This paper is based on the results of an extensive (840-page) report of the Committee on National Spatial Development of the Polish Academy of Sciences, entitled Studies on Spatial Chaos (edited by A. Kowalewski, T, Markowski and P. Śleszyński—Studia KPZK PAN, vol. 182, Warsaw 2018—in Polish). Its aim was to conduct a comprehensive and detailed study on the problem of spatial chaos (spatial disorder), including an estimate of economic costs in Poland. For this purpose, literature was queried (articles and reports, etc.) and special analyses were prepared for this purpose. The total annual costs of spatial chaos were estimated at not less than 20 billion euros per year. The conclusions also proposed solutions and suggestions (for the government and local governments), which may reduce the acute costs of spatial chaos in society and economy.

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Objective: In this article Urban Functional Areas (UFAs) and their essence of matter and leading qualities are considered through the prism of theoretical concepts such as transaction costs, the concept of territorial capital and the space of flows with connection to the network economy. Research Design & Methods:Each theoretical concept prompts its own group of intervention instruments in the processes of territorial development. On this basis the authors focus on explanation of the possibility of public intervention in the functioning and development of urban functional areas.Contribution / Value Added: This article has a theoretical character but formulates general basis for elaboration of integrated development policy on the level of local self-government co-operation". Finding and recommendations: The authors show that the territorial authorities and enterprises in Urban FunctionalAreas should integrate their development policies around the "new quality resource" in the form of territorial capital. The territorial capital in UFAs of modern economies becomes the most important source of building long-lasting competitive advantages for businesses.

The paper is an attempt at reviewing the classical theory of externalities and club goods in the new context of flow economy and network relations, as well as the role of human capital connected with high quality surroundings (urban environment), which is a catalysing factor, and allows the formation of new resources and new competitive advantages for cities and busiensses.

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