The aritcle explores two main economic theories that relate to ‘externalitites’ and the determination and evolution of property rights. Anderson (1996) believes economic analysis of natural resource and environment issues places too much emphasis on Pigourvian externalities and should more adequately address Coasean property rights and transaction costs. He believes it is a lack of determined property rights that “allows decision makers to ignore social costs”. He asserts that by viewing issues through a Coasean lens, we are essentially in a better position allocate resources and determine use (Anderson 1996).

Anderson (1996) states that Ronald Coase in the 1960s introduced better ways of analysing social cost than the theory Pigou had put forward in 1912 & 1920. This Pigouvian view was challenged by a few economists in the 70s and 80s, but was still the generally accepted view when this article was published in 1996.

The concept of ‘externalities are central to the Pigouvian approach. Anderson explains however that ‘externality’ is a “vacuous” term as “where property rights are not clearly specified claims of externalities implicitly assume a structure of property rights and therefore assume away the crux of the resource allocation problem” (Anderson 1996). Coase (1960 in Anderson 1996) summarised that social costs could be best defined as competing uses for resources for which property rights are not clear, ie air, water, trees, sound, and that without expressly defined property rights, in the case where one use of resources precludes another, there is a reciprocal cost (Anderson 1996).

Anderson (1996) states that consequently “environmental issues and natural resource mis-allocation are explained by a divergence between social and private costs.” He asserts that “environmental assets” offer a new frontier where arrangements can improve resource use, profits and social welfare.

The article puts forward an argument for what I would essentially term ‘natural capitalism’; the valuing of ‘property’ or natural resources that previously have had no ownership. Using the examples of Zoning, Water Allocation and Endangered Species, it explores the notion that property rights give incentive to the owner to maximise ‘rent’ and this provides a solution to natural resource allocation. The author believes that by designating ownership “we economists can begin to explore the possibility of making the environment an asset rather than a liability” (Anderson 1996). Like The Earth, the being that provides us with everything we need to sustain ourselves is somehow disposable, and that looking after the very thing that gives us life is somehow a burden.

Questions:

• This point of view is in direct contradiction to the philosophies of indigenous peoples across the worlds, and brings back to mind the questions famously asked by Chief Seattle in 1854 “How can you buy or sell the sky, the warmth of the land?” Can we place a monetary value on a having healthy planet?
• Is natural capitalism a step in the right direction towards properly valuing our Earth or does it simply reinforce the view that ‘the environment’ is only valuable if we can make money from it?
• Does using a polluter pays system simply reduce guilt of the wealthy with out making real change?
• Does the natural capitalist approach address natural resource allocation in a socially fair and ‘environmentally’ sustainable way?

References:

Anderson, T. 2004, “Donning Coase Coloured Glasses: a property rights view of natural resource economics”, Australian Journal of Agricultural and Resource Economics, v. 48, i.3, p.445

Seattle, C, 1854, "words from a savage?" [online] [viewed May 4]

9. Planning Economics 5th May, 2008 17:37:17   [#] [1 comment] 

Anti sprawl remedies since the 1970’s looks at the campaigns against sprawl that has appeared since the 1970’s, these campaigns it is noted occur have occurred and strengthen depending on the economic climate of the time. With more stringent controls on planning and growth called for in times of economic growth and more freedom in times of economic decline and stagnation.

The article looks at changing trends in attitudes and policies in relation to urban sprawl and the differences in attitudes and policies in Europe and America using the cities of Hamburg and Los Angeles. These countries and cities traditional residential values are identified and the changes that are occurring in these values are analyzed, one such change that is occurring is in the rising rates of car ownership in Europe which is actually out growing America in that area.

Throughout the rest of the article the focus is on the implementation of anti sprawl planning regulations in Portland, Oregon and what has been achieved and the results that have been obtained through their introduction. The article is very even handed in so far as it provides both the opinions of the critics of the urban growth boundary and the opinions of the supporters of the urban growth boundary. Both sides use various statistics to support there beliefs with supporters stating that the urban growth boundary stopped urban sprawl and improved densities. The critics however believe that the densities of the city would have increased regardless of the growth boundary and point to statistics that suggest other cities such as Los Angeles actually had a larger increase in density in comparison to Portland without an Urban Growth Boundary.

The author analyses the critic’s argument against stringent growth regulation and the type of top down state intervention that occurred in Portland. The critics argue that one of the main results of the growth restrictions has been an increase in land l prices due simply to the decrease in the supply of land. The critics also argue against the changes that occurred in relation to public transport in Portland which saw a huge investment in the train system and diverted funds away from roads, something that many people have been advocating recently for Melbourne. Surprisingly there has been a downwards turn in the number of people of using public transport system.

The author suggests that the aims of the Oregon people wasn’t so much to increase density for environmental purposes or to preserve the surrounding country side for agricultural purposes but simply it was “ an aesthetic consideration , the preservation of the countryside for it’s scenic and symbolic value” (Breugmann, R. 2005 pg 211). The article is finished by looking at the unforeseen consequences of introducing urban growth boundaries and identifies the winners and losers out of its introduction.

Questions:

• Do you think that with the rising petrol costs and increased environmental awareness that the trend of decreasing numbers of people using public transport in Portland would have changed similar to the way it has in Melbourne?
• The Portland planning system seems to be much more stringent, enforceable and direct than that of Melbourne 2030, do you think that Melbourne 2030 could have taken on some of its characteristics?
• The author identifies a large number of winners of losers from the introduction of stringent growth controls, with the winners mainly been those who already own or occupy land, do you believe that this is the case in Melbourne or is less of an issue as the regulations do not seem to be as stringent?

Reference:

Breugmann, R. 2005. “Anti Sprawl Remedies since the 1970’s”, Sprawl a Compact History. The University of Chicago Press, Chicago, ch 13

9. Planning Economics 5th May, 2008 11:28:17   [#] [0 comments] 

Alan W. Evans paper examines the reasons why economists efforts to land use planning have been ignored or disregarded by planners and politicians over the past 30 to 40 years.

The first reason highlighted by Evans surrounds the widespread view among planners that ‘planning should lead’ and the market should follow. Evans claims that because of this assumption, many planners disregard economic advice. Secondly, Evans argues that planning decisions are primarily political decisions, and are made as a result of political, not economic, calculation. Surrounding this issue is the idea that individuals have the potential to manipulate the planning system. As he suggests, ‘this has been increasingly recognised by economists as they have used the methods of public choice to analyse planning policies’ (p.196).

Furthermore, Evans explores the theory of public choice to analyse the effects of the planning system and to criticise its operation. In doing so he draws on examples from the USA, the UK, Australia and Italy to illustrate the diversity of responses. The conclusion is that while public choice theory can explain why planning policies are what they are, this does not mean that these policies maximise economic welfare. Therefore, welfare economic analysis is still necessary to demonstrate that some policies may, from an economic point of view, be better than others.

The paper begins by exploring the evolution of urban economics as a contribution to town planning. Initial economic studies on urban planning were based around positive economics, whereby the main aim was to explain and predict how, in a market economy, a change of some kind in the system would cause other changes through the market.

Throughout the 1970s, the theory of ‘welfare economics’ was applied to land use planning which sought to explain what actions should or should not be taken and in what ways economic welfare might be increased. The fundamental assumption of welfare economics by economists being that the social benefits of any intervention should outweigh the social costs (p.196). Evans points out that by the 1980s, the wave of interest in the application of welfare economics analysis to land use planning appeared to come to an end (p.196) because the ‘efforts by the economics profession to assist and improve land use planning appeared to be completely disregarded by planners’ (p.196).

Planners and the plan

Central to his argument is the idea that the main concern of a planner is with the realisation of a plan. ‘Best land use plan from a planning point of view is an end in itself; its achievement in the aim and nothing else’ (p.197).

Evans explains that the realisation of the plan is deemed most important and suggests that planners have little interest in the economic wellbeing of society.

Politicians and the plan

The second argument by Evans draws on the idea that the planning system is strongly manipulated by special interests. Land use planning is the responsibility of two groups, professional planners and the politicians with decisions regarding land use being made by politicians.

The issue that Evans raises is that planning is therefore a political activity, subject to political forces and manipulation. As he explains, the aim is not the ‘maximisation of economic forces and the balancing of social costs and benefits, as the welfare economist might expect, but the satisfaction of the claims of particular interest groups’ (p.199).

The realisation of this has in turn brought on subsequent studies which focus on the theory of ‘public choice’ to determine the way that the planning system actually operates.

Evans explains that ‘public choice theory’ presumes that the decisions of politicians will be primarily determined by their wish to be re elected, therefore politicians will give greater weight to the benefits and costs affecting their most vocal constituents, and very little weight to those benefits and costs affecting the less vocal, or those who are not their constituents.

Public choice and different planning systems

In exploring the theory of public choice to analyse the effects of the planning system, Evans examines the ways that the planning system functions in different countries including the USA, the UK, Australia and Italy. Evans highlights a recurring theme, that being, that the planning systems are being manipulated by special interest groups including politicians and the public who are only concerned with personal gain rather than the best social outcome.

Public choice, planning and welfare economics

Evans describes that in terms of land use, it is essential that that planners ensure the perceived gains outweigh the perceived benefits either in terms of global sustainability or social cost benefit analysis (p.210).

Further to this, it is argued that economics also has to be used to show how policies that are politically acceptable, because they benefit some politically vocal group, may impose substantial costs on the politically less vocal or even the politically unrepresented.

Evans concludes by claiming that these tactics will not make economics or economists any more popular with planners and politicians than they are already and as a result, economists will continue ‘shouting very loudly’ their predictions on urban planning policies.

The underlying theme of the paper is that planners must acknowledge economists advice if we are to progress in developing policies that satisfy all social groups. Evans argues that the current planning system is lacking to do so and as a result, manipulation by special interest groups is occurring.

Questions:

• Do you believe price information is relevant in the planning profession? Why/ Why not?
• Evans argues that the planning system can be manipulated by special interest groups. Do you agree? Do you think this is something that should be disapproved of? What can be done to control such manipulation of the planning system?
• In consideration of a proposed development, do you think that planners should be aiming to maximise net social benefits within the community?
• Do you agree with Evans that most politicians involved in the planning system are primary self interested agents?
• Do you think planning needs to have a stronger focus on economic outcomes? How do we better incorporate economics into the planning system?

Reference:

Evans, A. 2003, “Shouting very loudly: Economics, Planning and Politics”, Town Planning Review, v74, i2, p195 (18p)

9. Planning Economics 5th May, 2008 10:55:46   [#] [2 comments] 

The main theme within this chapter is about the role of the planner and the increasing influence of the public. Planning in its simplest form attempts to ensure that everyone is given access to ‘services such as electricity, roads, water, sewerage and so forth in places they choose to be’ (p37).

Moran refers to a planner who remarked that his “greatest lifetime achievements could be judged by what had not been built as a result of his efforts” (p36).

This is shows where planners have been able to take a more active role in controlling development in the past. He argues that this is not a role that is seen today with the influence of the public and them having a weight in the decision making process.

He goes onto discuss the issue of urban sprawl and cites Robert Bruegmann in stating that those who resent it the most are the more affluent, or those living in the central city as “they are used to being the ones to tell everybody else how to live” (p.36).

Moran believes that grand plans are required for towns based on the following assumptions:

• That ordinary people, left to their own devices, will systematically make wrong decisions;
• That the purposes of urban lice are fully known to planners;
• That the future is clear to planners;
• That both will be faithfully reflected in planning decisions; and
• That centralised coercion processes information, and express social knowledge, better than dispersed consent. (p.37)

He discusses how the need for land-rationing began to take shape in Melbourne and the issue of Density Vs Sprawl. Rising population and falling household sizes which requires higher density housing and land rationing to curb sprawl. (p38)

It is argued that zoning laws were implemented to preserve the amenity of local areas. People don’t just buy a house, they buy into an area or community which is why generally, there is a natural resentment to change. (p39)

Existing home-owners benefit from the rise in property value but resent the loss in amenity and increased crowding. They resent such large residential buildings being developed in their area but it is these developments that are inflating their own property values. (p38)

Moran introduces the Save Our Suburbs phenomenon and their effect in Melbourne. The guiding principle of the group is for “the protection of the property rights of residents” (39).

Moran then goes onto analyse the supporting principles of SOS believing that these rights are for the existing and continuing residents, and they aim to restrict the rights of developers as they tend to invite unwanted uses.

“SOS believes that the urban expansion of Melbourne should be contained by means of direct government intervention to prevent the development of peripheral agricultural and other land… SOS recognise the need to limit the geographical spread of suburbs…Urban expansion of Melbourne should be contained by direct restrictions or controls upon the development of peripheral land…. Medium density should be take place in properly chosen locations… Without affecting existing residents…
SOS now aims to stop the negative 3rd party costs associated with increased density developments”. (p39)

He argues that SOS are concerned about preserving existing middle to inner-ring suburbs but want to restrict development on the periphery. They also want quick, orderly and certain planning with local democratic control – that is, greater weight given to the public in planning decisions.

Planners become experts through study and devoting their professional life to planning but then these public groups attempt to take the situation into their own hands and the responsibility off the planner.

Discussion questions:

• Do you think that pressure groups such as Save Our Suburbs are holding Melbourne back in terms of growth or reaching our objectives?
• Are their objectives sustainable or rational?
• Do you think that anti-development or conservative/protectionist groups such as these provide a balance or check for planning regulations and objectives?
• Do you think that the influence of such groups is attempting to make the field of planning obsolete?

References:

Moran, A. 2006, “The Evolution of Planning: Servicing Needs to Creating Visions”, The Tragedy of Planning: Losing the Great Australian Dream, Institute of Public Affairs, Melbourne, ch. 5, (7p)

9. Planning Economics 4th May, 2008 16:17:25   [#] [6 comments] 

Introduction:

‘Places of historic significance reflect the diversity of our communities. They provide a sense of identity and a connection to our past and to our nation (Overview, p.1)’.

The Productivity Commission Inquiry Report was established to identify the main pressures obstructing the conservation of historic heritage places, and the inconsistency of the treatment of heritage zones, with some heritage zones covering up to 80 per cent of all properties (for example, City of Yarra, sub. DR346) (Chapter 11, p.287), and all handled differently by each local government.

Academic background of heritage conservation in Australia:

Since the first National Trust of Australia was formed in 1945, heritage conservation in Australia has come a long way. Though it was not until recently in 2003 that historic heritage was formally included under the Environment Protection and Biodiversity Conservation Act 1999, along with the creation of its accompanying legislation Australian Heritage Council Act 2003 and the Australian Heritage Council (Consequential and Transitional Provisions) Act 2003 (Overview, p.3).

Main recommendation of the Commission Report:

The Commission’s key recommendation was that for non-government-owned (private) property assessed as being a place with significant historic heritage, statutory listing should be only with the agreement of the owner on the basis of a negotiated conservation agreement (NCA) and that the listing would only remain while the agreement was in force (chapter 1, p.8). This is as opposed to the listing of a property as of heritage importance without the consent of the owner. The Commission Report addresses the unjustifiable forcing of owners into involuntary maintenance of heritage conservation, where significant maintenance, repair or restoration costs are required to uphold a property’s heritage significance, as well as the loss in the future developmental value of the property as a result of the ruling (Overview, p.35).

The Commission notes the problems that arise from the old system of involuntary heritage listing of property, where hostility and resistance to listing is experienced in a small but significant number of cases. The reluctance to undertake the necessary conservation sometimes leads to the eventual demolition because of neglect, as well as the generation of a high level of enforcement cost (Overview, p.27).

As a result, ‘heritage listing in this segment is often ineffective and inefficient’. The Commission reports that heritage listing is conducted inconsistently across Australia, often in areas where the net community benefit is uncertain, and added costs are unfairly borne by the owner for this ‘wider community benefit’ (Overview, p.27).

The main purpose of this recommendation was to encourage governments, especially some local governments, ‘to consider explicitly the cost consequences of their decision to apply proscriptive regulation to protect the heritage values of a place (chapter 1, p.8)’, and to ‘assess net community benefit (Overview, p.27)’ before formally including the place on their statutory list.

The importance of the Commission Report:

It provides owners with the right to appeal statutory listing on the grounds of unreasonable costs (Overview, p.7). Currently, ‘while there is scope in the legislation for governments to consider the cost consequences of this at the time of listing (and a few do), owners have no right to insist that this is done (Overview, p.25)’. Now new listings can appeal based on (a) the zoning of the land which permits higher value land use than that allowed under heritage restrictions, or (b) unjustifiable hardship on the owner in maintenance, repair or restoration costs required to continue a property’s heritage significance (Overview, p.35).

Justification for the proposed changes:

This system is unsustainable, and the amount of funding required to support this is extraordinary and unrealistic. There is simply too little funding available – ‘the lists of statutory-protected properties are growing, but a significant proportion of them are poorly maintained. In 2003, Heritage Victoria estimated that some 20 per cent of places on the Victorian Register were in poor or very poor condition — with many losing or having lost their heritage significance (Overview, p.24)’. If the current heritage listing system continues this way, there will be no point to even declaring a property ‘heritage-worthy’.

Conclusion:

The Commission Report highlights the issue of growth in cities, and how much change is acceptable in a country where heritage is legislatively protected even where it is financially unviable. Massive heritage overlays in cities such as South Yarra indicate a conflict of planning goals when faced with contemporary modern development and heritage values in an inner-city municipality. This needs to be defined before the city’s growth is curbed by our inefficient system of heritage conservation.

Questions:

• The system of Negotiated Conservation Agreements proposed: too voluntary a system of heritage listing that would dismantle 30 years of heritage policy evolution?
• Should all places identified as having ‘heritage significance’ be protected irrespective of cost?
• Is heritage conservation taking up too many resources?
• Are local governments not sufficiently considering the cost of heritage protection before imposing listings?
• Should owners of these properties have a say in whether or not their properties are listed?
• Is our historical heritage listing sufficient to protect our identity, culture, sense of belonging and history?

Reference:

Productivity Commision 2006, "Inquiry Report: Conservation of Australia’s Historic Heritage", No.37, Commonwealth of Australia

9. Planning Economics 3rd May, 2008 23:59:06   [#] [1 comment] 

The article was started by defining the basic components of American property law that was originated from England. The author, R. Meiners and A. Morris were questioning if the traditional property law can adapt with the current e-commerce, intellectual property world and smart growth movement (Meiners, R., Morriss, A. p.180).

The authors mentioned the important of having the right common property law for the sake of the long-term success of economy. They tried to suggest the superiority of property rights solutions compare to the traditional planning approaches through study cases and examples, as he also referred to Richard Epstein’s simple rules for a complex world. The suggested property law will provide various solutions to problems, instead of traditional command and control mechanism like zoning(p.180).

They divided this article into 3 sub-chapters. The nature and source of property rights, free market environmentalism and environmental creativity.

The authors were really concern about personal freedom. It reflected on what they said about property rights, which they called the negative rights. They acted as environmental protection and urban sprawl prevention, but were actually disguises of feudalism that limits the ability of others developing the existing resources(p.181).

The examples they used afterwards were against the property rights as environmental protection. First one was about a man whose land development was held for 26 years because of the long and complicated permit application process in the justification of environmental issue (p.184) and second one was about a biologist that was sent to federal prison for the crime of reclaiming a land to become a wildlife sanctuary(p.185).

The authors conveyed the reader to reflect huge failures of centralized planning model that wholly applied to economics such as Five Year Plans (the Soviet Union), Great Leaps Forward (China), and National Socialism (Nazi Germany).But then, the planners argued that catastrophic consequences would not be resulted by using planning for a relatively small section of economy. And if it did happen, the cost would be overcome by its benefits(p.188).

Furthermore, the authors were wondering about how to determine the environmental goals are enough. Weren’t the answers come from the government or planners?(p.189)They thought that government-run environmentalism was just the same with government-run military(p.194). Central planners must not need to force property and land owners to protect their own environments(p.190). One evident was about a free individual who deliberately used her land as hawk’s preservation. At her time, she might be considered crazy, but she has used her free will to save her environment(p.195).

As conclusion, the authors suggested that people have to avoid the thought that some people are superior to design the world for the others. There was not any constant example of planners can always make a better habitat(p.199). People have to encourage the free market environmental and environmental creativitiy(p.196). Free market environmental was about diversity that allows freedom of values expression, It also allows others to learn from the options, bad or good, right or wrong. Then, the environmental creativities are experimentations about what people prefer for the protected environment and enjoyable spaces, without too much command and control from the government. As long as people are willing to pay for the cost, they were sure that people would be able to achieve creative solutions for enhancing environment development(p.197).

Questions to think about :

Do you agree to what the authors were saying? Do you also think that the centralized planning is bad and can’t be used in Australia?

How do you think the free market environmental and environmental creativities would affect the environment?

If government does run the author’s proposal, do you think it would raise the economic situation and the housing affordability?

Reference :

Meiners, R., Morris, A. 2001, “Property Rights in a Complex World”, Smarter Growth : Market-based Strategies for Land-Use Planning in the 21st Century, Greenwood Press, Westport, ch. 10, (22p)

9. Planning Economics 3rd May, 2008 02:15:47   [#] [0 comments] 

This research paper explores the heritage housing market in Sydney. The aim of the research was to try and estimate the market price difference between heritage-listed and regular, unlisted houses. Together with this aim, the research tried to examine the relationship between market price and the level of heritage significance of heritage houses. The reason why such research was carried out was because there have been no substantial studies in the area of heritage in the housing market.
Consequently, eight suburbs in Sydney were used to define the sample. Deodhar notes that, “market preferences are determined by consumer tastes and latter in turn are governed – though not entirely – by people’s income, education and occupation profiles, ethnicity, family structures and stage of life. [Therefore], by selecting suburbs with similar demographic, ethnic and socio-economic profiles, the likelihood of identifying a homogenous market would be maximised” (Deodhar, 2004). Data from 64 listed houses and 76 unlisted were collected with the following taken into account; Land size, number of rooms, quality of house interior, estimated age, street access, swimming pool, east or west of the railway, proximity to train station, proximity to business district, traffic levels on street, whether or not heritage-listed, time of sale and heritage significance level of a listed property.

After extensive research over several years, it was found that heritage- listed houses were found to enjoy a premium over unlisted houses. “This premium is a measure of the combined value placed by the market on both, the heritage character of houses and their statutory listing status” (Deodhar, 2004). The average price for listed houses was $1.2 million compared to $0.8 million for unlisted ones. While the cheapest property in both groups was priced at about $0.35 million, the most expensive heritage-listed property sold for $3.8 million in contrast to $1.9 for an unlisted one.

As well as this, the second aim of the research was to examine the relationship between the heritage significance of a house and its market price. It is common knowledge that there is a wide variation in the level of historic or even cultural values a heritage property owns. Deodhar explains this, “a historic house associated with the life of a famous Australian person may enjoy a heritage value that is higher or lower compared to a historic house valued for its distinctive architectural design. Similarly, a historic house with most of its original features intact is likely to represent a higher heritage value than a house which has lost some of its original features but is otherwise in outstanding condition” (Deodhar, 2004). However, the research found that there is a premium one pays for a ‘higher listed’ heritage property than that to a ‘lower listed’ one. This premium reflects the combined value that the market places on their heritage character, their architectural style elements, and their statutory listing status.

“In sum, this market [the 8 suburbs in Sydney] appears to support conservation of heritage- listed houses” (Deodhar, 2004).

Questions to think about...

• Do our councils in Melbourne value heritage? If not, should they value heritage more? How can they do this?
• Which suburbs in Melbourne have a healthy market for heritage listed homes? Is this because of council regulation?
• Would you consider buying a heritage listed property over an unlisted property? Why/why not?
• Do you think that heritage listed properties should sell for more or less than an unlisted property?
• Is there scope to keep heritage listed buildings and provide higher density housing in the same suburb? Or do we have to leave heritage listed suburbs as low-density areas?

Reference:

Deodhar, V. (2004) “Does the Housing Market Value Heritage... Some Empirical Evidence” Macquarie Research Paper, No. 3

9. Planning Economics 2nd May, 2008 14:46:34   [#] [7 comments]