THE EVALUATION OF COMPLEX URBAN POLICIES Simulating the Willingness to Pay for the Benefits of Subsidy Programs*

To an economist, the justification for publicly provided urban shelter or urban renewal projects is much stronger if they are socially ‘profitable’ than if they are merely politically acceptable forms of redistribution towards deserving groups. Indeed, if such programs pass the cost-benefit criterion of social profitability, then efficiency can be improved with no sacrifice of distributional goals. Urban shelter or urban renewal projects can be justified as socially profitable, in turn, if either suppliers or demanders face inefficient price signals for example, if some prisoners’ dilemma prevents atomistic suppliers from maximizing collective profits or if some non-marketed external benefit incidental to housing consumption prevents demanders from maximizing utility. To justify some urban shelter program on the basis of consumption externalities, it would be necessary to demonstrate that an urban housing investment program provided increased public health, safety or labor market benefits which were not reflected in consumers’ willingness to pay for increased amenities. Although there is no lack of assertions about the