Abstract: “City” and “trade” are contradictory unity，whose functions are different and even opposite，mutually blended.Historically，“city” comes earlier than “trade”，and because of “trade”，“city” possesses the advantage of scale.Only when institutional efficiency is focused on can the origin of a city be reasonably explained and thus be reasonably planned.The largest function of a modern city is to create an institution of incentive compatibility.Based on this，the purpose of city management is to create higher efficiency and greater productivity instead of abusing rights.In building a well-off society in an all-around way，we have finished the first two steps of the three，and those who have become rich first have used up their motivation.The second-level motivation should come from the innovation incentive of the middle class，and doubtlessly，cities will provide the most important platform for them to realize the strategic transfer.

Key words: city, effectiveness, institution