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Economics and Land Use Planning: Insights from Britain

Blog Entry No. 2
October 14, 2016

Urban policy, including land use policy, is often ineffective because of a failure to utilize economic analyses and insights

This is the second in a series of five blog entries showcasing insights and recommendations via excerpts from the 2014 book Urban Economics and Urban Policy: Challenging Conventional Policy Wisdom authored by Paul C. Cheshire, Max Nathan and Henry G. Overman. This entry focuses on the role of economics in urban planning. 

(Note: the term “city” as applied in the book refers to an “urban region.")

  • "As this book will set out, many (though not all) of the key tools in the urban policy box have had limited or little positive effect on the economic and social outcomes we all care about. Equally, some of these tools – in the U.K. notably land use planning have generated substantial economic and social costs for large groups of people. And until recently a lack of robust evaluation has exacerbated these problems, by leaving ineffective or counterproductive interventions in place." (p. 2)
  • "We strongly believe that urban policy could be improved by bringing a stronger economic understanding into policy design and delivery...Of course we also recognize that city leaders and urban policymakers need to balance economic, social and environmental welfare. But we suggest that in at least some cases – planning, again – applying insights from urban economics can improve outcomes across all of these domains." (pp. 2-3)
  • "And urban policy is likely to neither be good or to achieve its objectives unless it is informed by an understanding of how cities work." (p. 221)
  • "In essence, Chapters 2 and 3 make the case that a better understanding of how city economies function – in particular the importance of the three way interaction between agglomeration benefits, congestion costs and the sorting of workers across cities and neighbourhoods within those cities – helps explain both how global trends play our spatially and the role spatial economy plays in driving national and global macro trends." (p. 5)
  • "This highlights one of our other central messages – that the most effective urban economic strategies are based on the actual workings of local economies, rather than how some policymakers would like them to behave. It is for this reason that a significant part of this book focuses on the impact of restrictive land use regulation.” (pp 45-46)
  • "A key argument in this book is that urban policy needs to work better with the grain of markets. That does not mean letting markets rip: cities contain many endemic market failures, especially in land and property, where it is often in the wider social interest to override market signals. To do this effectively, however, implies building market signals into the underlying policy framework." (p 5)
  • "Much of this book has focused on how urban economics research should feed into urban policy development. But we also strongly believe that the effective evaluation of existing interventions (however formulated) has a vital role to play in improving urban policy. Unfortunately, the vast majority of urban policy evaluations are of poor quality." (p 225)