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Book Review
by
Richard M. Ebeling,
September 2002
Liberating the Land: The Case for Private Land-Use Planning by Mark
Pennington (London: Institute of Economic Affairs, 2002); 114 pages; $15.
Over the last 20 years there have been a variety of strong reactions against
the idea of government planning. But one of the areas in which most people
still take for granted the necessity of government planning and regulation
is urban and rural land use.
This goes beyond the environmentalist movement in the narrow sense.
Virtually everyone assumes that the city, county, state, and federal
governments must establish various rules and restrictions on the private use
and development of land. There are many conservative city councilmen who
could wax as eloquent as an articulate classical liberal on the dangers of
and abuses from government oversight and regulation of private enterprise
and the free marketplace.
But more often than not they believe as strongly as their left-of-center
“liberal” political colleagues do that zoning laws and land-use planning
must exist “in the interests of the community.” At the local level,
unfortunately, most people are advocates of government control.
In 1996, the Institute of Economic Affairs (IEA) in London, England,
published a monograph by Mark Pennington, lecturer in public policy at the
University of London, titled Conservation and the Countryside. He pointed
out,
“Before the Second World War, countryside conservation in the United Kingdom
rested with individuals and voluntary bodies. From the natural history
societies of the Victorian middle classes, to the first property obtained by
the National Trust, conservation was a matter for the private sector. Half a
century of government control began with the 1947 Town and Country Planning
Act, which removed from the individual the automatic right to develop land,
paving the way for Green Belts, National Parks and the other statutory
designations which have become the dominant feature of countryside policy.”
Pennington then proceeded to show the negative and perverse effects from
government planning over land use, pointing out that cases most frequently
cited as “market failures” concerning conservation and environmental issues
really reflected government failures inherent in the nature of the political
process.
The IEA has recently published a new, longer monograph by Pennington called
Liberating the Land: The Case for Private-Use Planning. His purpose is to
challenge the underlying assumptions behind the planning perspective and to
explain the superiority of market solutions to land-use problems.
There have been three variations on the planning idea, Pennington says.
“First, there is the comprehensive planning model, under which it is assumed
that the planners have the ability to obtain and objectively evaluate all
the relevant information necessary to determine the optimal and most
desirable allocation of scarce land resources among their potential uses.”
“Second, there is the incrementalist planning model, under which it is
admitted that the planners may not be able to have all the pertinent
information to begin with, but it is assumed that through a process of trial
and error they can learn how to manage the land uses of the society.”
“And, third, there is the collaborative planning model, under which citizens
are to determine land uses more directly through a process of participatory
democracy in which all the members in a community have their say before any
one landowner may use his property for any particular purpose.”
Pennington counters these arguments by drawing upon three strands of
free-market ideas: Hayek’s conception of the division of knowledge and the
price system; the public-choice approach, with its emphasis on
self-interested behavior in the political process; and the property rights
analysis that focuses on the incentives at work under private ownership.
If governments are to determine the allocation and use of land, they must
have some rule or guide or steering mechanism to decide the appropriate
apportionment of the land resources under its control.
How much land and which pieces of land shall be used for residential
housing, industrial sites, recreational locations, urban development,
agriculture and farming, and wildlife preserves?
And how much land and where, at the margin, shall the land uses be changed
or modified as circumstances, uses, values, and demands change over time?
If such uses are to reflect the values and desires of the members of
society — assuming that these decisions are not to be made simply
arbitrarily by an arrogant environmental elite asserting dictatorial right
of control for themselves — then there must be some system through which
individuals can express and demonstrate their valuations, judgments, and
willingness to pay a price for land to be used for some purposes rather than
others in various geographical locations.
Pennington explains that the Austrian economist Friedrich A. Hayek’s
contribution to economic understanding was to demonstrate the manner in
which market competition and prices serve as the means through which the
allocation of land among alternative uses can reflect people’s preferences.
Where land is privately owned, individuals have the opportunity and ability
to buy and sell it for various uses. They express their individual
valuations and appraisements for different pieces of land through the prices
they are willing to pay or receive for them.
Market prices, therefore, encapsulate and incorporate the information and
knowledge of multitudes of people in society concerning their desires and
demands for land to be used for one purpose rather than some other.
Furthermore, in the marketplace decision-making and control is
decentralized, divided among a vast number of owners and buyers. Thus, if
error or miscalculation results in someone’s misusing or incorrectly
allocating some pieces of land, the mistake is localized and limited, unlike
errors made by the general and centralized government decision-making, under
which the error or misuse has less of an immediate negative feedback and
potentially affects the entire community.
Hayek’s analysis, Pennington explains, was meant to show that, even if we
assume that the central planners had the best of intentions in mind, with
only a desire to “do good” for their fellow men, without the competitively
generated structure of relative prices to reflect market demand for scarce
land resources, they would not know how to rationally apply and use the land
under their control.
Public-choice theory, on the other hand, reminds us that people, including
those participating in the political process, are basically guided by their
own self-interest.
Central planners have their own agendas, and various special-interest groups
desire to use the political avenue to acquire what they want outside of the
peaceful and voluntary relationships of the market economy. Individual
voters often lack the incentives to become informed enough to understand how
and for what purpose the political process is being used by interest groups.
(This is called “rational ignorance.”)
And often the political gains accruing to the special-interest group far
exceed the particular burden born by the individual consumer. The individual
voters bearing this cost do not have the motive to resist the system of
political privileges and favors. (In technical terms, this is “the
concentration of the political benefits for the interest groups and the
dispersion of the costs of those benefits among the general consuming
public.”)
This means that land-use decisions and allocations through the political
process usually have nothing to do with some imagined “public interest” or
“general welfare.” They reflect the power and pull of those who desire
monopoly position to restrict competition, and the desires of those who wish
to impose their valuations and preferences on others through coercion and
control rather than through peaceful persuasion and exchange.
In addition, Pennington emphasizes that private property rights mean that
individuals must take into consideration the consequences and effects of
their actions on others in the society. The problems of pollution and
environmental waste or abuse arise only where property has not been
privatized and property owners are not expected to be legally as well as
morally responsible for their actions.Furthermore, property rights create
incentives for owners to think about tomorrow before deciding how to use
their property today. Their property represents sources of future income,
both from using land resources for the manufacture of products or the
marketing of services and from its resale value as a potentially productive
asset.
Finally, Pennington turns to the question of how land uses might be
determined in the private market if left completely free of government
planning, regulation, and control. He suggests that precisely because
individuals and families do have different preferences and desires
concerning the types of neighborhoods and environments they would like to
live in, proprietary communities would probably develop and take shape.
They would offer the services and surrounding land-use amenities reflecting
the wishes of different groups looking for places to live and bring up their
children. Restrictive covenants agreed to by those who moved into such
diverse communities would ensure that all those participating respected the
valuations and wishes of their chosen neighbors. “A housing developer who
fails to provide a package of restrictive covenants to protect amenity
values will lose custom to those competitors who do so,” he explains. “In
the proprietary community model individuals are, in effect, contracting into
a set of collective or shared private property rights offered for profit by
institutional entrepreneurs.”
These and other possible private institutional arrangements offer “market
solutions” to community and land-use problems. As Pennington points out,
“The primary argument for the market as advanced by Hayek is that it is a
realm of voluntary planning characterized by private property and freedom of
contract. It is within such a realm of private contract that people may
voluntarily associate in organizations that restrict their own behavior in
particular ways, in order to engage in acts of planning and social
cooperation that can serve the collective good.”
Richard Ebeling is the Ludwig von Mises Professor of Economics at Hillsdale College in Michigan and serves as vice president of academic affairs at The Future of Freedom Foundation in Fairfax, Va.
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