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The Basic-Nonbasic Concept of Urban Economic Functions

Author(s): John W. Alexander
Reviewed work(s):
Source: Economic Geography, Vol. 30, No. 3 (Jul., 1954), pp. 246-261
Published by: Clark University
Stable URL: http://www.jstor.org/stable/141870 .
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 THE BASIC-NONBASIC CONCEPT OF URBAN
ECONOMIC FUNCTIONS
John W. Alexander
Associate Professor Alexander of the University of Wisconsin has
worked in the field of manufacturing geography and also on the economic
base of cities.
AMONGgeographersthere appears
to be an increasing interest in
urban geography as evidenced
in faculty research and the number of
Ph.D. dissertations. The purpose of
this paper is to analyze a concept which
has particular value in the geographic
study of urban settlements. It applies
specifically to the economic functions
of a city.
The traditional system of studying
urban economic functions begins by
measuring the livelihood structure. It
determines the number of people em-
ployed in the city and tabulates them
in such categories as trade, manufactur-
ing, and government. This classification
is based, not on any characteristic of
space-relationships, but rather on type
of service performed.
The concept discussed in this paper
is based on a space-relationship; and it
recognizes that cities develop in response
to demands from other places. Indeed,
as Mark Jefferson observed over 20
years ago, " Cities do not grow up of
themselves. Countrysides set them up
to do tasks that must be performed in
central places."'1 No city lives to itself.
It serves other areas which can be said
to constitute the city's "market region."
In turn, the region serves the city. Such
functioning is of immediate interest to
geographers because the interconnec-
1 Mark Jefferson: "The Distribution of the
World's City Folks: A Study in Comparative
Civilization," Geogr. Rev., Vol. 21, 1931, p. 453.
tions between city and region are one
type of spatial relationship. Thus, one
aspect of urban geography is the
analysis of those ties which bind a city
to its region. For example, how exten-
sive is the region served by a city? How
far and in what directions does that
region extend? What does the city do
for that region? To what degree is the
region dependent on that city for goods
and services? Answers to these ques-
tions constitute useful criteria by which
relationships between city and region
are measured.
One of the strongest ties between
city and region is the economic bond, for
the economic life of a city is inextricably
interwoven with the economic life of
its region. A portion of the economic
effort in a city is supported by non-local
demands. But these city people in
turn have need for local services, and
thus a second urban function is dis-
cernible that which caters to the
needs of local inhabitants.
The difference between these two
economic efforts is of fundamental
importance, because the former con-
stitutes the city's economic foundation.
As Jefferson observed, the city's life
depends upon it. It brings money into
the city and is termed "basic." By
contrast, the second category (serving
local demands) is termed "nonbasic"
and simply involves an exchange of
money which basic efforts have already
brought in.
 THE BASIC-NONBASIC CONCEPT OF URBAN ECONOMIC FUNCTIONS
The concept of this basic-nonbasic
dualism is recognized in several social
sciences, particularly economics and
geography. "The primary or 'city
building' activities should be identified,
i.e. those activities which bring into
the community purchasing power from
outside."2 " The support of a city
depends on the services it performs
not for itself but for a tributary area.
Many activities serve merely the pop-
ulation of the city itself. Barbers, dry
cleaners, shoe repairers, grocery men,
bakers, and movie operators serve
others who are engaged in the principal
activity of the city which may be
mining, manufacturing, trade, or some
other activity.3
The purpose of this study is prin-
cipally to analyze the basic-nonbasic
concept in terms of its relevance to
urban geography. The paper is so
organized as to present (1) salient points
in the historical development of the
concept, (2) an inspection of those
qualities which recommend the concept
for application by urban geographers,
(3) a review of selected case studies in
which the concept was applied, and
(4) questions which need to be answered
or refinements which need to be made
in maturing the concept for more fruitful
application in geographical studies.
HISTORICALDEVELOPMENTOF THE
BASIC-NONBASIC CONCEPT
The concept of a city's economic
dichotomy has been recognized in theory
for more than three decades. Various
writers have identified it, often using
different terminology such as primary,
urban growth, external, supporting for
"basic," and secondary, service, internal
for "nonbasic." The first expression of
2 Richard U. Ratcliff: "Urban Land Eco-
nomics," New York, 1949, p. 43.
3 Chauncy D. Harris and Edward L. Ullman:
"The Nature of Cities," Annals of the Amer.
Acad. of Pol. and Soc. Sci., Vol. 242, 1945, p. 7.
247
the idea appears to be that of Aurous-
seau who wrote in 1921: " It is well
known that towns have an extraordinary
power of growth. This appears to be
due to the relationship between the
primary occupations and the secondary
occupations of the townsfolk. The
primary occupations are those directly
concerned with the functions of the
town. The secondary occupations are
those concerned with the maintenance
of the well-being of the people engaged
in those of primary nature."4
The first urban analysis explicitly
to identify a city's economic dualism
was the New York Regional Planning
Committee's Regional Survey of New
York and Its Environs published in 1927.
On pages 42-43 of this survey the
concept was described in terms of
" primary " and " ancillary " as suggested
by Frederick L. Olmsted who described
the economic activities of a city as
follows: "the multiplicity of their pro-
ductive occupations may be roughly
divided into those which can be con-
sidered primary, such as carrying on
the marine shipping business of the
port and manufacturing goods for gen-
eral use (i.e., not confined to use within
the community itself), and those occupa-
tions which may be called ancillary, such
as are devoted directly or indirectly to
the service and convenience of the
people engaged in the primary occupa-
tions." A footnote in the text indicates
that Mr. Olmsted first expressed this
terminology in 1921 in a letter to a
member of the New York Planning
Committee. However, after defining
the primary and ancillary components,
the study did not proceed to apply
the concept in very much detail in
analyzing New York's economy, prob-
ably because methods had not yet been
4M. Aurousseau: "The Distribution of Pop-
ulation: A Constructive Problem," Geogr. Rev.,
Vol. 11, 1921, p. 574.
248 ECONOMICGEOGRAPHY
developed for applying the fledgling idea.
In subsequent years the concept
received attention in different disciplines
where scholars refined the theory or
added new concepts. The most thor-
ough analysis of this historical develop-
ment is presented in a recent series by
Professor Richard B. Andrews.5
As far as the author has been able to
determine, the first geographer to apply
this idea to a specific city was Richard
Hartshorne in a study of Minneapolis-
St. Paul published in the July, 1932,
issue of the Geographical Review. On
page 437 the author writes, "The con-
version of this particular pair of towns
. . . into a metropolitan district of
three-quarters of a million in 1930 was
based largely on the establishment of
that district in the period of rail con-
struction as the one all-important focus
of rail lines of the central northwest.
This may be readily seen from a brief
analysis of the external functions of the
urban district. In any city these tend
to be obscured somewhat by the large
number of functions developed to serve
simply the residents of the city itself.
In Minneapolis-St. Paul the 'internal'
functions employed, in 1919, more than
half the total number of men workers.
Of the remainder, the railroads, includ-
ing the car shops, employed more than
a fourth-by far the largest single
group." The author does not explain
how he determined these proportions.
That a city's economy consists of two
components was obvious, but nothing
appears to have been done in formulat-
ing a methodology for applying the
concept until Richard Hartshorne
worked on the United States manu-
facturing belt.6 IHartshorne reasoned
5 Richard B. Andrews: "Mechanics of the
Urban Economic Base," Land Economics,
Vol. 29, 1953.
6 Richard Hartshorne: "A New Map of the
Manufacturing Belt of North America," Econ.
Geogr., Vol. 12, 1936, pp. 45-53.
that a part of manufacturing in every
industrial city produces only for local
consumption and that the most mean-
ingful map of a manufacturing region
would locate concentrations of industry
producing over and above local de-
mands. To arrive at some measurement
of this (which actually could be termed
"basic" manufacturing) the author
mapped industrial wage earners for all
cities with over 10,000 population,
subtracting from each city's total of
industrial wage earners a factor of
10 per cent of the population. The
assumption was that 1000 wage earners
in manufacturing would be required
to meet the needs of a city of 10,000
people. Hartshorne subsequently con-
cluded7 that this factor was too high
and probably should have been 8 per
cent. Nevertheless his study was a
pioneer effort to measure what is herein
termed "basic" effort, applying it to a
single type of endeavor, manufacturing.
The next advance in methodology
was an analysis of the economic func-
tions of Oskaloosa, Iowa by the research
staff of Fortune magazine.8 By measur-
ing the balance of payments between
Oskaloosa and "the rest of the world"
they arrived at a distinction between
the city's payments to local creditors
and to nonlocal creditors.
A third advance in methodology was
Homer Hoyt's outline of six steps for
measuring basic activity which appeared
in a book published in 1939.9 In ad-
vancing this method Hoyt also suggested
new terminology: "urban growth " for
I Personal conversation with the author.
8 "Oskaloosa vs. the United States," Fortune:
April, 1938, 55-62 ff.
9Arthur M. Weimer and Homer Hoyt,
"Principles of Urban Real Estate," New York,
1939. The criteria here quoted appear in the
text in Chapter VI, "The Future Growth and
Structure of Cities." For the background of
Hoyt's experience which led to the formulation
of his ideas see Richard B. Andrews' study in
Land Economics, 1953, op. cit.
 THE BASIC-NONBASIC CONCEPT OF URBAN ECONOMIC FUNCTIONS
" basic " and " urban service " for " non-
basic." The six steps are as follows:
1. From census reports, or from local
sources such as chambers of commerce,
local establishments, local trade associa-
tions, and employment offices, determine
the number of persons engaged in the
principal types of employment. It
may be necessary to use estimates in
some cases, especially in communities
for which there are few published
statistics.
2. Determine the number engaged
in manufacturing, excluding those firms
whose production is intended predom-
inantly for the local market.
3. Determine the number engaged
in extractive industry obviously in-
tended for the nonlocal market.
4. Determine the number engaged
in nonlocal governmental, transporta-
tion, or communication services and the
number employed in lines of work
catering to amusement seekers, tourists,
or travelers.
5. From published sources (for ex-
ample, the periodical Sales Management)
determine the percentage of the national
income that is earned by the city being
analyzed. Then apply this percentage
to the total number of persons engaged
in trading, financing, professional, and
related activities in the country, as
shown by the figures of the Bureau of
the Census and the Department of
Labor. Assume that the number by
which local employment in these lines
exceeds this percentage is "urban
growth" employment. For example,
suppose 15,000,000 persons are employed
in these activities in the United States
and that the city being analyzed has
1 per cent of the total national income.
On this basis, it may be assumed that
150,000 persons will be required to
perform the trading and related activi-
ties of the city. If 200,000 are so
employed, then 50,000 may be con-
249
sidered as representing "urban growth"
employment.
6. Total the figures arrived at in
paragraphs 2-5 above and compute the
percentage which each type of "urban
growth" employment represents of this
total. These percentages will indicate
the relative importance of manufactur-
ing, extractive industry, trading, and
the other types of activity in the eco-
nomic development of the city.
In 1942 Harold McCarty expanded
the concept to apply to regional econ-
omies as well as community economies.
He described basic-nonbasic activities
in relation to what he called the occupa-
tional pyramid: "The base of the
pyramid consists of that group of
occupations whose presence in the area
is not predicated on the existence of
other types of production. . . . The
base of the pyramid dictates the pattern
of the remainder of the structure..
The workers in basic industries are not
self-sufficing individuals, and the local
economic organization must provide
them with many types of goods and
services including merchandising estab-
lishments, as well as transport facilities,
business, and personal services, and
each of these groups in turn requires
workers to care for its needs."'0
J. H. Jones, in a volume on national
planning for Britain's postwar recon-
struction of damaged cities, introduced
the idea that city planners should give
priority to basic activities. " These
industries (including services) are the
foundation upon which the town has
been built, and may therefore be called
'basic' industries. Their size will deter-
mine the size of the industrial structure
and population of the town; no town
can grow merely by adding to an
already adequate supply of local indus-
1OHarold H. McCarty: "A Functional Anal-
ysis of Population Distribution," Geogr. Rev.,
Vol. 32, 1942, pp. 287-288.
250 ECONOMIC GEOGRAPHY

ECONOMIC STRUCTURES itself, . "12 "While granting that in

Number of one and the same industrial occupation

Employees OSHKOSH
10t000
it is impossible to come to a quantitative
M M measure of the relative importance of
the nation-wide and international mar-
5,000-
S .... 8.T. ........ ket, the local urban market, and the
wider regional market, this is no reason
G why the last should not be adopted as
-(A)Total Economy (B) Basic Economy
16,000 employees 29,200 employees a main approach to the study of the
occupational structure of towns."'13
SServices TTMADeSO/ r In the past few years, since the
publication of Hoyt's "six steps," there
0~~~~~ has been increasing interest in theo-
(A) Total Economy (B) Basic Economy retical aspects of the basic-nonbasic
concept. Students in various disciplines
Vo ....-....... S find it useful. Several features com-
M Mauatrn 0 thr mend it, particularly to geographers
1~
FIG since it is a meaningful expression of a
o A) Total Economy (B) Basic Economy fundamental space-relation between city
53,500 employees 29,200 employees
and supporting areas.
largeSo
and,,.,small,,,
Services T= mus
Trade coti som
G= Government
se =
Mlanttfectiring = Others
t tha are GEOGRAPHICQUALITIES OF THE
totewordoutsid th
BASIC-NONBASIC CONCEPT
FIG. 1.
Traditional community studies based
tries and services.... Every area, on employment data published in the
large and small, must contain some Census or procured from employment
industries that 'export' their products agencies usually are seriously lacking
to the world outside that area . . . the in one respect: they provide no measure
inhabitants of the towns could not be of basic activities because such em-
expected to live by taking in each ployment data permit no reliable classi-
others' washing.em fication of activity in terms of the
Robert E. Dickinson directed con- geographic areas to which the city's
siderable attention to the concept in a goods and services are sold. The local
book published in 1947 and pointed component is indistinguishable from
out the need for more urban analyses the more fundamental (basic) compo-
in terms of this economic dichotomy. nent which supports the settlement.
He went further to suggest that analyses The conventional method of measuring
of cities could be based on this approach. "livelihood structures," informative as
"sWhat is needed is a much more careful far as it goes, thus has a definite short-
analysis of the urban community, not coming. Much of this can be remedied
only as a seat of specialized industry by application of the basic-nonbasic
and service serving a wide market, but concept which, by classifying economic
also as a seat of industry and service
endeavor in terms of market location,
for the 'regional' market over and above
recommends itself to urban geographers
'local' needs of the urban community
for four reasons:
11 J. H. Jones: " Industry and Planning,"
pp. 126-127 in "Creative Demobilization," 12
Robert E. Dickinson: "City Region and
Vol. II, "Case Studies in National Planning," Regionalism," London, 1947, p. 24.
edited by E. A. Gutkind, London, 1944. 13Ibid.. p. 36.
 THE BASIC-NONBASIC CONCEPT OF URBAN ECONOMIC FUNCTIONS 251

(1) The concept provides a view of structure. By total employment, Madi-

economic ties which bind a city to other son's leading activities are services,
areas. The contrast between total em- government, manufacturing, and trade
ployment and basic employment in this in that order; but the basic structure
respect is shown in Table I (parts A reveals services and trade to be far
and B) and Figure 1 which give data behind government and manufacturing
for two Wisconsin cities, Oshkosh and in sustaining Madison's economy. This
Madison.l4 The traditional livelihood is a meaningful distinction producing
structure (total employment) for Osh- an entirely different picture, one not
kosh reveals that manufacturing is the revealed by conventional methods of

TABLE I
EMPLOYMENT IN OSHKOSH AND MADISON, WISCONSIN

Oshkosh Madison

1950 Population .42,000 110,000

1940-50 Population growth ............................................... 5% 28%
Total Employment ...................................................... 16,000 53,500
Basic Employment ....................................................... 10,000 29,000
Leading basic activity......................................Manufacturing Government
Nonbasic Employment ......................... ................ I ....... 5,900 24,300
B/N ratio . ............................................................. 100:60 100:82

A. TOTAL Employment
1. Services......................................................... 3,100 14,500
2. Government .......... ....................................... 1,200 14,300
3. Manufacturing....... . ........................................ 8,200 12,100
4. Trade.......................................................... 2,700 10,200
5. Others...................8........0........................0...... 80 2,400

Number of Employees. ................................I............. 16,000 53,500

B. BASIC Employment
1. Services..........................................................900 4,500
2. Government . ....................................................... 120 11,300
3. Manufacturing................................................... 7,880 10,100
4. Trade ..... 950 3,000
5. Others ................... ....................... ............ 250 300

Number of Employees ............. ................................. ..... 10,100 29,200

leading form of employment followed by studying livelihood structures. The

services, trade, and government. But rationale of the basic-nonbasic concept
when the nonbasic component is re- is that the relationships revealed by
moved, the structure of basic employ- data on basic employment constitute a
ment (part B) reveals more clearly the more meaningful basis for analyzing a
dominance of manufacturing in sup- city's economy than do those comprised
porting Oshkosh, with trade displacing by total employment, that part B of
services in second place. In the case Table I and Figure 1 are more sig-
of Madison the structure of basic nificant than part A.
employment (part B) is markedly differ- (2) Another value of the concept to
ent from the traditional livelihood geographers is that it permits the most
14 John W. Alexander: "Oshkosh, Wiscon- satisfactory classification of cities in
sin, An Economic Base Study," 1951, and
"An Economic Base Study of Madison, Wiscon- terms of regional function. Cities are
sin," 1953. Both were published by the Bureau more accurately distinguished by their
of Business Research, School of Commerce,
University of Wisconsin. basic economy than by their total
252 EcoNo-mic GEOGRAPHY

NONBASIC EMPLOYMENT reason for subjecting a city's economy

Number of
Employees
to the basic-nonbasic concept: segrega-
S
o0,000- 7
tion of basic and nonbasic components
T reveals an entirely different structure
for each, a difference which the tradi-
5,000;
tional system (by blending the two into
one livelihood structure) fails to reveal.
Indeed, it even may be that the
OSHKOSH MAD/SON
structure of nonbasic activities is sub-
stantially the same for every city. So
Percentage of
Nonbasic
far, not much is known about the
Employment
50 -
nonbasic structure of city economies,
40 S but data on Oshkosh and Madison
T-Service T=Tr GoernmeT reveal that their nonbasic structures
30

20 G are remarkably similar in spite of the

0
10-M
o ~
OS//KOSH
S= Services T=Trode
M= Manufacturing
FIG. 2.
economy because the basics express a
city's service to its region. For such
a purpose, the nonbasics "cloud the
picture" and therefore should be sub-
tracted from the total economy as one
endeavors to distinguish industrial cities
from commercial cities from government
cities, etc. Harris recognized this and
suggested empirical estimates of per-
centages to achieve such distinctions.'5
However, it would seem that a measure-
ment of basic activity would provide
~GM0 fact that they are such different types
of settlements. Table I shows that
MAD/SON
Madison is much larger than Oshkosh,
G=Government
is growing much faster, and is supported
O Others
primarily by government while Oshkosh
is mostly a manufacturing city. Clearly,
these are different types of cities. Yet
the nonbasic structure of each is revealed
in Table II and Figure 2 to consist of
the same activities in order of impor-
tance: In each city the leading nonbasic
activity is service, followed by trade,
government, and manufacturing. But
the similarity is even more remarkable,
for although Madison has 24,300 non-
basic employees and Oshkosh only
TABLE II

a more accurate method for defining NONBAsIc EMPLOYMENT

urban regional functions.

Oshkosh Madison
Evidence from the Oshkosh and
Madison studies reveals that the non-
Services ............... .... 2,200 10,000
basic employment structures were con- Trade ..................... 1,750 7,000
Government ............... 1,080 3,000
siderably different from both the total Manufacturing . ............ 320 2,000
Others .................... . 550 2,100
and the basic structures. (Compare
Table II and Pigure 2 with Table I Number of Employees ....... 5,900 24,300

and Figure 1.) Herein lies a corollary Percentage of Nonbasic Employment

15 For instance, " . . . only cities with more
Services ................... 38% 41%
than 60 per cent of their employment in manu- Trade .......... .. 30% 30%
facturing are classified as industrial, whereas Government .... .. 18% 12%
cities with only 20 per cent in wholesaling are Manufacturing ............. 5% 8%
classified as wholesale centers." See Chauncy Others ..................... 9% 9%
D. Harris: "A Functional Classification of
Cities in the United States," Geogr. Rev., 1943, TOTAL................... 100% 100%
pp. 86-99; reference on p. 87.
 THE BASIC-NONBASIC CONCEPT OF URBAN ECONOMIC FUNCTIONS
5900, the percentage breakdowns are
much alike. Table II and Figure 2
reveal that in spite of differences in
overall size, each city has exactly -the
same per cent of nonbasic employment
in trade (30 per cent), nearly the same
in services (38 per cent compared to
41 per cent), and somewhat similar
percentages in government and manu-
facturing. Thus, Table II and the
graph of percentage employment in
nonbasic activity are remarkably sim-
ilar. To be sure, evidence from just
two cities is insufficient to warrant the
conclusion that nonbasic structures are
constant from city to city. Neverthe-
less, the facts on Oshkosh and Madison
are presented to suggest that if nonbasic
structures are similar from city to city
then they definitely should be isolated
so that any functional classification of
settlements can be based on the basic
functions which do differ from city to
city without being confused with func-
tions which are not much different.
In any case, nonbasic activity should
be culled out in order to provide an
unobstructed view of the city supports,
those activities which connect a com-
munity with its supporting territory
and therefore serve as the best criteria
for a geographical classification of cities
in terms of function.
(3) The basic-nonbasic concept pro-
vides a new ratio which may have
significance in differentiating types of
cities. This is the "basic-nonbasic
ratio" which, for short, can be termed
the "B/N" ratio. Suppose, for ex-
ample, that a city has a total of 50,000
people employed, with 25,000 engaged
in basic and 25,000 in nonbasic activity.
The B/N ratio then is 100: 100, which
means that for every 100 basic employees
there are 100 nonbasic employees. But
another city also with 50,000 employees
might have 30,000 basic and 20,000
nonbasic giving a different ratio: 100: 66.
253
As yet, this concept has not been
applied in the analysis of enough cities
to produce much evidence about the
nature of B /N ratios. Moreover, the
few case studies available have em-
ployed so many different methods for
measuring the basic component that
the resulting ratios are scarcely com-
parable. However, studies by the same
analyst employing the same method-
ology in the case of the two cities
already cited (Oshkosh and Madison)
revealed that the B /N ratio varied from
100: 60 to 100: 82 (Table I). Madison's
nonbasic component is a third greater
than that in Oshkosh. Obviously, the
ratio can vary considerably. More
detail on its variation is presented in
the following section on specific case
studies. With the limited information
as yet available it seems plausible that
urban geographers will find the B /N
ratio a useful criterion for the compara-
tive study of cities.'6
(4) Provision of the B /N ratio also
enables a new classification for indi-
vidual economic endeavors. To illus-
trate, a business which makes all of
its sales to the local market is distinctly
different from one which makes all its
sales to the outside market. Both
businesses might be factories. The
traditional method of classifying eco-
nomic activities would consider them
to be in the same category: namely,
manufacturing. And yet, in terms of
spatial relationships with market areas
they are opposites; one is basic activity,
the other is nonbasic. One is tied to the
local region for its sales; the other is
tied to the surrounding region.
A second illustration: A mail order
establishment employs 1500 people who
16 Homer Hoyt, leading student and advocate
of the basic-nonbasic concept, says, "I believe
that every city has its own distinctive ratio
between primary and secondary employment
or between basic and nonbasic." (From per-
sonal letter to the writer, December 27, 1952.)
254 ECONOMIC GEOGRAPHY

fill orders originating in nearly every

state of the nation. The local com- Categtoy
designation
Degree to which the organization is basic

munity generates a demand for less

B = Basic
than 1 per cent of the sales. Elsewhere N = Nonbasic
in that community is a garment factory B . ........
Bn ........
75%-100% sales
sales
to
to
basic
basic
market
market
50%- 75'%
making work clothes. It also employs Nb ........ 25%- 50% sales to basic market
N . ....... 0 - 25% sales to basic market
1500 people who fabricate a product
distributed through a market area
covering several states. Again the local little money into the community; in-
community purchases less than 1 per deed, they are supported by local
cent of the company's production. By money. But the second and basic
the traditional method of classification, group brings money into the city. Such
these two companies would be different: a distinction between basic and nonbasic
One is trade, the other is manufacturing. can divide not only the education
Yet from the standpoint of areal category but also manufacturing, trade,
relationships they distribute to sur- government, and every other category
rounding regions, selling very little to in the traditional classification system.
the local market. They bring money Data for such classification are not
into the city and are similar in that published but must be procured through
both are nearly 100 per cent basic personal contact with individual com-
economic activities. panies and institutions. Organizations
A third illustration: a city has 3000 providing information can then be
employees in education 1500 of them classified in terms of basic effort. For
in the local public school system, and example, four categories might be de-
1500 in a state-supported school of fined as above and illustrated in Figure 3.
higher learning. The first group con- Whether the economic activity is a
stitutes a nonbasic activity, bringing factory, or a shoe store, or a state

Degree of Dependence Degree of Dependence

uponfie BASIC Markef upon the NONBAS/C Markef

?/O8 Basic

Basic
50i5%~50 c

FIG. 3.
 THE BASIC-NONBASIC CONCEPT OF URBAN EcONOMIlc FUNCTIONS 255

university, if over 75 per cent of its
service is in response to a demand from
the non-local market region it is in
category B (Basic). Category Bn
(mostly basic, but at least 25 per cent
nonbasic) includes stores, factories, the-
atres, and other enterprises which bring
in more money from the outside than
from the city but are more dependent
on the nonbasic market than is category
B. The two remaining categories de-
with other areas, by providing a regional
service criterion for classifying cities
in terms of regional function, by provid-
ing the B/N ratio as another criterion
for distinguishing between cities, and
by a new method of measuring indi-
vidual business firms-the basic-non-
basic concept contributes to the geo-
graphical understanding of cities.
APPLICATION OF THE BASIc-NONBASIC

pend for most of their support upon CONCEPT IN URBAN STUDIES

the local market, category N to a Although the concept has existed
greater degree than category Nb. in theory for more than 30 years, efforts
An additional entry could indi- to separate basic and nonbasic parts
cate type of activity in terms of the of a city's economy have been relatively
traditional classification: "i m "--manu- recent. Such studies have been marked
facturing, "t "-trade, "g "--govern- by a wide diversity of methodology
ment, "s "-service, or any of several with a consequential variety of results.
categories desired. Category " Bnt" The purpose of the present section is
would include trading establishments not to analyze every case study in
drawing 50-75 per cent of their revenue which the concept has been applied
from basic customers. Obviously, many but rather to select a few which illus-
other variations of this system are trate (a) various methods for measuring
possible. Subnumerals could represent basic endeavor and (b) the wide varia-
"tenths" of basic component: e.g., B1 tion in resulting B/N ratios. Readers
for 10 per cent basic and B8 for 80 interested in a comprehensive analysis
per cent. of several case studies using the concept
The contention in this paper is that are reminded of Richard Andrews' series
a discipline in which spatial relation- of articles "Mechanics of the Urban
ships are fundamental should, in analyz- Economic Base" in Land Economics.
ing urban economies, augment tradi- The pioneer case study apparently
tional methods by a classification recog- was by the research analysts of Fortune
nizing areal associations. Thus, a magazine who investigated the circula-
factory supported by non-local demands tion of money into, through, and out
is, in the economic life of the city, more of Oskaloosa, Iowa."7 By numerous
akin to a basic mail-order house, a basic interviews and questionnaires data were
store, a basic educational institution, or gathered from both individuals and
a basic government agency than it is business firms as to the amount and
to a nonbasic factory, albeit both are source of income. Total business receipts
" manufacturing." Indeed, insofar as were $13,942,000 of which $8,114,000
role in a city's economic life is con- came from non-local buyers. This gives
cerned, it often is more important to a
B/N ratio of 100: 72. Over $800,000
know whether an enterprise is basic (B)
also came into the city via individual
or nonbasic (N) than to know whether
channels-e.g., Oskaloosa residents em-
it is manufacturing or trade.
ployed elsewhere. This increases the
By revealing components of the
urban economy connecting the city 17 Fortune, op. cit.
256
basic component so that the ratio
becomes 100: 65.
Another early effort to measure basic
endeavor appears in Harris' study of
Salt Lake City. In this, his Ph.D.
dissertation at the University of Chicago
in 1940, Harris observed, "The im-
portant basic occupations of the city
are those which serve the hinterland
as well as the city. Two measures of
the extra-city function in any given
occupance are (1) the number engaged
beyond the estimated local needs of the
GENERAL
Clerical .......................................
Wholesale trade .4,137
Retail trade .9,565
Other trade .3,176
Domestic, personal service .6,527
Public service .1,813
Professional service.
Manufacturing and Mechanical Industries
Transport, Communications .5,656
Others .1,821
*Adapted from Harris, op. cit., p. 4.
city and (2) the per cent of the total
state employment concentrated in Salt
Lake City.
"The criterion of employment beyond
local needs suggests that about 10,000
of the 54,000 people employed in Salt
Lake City are engaged in activities of
primary regional significance.... The
other 44,000 are of local or secondary
regional significance in that they serve
partly the population of the immediate
hinterland of Salt Lake County and
partly the people of the city or county
who are engaged directly in regional
activities. [Thus there are at least
10,000 basic employees, and a portion
of the remaining 44,000 apparently
ECONOMIC GEOGRAPHY
might be ascribed to basic effort. See
Table III in this article.] . . .
"In each occupational group the
relation of the total employed in Salt
Lake City to the total employed in the
state gives a clue to the regional im-
portance of the city in that occupation.
. . . [E.g., Salt Lake City contains
28 per cent of Utah's population but
71 per cent of the state's employment
in wholesale trade.]18
In 1944 Homer Hoyt applied to
New York City the method he proposed
TABLE III
OCCUPATION ANALYSIS OF SALT LAKE CITY*
Estimated surplus over local needs. Number
Number actually employed in the city minus the estimated
Employed in local need for Salt Lake County. The latter is
Salt Lake City taken arbitrarily as 38.2 per cent of the total
state employment on the assumption that the
occupational need is proportional to population.
8,097 3,100
2,000
1,600
1,000
1,200
700
5,691 500
.13,522......
......
.....
54,069 10.100
in the 1939 edition of the textbook
already cited.'9 Employed by the
Regional Plan Association of New York
to make an economic base study, he
determined that for every 100 basic
employees in Greater New York there
were 215 nonbasic employees. He
explains his method as follows: "For
wholesale trade it was assumed that
all the workers in the Region in excess
of the number of wholesale workers
employed on the average by the same
population in the United States outside
'8 Chauncy Harris: "Salt Lake City, A Re-
gional Capital," University of Chicago, 1940,
pp. 8-9.
19Wiemer and Hoyt, "Principles of Urban
Real Estate."
 THE BASIC-NONBASIC CONCEPT OF URBAN ECONO-Iic
the Region, could be attributed to
wholesale activities for the benefit of
persons outside the Region. For manu-
factures it was estimated that the
New York Region would consume its
share of the total national production
based on its percentage of the total
United States population (9.8 per cent)
or purchasing power (14.7 per cent),
and that the excess of its production
above this percentage of the national
production was attributed to production
for persons outside the Region. For
clothing it was assumed that the New
York Region consumed slightly more
than its percentage of the national
income, or 15 per cent, because expendi-
tures for clothing tend to increase with
income; but for food it was assumed
that the New York Region consumed
more than its percentage of the total
population but less than its percentage
of the national income. In this manner,
the number of persons working in New
York for persons outside the Region,
was calculated, and it is estimated . . .
that approximately 1,500,000 persons,
or about 32 per cent of the total number
employed in 1940 in the Region, were
working on goods or services to be sold
outside the Region. This means that
for every 100 persons so engaged,
another 215 persons are employed in
local manufacture or in service lines."20
Hoyt later concluded that the nonbasic
component of this ratio was too high
because many people were on relief.
Since relief payments are a form of
basic support, they could be considered
to represent the equivalent of a certain
amount of basic employment. Thus
the 215 nonbasic employees in the
foregoing ratio should be linked with a
figure exceeding 100 for the basic com-
20
Regional Plan Association of New York:
"The Economic Status of the New York Metro-
politan Region in 1944," p. 6.
FUNCTIONS 25 7
ponent. Or, the ratio could be 100: a
figure less than 215.21
Also in 1944 the Detroit City Plan
Commission issued its Economic Base of
Detroit which states that for every 100
primary employees in Detroit the city
has 117 secondary employees. No spe-
cific explanation is made of the method
by which these ratios were determined,
but it appears that all manufacturing is
considered to be primary and that all
other employment is considered to be
secondary.22 Indeed, "service" activi-
ties are specifically declared to be en-
tirely secondary, "Detroit has no
primary employment in services."23
An analysis of Cincinnati in 1946
sponsored by the City Planning Com-
mission, with Victor Roterus as research
director, estimated -that the ratio was
100: 170 between " urban-growth "
(basic) and "urban-serving" (nonbasic)
activity. The ratio was derived by
much the same technique as that used
by Hoyt in New York, "Urban-serving
employment for each activity can be
calculated by assuming that the popu-
lation of the area will consume its
proportionate share of the national
production of goods and services. For
example, if in the United States in
1940, 25.2 persons per 1,000 population
were employed in supplying professional
services, then professional employment
in the same ratio (amounting to 19,830)
in the Cincinnati area would be classed
as urban-serving. Employment above
the figure would be considered urban-
growth (serving persons outside the
area)." This study made clear that
the formula would have to be varied
with each activity because urban con-
21 Personal letter to the writer, December 27,
1952. Mr. Hoyt credits Professor Richard U.
Ratcliff with observing this discrepancy in
the ratio.
22 Detroit City Plan Commission: "Eco-
nomic Base of Detroit," 1944, pp. 5, 47.
23 Ibid., p. 15.
258 EcONoMIc
sumption differs in many instances
from the national.24
In 1949 Homer Hoyt released The
Economic Base of the Brockton, Massa-
chusetts Area in which he identified the
two components as "basic" and "serv-
ice'" (" nonbasic'") and observed:
"Every person employed in a basic
industry normally supports approxi-
mately one other person in the service
or nonbasic activities. Due to the
instability of employment and to the
number living on unemployment com-
pensation, there were only 21,600 in
the service lines in the Brockton area,
compared with 26,500 in basic lines."25
This is a ratio of 100 to 82 in favor of
the basic endeavors. The report esti-
mated employment in basic activity
apparently on the basis of replies to
questions submitted to various economic
enterprises.
The analysis of Albuquerque, New
Mexico, in 1949, undertaken jointly by
the Federal Reserve Bank of Kansas
City and the University of New Mexico's
Bureau of Business Research, arrived
at a ratio of 100: 103 between "support-
ing" and "service" effort. This study
actually is of the economic base of
Bernalillo County: "where economic
data is concerned, Albuquerque can be
considered as synonymous with Berna-
lillo County since no less than 95 per
cent of the population lives in and finds
employment in the urban area." The
number in supporting employment was
estimated by two steps: (a) sampling
representative business establishments
to determine the proportion of business
each did with people living outside
Bernalillo County and (b) pro-rating
total employment data for each type of
activity (manufacturing, wholesale
24 City Planning Commission, Cincinnati,
Ohio: "Economy of the Area," 1946, pp. 22-23.
25 Homer Hoyt Associates: "The Economic
Base of the Brockton, Massachusetts, Area,"
1949, p. 15.
GEOGRAPHY
trade, etc.) according to the percentages
determined bv the sample.26
The "firm-by-firm " approach was
used in the economic base study of
Oshkosh, Wisconsin.27 Data tabulation
began, not with total employment
figures for the city as a whole but with
individual business firms each of which
reported its total employment and the
percentage of sales to local and nonlocal
buyers. Accordingly, employment was
pro-rated into basic and nonbasic com-
ponents. For example, a company
with 100 employees depending on the
basic market for 70 per cent of its sales
would have 70 employees ascribed to
basic endeavor. Another company mak-
ing 90 per cent of its sales to local
buyers and employing ten people would
have nine ascribed to nonbasic activity.
Three-fourths of the city's employment
was thus tabulated firm by firm; the
numbers of employees in basic and
nonbasic categories were accumulated
with a final addition, an estimate, for
the quarter of the economy not con-
tacted in the survey. By this method,
the basic-nonbasic ratio in Oshkosh was
determined to be 100: 60. The same
method applied to Madison, Wisconsin,
in 1951 revealed a B /N ratio of 100: 82.28
It is not the purpose of this paper to
review every urban study employing
the basic-nonbasic concept, since An-
drews' work is a comprehensive digest
of these studies. Rather the purpose
here is to observe some distinctive
methods which have been used and the
difference in B/N ratios resulting.
It would seem that none of the
methods used in the foregoing studies
is entirely satisfactory for application
26 Federal Reserve Bank, Kansas City,
Missouri, and Bureau of Business Research,
University of New Mexico: "The Economy of
Albuquerque, New Mexico," 1949, p. 23 ff.
27Alexander: "Oshkosh, Wisconsin-An Eco-
nomic Base Study."
28 Alexander: "An Economic Base Study of
Madison, Wisconsin."
 THE BASIC-NONBASIC CONCEPT OF URBAN ECONOMIC FUNCTIONS
to all cities. Tabulation of employment
by individual companies is accurate
but tedious and generally impractical
for large settlements. Use of national
proportions as factors for multiplying
a community's employment in specific
activities is acceptable as a method of
estimating but probably permits a large
degree of error since it cannot dis-
criminate well between types of com-
munities. Its application to small cities
might result in considerable errors.
The variation in the reported B/N
ratios is considerable, from the one
extreme of 100: 215 (New York) to
100: 60 (Oshkosh). Are these cities
actually that different in their economic
nature? Or were the methods used to
determine the ratios that different?
The need is for more case studies
which apply the basic-nonbasic concept.
Surely the refining of the concept in
terms of what should be included in
"basic" and "nonbasic" activity, and
improvement of the methodology for
delimiting the two functions are worthy
objectives for urban geographic research.
QUESTIONS FOR FURTHER RESEARCH
After various methods have been
tested for measuring basic enterprise
and reliable techniques have been
proved, answers to the following ques-
tions should be available to further the
understanding of urban settlements:
(1) Is the B/N ratio truly a mean-
ingful characteristic for distinguishing
cities? If so, a method for classifying
cities could be in terms of B/N ratios.
How many cities and what types would
have ratios of 100:100? What propor-
tion and what types of settlements
would have ratios of 100: less than 100?
of 100: more than 100? Or will it be
demonstrated that all cities have sub-
stantially the same ratio and that
variations cited in the foregoing case
259
studies are coincidental, resulting from
flaws in imperfect methodologies?
If the B /N ratio is found to be a
meaningful variable, additional ques-
tions await investigation.
(2) Does the B /N ratio vary with
size of settlement? Is there a distinctive
ratio for a hamlet, for a small town, for
a city of 10,000 people, of 100,000, of
1,000,000? From the case studies cited
it would appear that the larger the city
the larger the proportion of nonbasic
activity. Communities compared in
this study are here listed according to
population as reported in their analyses:
Community Population B/N Ratio
New York .12,500,000
Detroit .2,900,000
100: 215
100: 117
Cincinnati .907,000 100: 170
Brockton .119,000 100:82
Albuquerque. 116,000 100:103
100:82
Madison .110,000
Oshkosh .42,000 100:60
The correlation between size of city
and size of nonbasic component in the
above data is not entirely consistent;
perhaps the relationship would have
been clearer if there had been uniformity
in methods of measuring the ratio.
Nevertheless, in the case studies cited
the larger city was found to have the
larger proportion of nonbasic employees
where: (a) the same method was applied,
even by different analysts, viz., New
York and Cincinnati; (b) the same
analyst applied different methods, viz.,
Homer Hoyt in New York and in
Brockton; and (c) the same analyst
applied the same method, viz., Oshkosh
and Madison. Not until the same
method is applied to numerous cities
can evidence be advanced for this
hypothesis, but the question can be
raised to challenge investigation: Does
the B/N ratio vary with population?
(3) Does the B /N ratio vary with
type of settlement? Would a manu-
260 ECONOMIC GEOGRAPHY
factoring city of 50,000 inhabitants
have a different ratio than a trading
center or a government center of the
same size?
(4) Does the B /N ratio vary not
only with size and type but also with
location of settlement? Other things
being equal, would a city of 40,000
people located 30 miles from a metrop-
olis have a ratio different from a coun-
terpart located 300 miles from a similar
metropolis?
(5) Does a city's B /N ratio vary
from time to time? Would a city's ratio
during a depression be different than
in a period of prosperity?
(6) Does a vigorously growing city
have a different ratio than a stagnant
city of the same size?
(7) Are nonbasic activities similar
from city to city? Or is the similarity
between Oshkosh and Madison merely
a coincidence?
(8) How does one delimit an urban
community for application of the basic-
nonbasic concept? The United States
Census provides one useful definition
in terms of settlement density, essen-
tially that an " urbanized area " includes
not only a municipality of 2500 in-
habitants but also areas with a popula-
tion density of 2000 per square mile
(as long as the agglomeration has at
least 100 dwelling units). However, the
economic functions of an urban agglom-
eration usually are rendered by not
only the locally employed inhabitants
but also by commuters who reside
elsewhere. These people are not part
of the settlement in terms of residence;
they are part of its economic function.
Conversely, residents of a community
working elsewhere are not tabulated
with employees in the settlement's
economic activities, yet their endeavors
bring money into the city. Should an
analysis of a settlement's economy be
in terms of those who work in it, who
live in it, or both? Research endeavors
in this field need to clarify the method
of delimiting an urban settlement in
terms of economic function.
(9) What is the best method for
applying the basic-nonbasic concept
to a settlement, once it has been de-
limited? What is the best definition of
" basic "? Surely the concept needs
refinement and the methodology needs
improvement. In any case, the need is
for an accurate method for measuring
basic activity applicable to a metropolis
as well as a small city. Surely, the
search for such techniques is a profitable
expenditure of a scholar's time.
SUMMARY AND CONCLUSIONS
For several years students of "ur-
banology" have recognized a dichotomy
in urban economies, based on geograph-
ical location of markets for the urban
efforts. A city's basic activity links
the settlement with other portions of
the earth's surface; nonbasic endeavors
link the settlement with itself.
This concept has merit for urban
geography because it classifies economic
functions fundamentally on the basis
of space-relationships, it reveals one
group of economic ties which bind a
city to other areas, it permits a classi-
fication of and comparative analysis of
settlements, and it provides an addi-
tional method for classifying individual
economic activities within a city.
Case studies in which the concept
has been applied have reported a wide
difference in B/N ratios which appear
to vary with method of measurement
and size of settlement. There is a need
for more case studies as a means of
improving the methodology.
Urban analysts in a discipline where
spatial-associations are fundamental can
augment their traditional methods of
studying urban economies by applica-
 THE BASIC-NONBASIC CONCEPT OF URBAN ECONOMIC FUNCTIONS
tion of a concept distinguishing between
economic endeavors on the basis of
location of the demand area. Applica-
tion of the idea in more case studies
should not only improve the method-
ology but also provide answers to
numerous questions, contributing to
the body of knowledge about urban
settlement. This is a frontier challeng-
ing geographic analysts wishing to
advance the borders of their discipline
toward a mature fruition of economic
geography.
261
ACKNOWLEDGMENTS
In pursuing this study the author has profited
considerably from discussions with Professors
Richard U. Ratcliff, W. D. Knight, and Richard
B. Andrews of the School of Commerce, Univer-
sity of Wisconsin; from Professors Chauncy D.
Harris and Harold M. Mayer of the Depart-
ment of Geography, University of Chicago; and
from correspondence with Professor Edward L.
Ullman, University of Washington, Professor
Jan 0. M. Broek, University of Minnesota, and
Mr. Homer Hoyt, Homer Hoyt Associates,.
Washington, D.C. Mr. Frank Cook, one of the
author's graduate students, read the manuscript
in its initial stages and made helpful suggestions.