The new institutional economics and the evolution of modern urban planning: Insights, issues and lessons

Abstract

Urban planning is constantly in tension; always evolving and forever re-inventing itself. The history of modern urban planning is the story of society in search of ways of managing spontaneity. This is a conundrum to which there is no obvious or easy answer. Failing to understand it leads to planning that does not work. To understand how cities develop at the boundary between market forces and government policy it is necessary to understand the role of both kinds of institution in allocating property rights over scarce land and land-related resources. This paper examines these ideas, first with reference to some theoretical insights from the New Institutional Economics and secondly, by drawing lessons from the evolution of the British town planning system over the last hundred years. The discussion addresses key issues at the heart of the institutional design problem, including the question of how rights should be distributed between state and private property owners - including third parties affected by contracts between one or more other parties; how state rights should be allocated between different levels and spatial scales of governance; and, which institutional mechanisms should be used to exercise those rights most effectively and efficiently in the interest of achieving better co-ordinated cities.