ABSTRACT
This chapter describes an accounting system that allocates externality flows to agents, thus endowing externalities with an explicit spatial distribution. It examines the possibility of equilibrium in such cities and also discusses a more general equilibrium concept which comes closer to experience. An important aspect of the environment refers to its spatial dimensions. The environment of an individual at a particular location depends not only on attributes related to that location, but also upon attributes related to other locations. However, geographical analysis often confines itself to phenomena exhibiting a trivial choice behaviour in response to environmental stimuli. One way of dealing with the problem through the idea of a spatial externality: the mere concept of an externality implies preferences; and the word "spatial" embodies the truth that the environment at a particular location is a set–rather than a point–determined process.
