Growth, regulatory, and ecological economics 53Before considering the far-reaching implications of this assumption in the
next section, we briefly consider another familiar widespread economic sys-
tem,regulatoryeconomics.Government regulations, laws, and other limitations
on free markets and freedom of action usually attempt to head off, or result
from, crises or problems, or may result from planning for the future (Aghion
and Howitt1998,Jones2002,Permanet al.2003). The public may demand reg-
ulations or the government impose them. Also the regulations are policed by
government with varying degrees of effectiveness. Crisis management and the
solutions to problems generally involve relatively short-term regulatory actions.
On the other hand, planning may involve long-term limitations, such as zoning
forappropriate land uses, land protection for a park system, or investment in a
transportation system. Government may be particularly suited for multi-sectoral
optimization or ‘‘what if ” analyses, as well as implementation of their results.
Governments often act and invest to meet demand. Such regulations are reac-
tive rather than proactive. Sometimes government acts to open up opportunity.
An array of institutional structures, economic instruments, and incentives may
be used. Most government actions are relatively short-term and are usually some-
what dependent on changing levels of income.
Regulations intrude on business and the free market, and too often sup-
press innovation. While they may protect the public against inept or unethical
actions, regulations put limits on experimenting with new ideas and may protect
mediocrity.
Perhaps all national and urban economies have a combination of free-market
growthand government regulation, and mainly differ by their position along
the gradient between the two poles. As politics change, the economies slide,
normally temporarily, along the gradient to right or left.
Finally, corruption should be mentioned as an economic limitation though
not a regulatory one. Corruption, which varies from high to low both spa-
tially and temporally, may put limits on both the free market and government
regulation.
The relationship between population growth and economic growth is espe-
cially important around growing cities. In general, if suitable pre-conditions,
such as various financial institutions, are in place, population growth commonly
leads to economic growth and development (Cheshire1988,Ray1998,Rogers
et al.2006). Fluctuations and adjustments in wages, prices, markets, credit,
interest rates, employment, technological change, international trade, and other
variables affect growth rates, and thus are important in economic models. Nev-
ertheless, more people consume more resources, make more products, create
larger markets, require more housing units, and affect a greater area.