ANATOMY OF URBAN CRISIS* By WILLIAM I.BAUMOL There are some economic forces so powerful that they constantly break through all barriers erected for their sur ample,are the forces of supply and demand which haver medieval efforts to abolish t sted alik and co mpts to contro at I belie the futur ored the past and seems likely to stamp its characteron .It helps us to understand the prospective roles of a wide variety of economic services:municipal government,education,the per- forming arts,restaurants,and leisure time activity.I will ar gue that inherent in the technological structure of each of these acttesr forces working almost unavoidably for p sive and cumulative in creases in the real costs incurred in s ing them As a c equence. efforts to offset these cost in may succeed temporar- in the merely palliatives which can have no significant on th erlying trends. The justification of a macroeconomic model should reside primarily in its ability to provide insights into the workings of observed phenome Its aggregation of diverse variables usually deny it the elega nce and the rigor that are provided by microeconomic analy sis at its he models have succeeded in exp plaining the structu and in offerin guidance for policy egre far eluded th ore pa stak des at has so th e trad of economic analysis.This article hopes to fol- 1t1 the structure of its basic model is rudimentary. Yet it can perhaps shed some light on a variety of economic problems of our generation. 1.Premises Our model will proceed on several assumptions,only really essential.This basic premi not entirely arbitrarily, s that ecor activities can, gressive o two types:technologically pro activities in novations,capi tal accumulation.and economies of large scale all make for a cumulative rise in output per ◆The author i Ford Found ants 1am rming arts c every cas the data bave doc support Copyright2001 All Rights Reserved