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The economic value of planning

13 January 2015

David Pendlebury

In 2015, the RTPI will be continuing with one of our major programmes of work seeking to examine the question, ‘what is the economic value of planning?’

This a complex question to answer, but also a critical one. Due to its role in determining the best use of land within a jurisdiction, and with land being one of the key economic inputs, planning decisions and economic outcomes are inextricably linked. Indeed, many of the major policy debates that have been centre stage during the tenure of the current Government, such as how to solve the housing crisis, and where and how to build major transport infrastructure (including HS2 and airport infrastructure in the South East) can be regarded both as planning decisions that have economic consequences, or as economic investments which need to be planned. Furthermore, at a more micro level, decisions relating to the best location of housing and infrastructure within Local Authorities in the UK, along with many others, are taken every day with input from both planners and economists.

Nonetheless, regardless of which way the problem is looked at, it should be fairly apparent that the goal is a common one – to develop successful places in which people and economies can thrive. However, the existence of shared aims and objectives isn’t always apparent in the historically tested relationship between the two disciplines of planning and economics. For example, some free-market leaning thinkers who would prefer to see a more liberal planning regime, such as the economist Alan Evans, have decried that “efforts by the economics profession to assist and improve land use planning appeared to be completely disregarded by planners”. Whilst others, such as planning academic Yvonne Rydin, have lamented that ‘the British planning system has become dominated by the paradigm of growth-dependent planning”.

"[T]he reality is, as ever, much more complicated. Economics is a heterodox discipline, and while a neo-liberal orthodoxy has dominated mainstream economic debate since the 1980s, it would be inaccurate to equate economists or the discipline of economics as being simply about the promotion of free markets."

To the casual observer, there might appear to be a gulf between the philosophical starting points of economists who undertake research on planning matters, and planners getting involved in economic debates, and Evans has summed up his perception of this relationship as follows:

“Seen from a distance the planner and the economist look to be on the same track heading for the same destination. A closer approach reveals that although they are both heading in the same direction, they are in fact on different tracks and some distance apart so that communication between them is difficult and only occasionally possible by shouting very loudly”.

However, the reality is, as ever, much more complicated. Economics is a heterodox discipline, and while a neo-liberal orthodoxy has dominated mainstream economic debate since the 1980s, it would be inaccurate to equate economists or the discipline of economics as being simply about the promotion of free markets – which is a trap that those within the planning profession can often fall into. At its most fundamental level, economics is the study of how best to allocate scarce resources - including land - which logically has strong social and environmental implications.

Our hypothesis, set out in our June 2014 research paper ‘The Value of Planning’ by Professor David Adams from the University of Glasgow and Professor Craig Watkins from the University of Sheffield, is that good planning delivers a wide range of economic benefits which are under-analysed in mainstream academic literature on the relationship between economics and planning.

Moreover, we propose that these benefits, which include, delivering greater transport connectivity between firms and individuals; developing agglomeration economies; managing heritage and cultural assets; and delivering greater individual and collective wellbeing through creating better places,  far outweigh the traditional ‘costs’ attributed to planning. These ‘costs’ are most commonly that planning is a constraint on unfettered development by free market actors, and is usually made by analysts who take an extremely narrow and unrealistic view of planning as simply a system of land use regulation – and this is the equivalent economists’ trap as that described above for planners.

Nevertheless, you may ask ‘why is this approach being taken?’ By focusing the debate on economics, are we not tacitly playing into the hands of those parties, including some think tanks and commentators – see Mike Harris’s recent blog on ‘why some people seem to hate planning’ - who want to see the planning system subservient to the interests of developers and big businesses? 

For example, we know that there are those who try to wrap up profit seeking motives, often represented in development terms as ‘viability’ requirements, as being about ‘good’ economics, and try to persuade policy makers and others that regulatory and legislative environments that boost their profits, boost the economy.

However, whilst there may be a (very) short term legitimate economic rationale behind this argument (more spades in the ground = more output = higher GDP), viewed over a longer time period, the logic falls apart.

In essence this is because, in the twenty-first century, in the wake of the financial crisis, and with growing concern about rising inequality and systemic challenges  to delivering individual and global wellbeing like climate and demographic change, ‘good’ economics, isn’t about profits, development, or growth at all costs. Instead, at its core is systemic sustainability, and a pressing need to deliver positive social and environmental outcomes. Economies can only grow over the long-term, and can only grow in the interests of whole populations, rather than just elites, if they take care to develop the best (built) environments in which economies can succeed. And this is where planners come in. As outlined  in the RTPI’s 2014 SPIRe report from Newcastle University – Success and Innovation In Planning - planners operating as creative enablers develop places in which individuals and businesses can thrive, and by developing and implementing a progressive vision of the built environment, planners facilitate positive human interaction, encourage the undertaking of commercial transactions, help markets to flourish and excel, and supply the conditions in which people can achieve their potential.

In this context, by viewing economics as not just about seeking more development, but the right kind of development in the right places (i.e. well planned development), we are not only trying to talk about a vision of economics that takes more factors into account than just GDP growth (although this will be a helpful by-product of the approach), but we are actually talking about a vision of economics which can deliver more efficient and productive outcomes for firms and individuals, and hence greater growth, delivered in a balanced and sustainable form.

We cannot allow the debate to be framed by the more extreme positions. In an economic vision of the future that contains sustainability and wellbeing at its heart, it is clear that economic, social and environmental interests are inalienably intertwined, and that moreover, so are the goals of economists and planners, who both strive to seek the development of thriving, successful places, and the best answers to some of the major policy decisions facing us in the twenty-first century.

About David Pendlebury

David Pendlebury is Economics Research Officer at the RTPI, working on the value of planing agenda. His other interests include transport planning, international affairs, and public sector finance. Before joining the RTPI, David worked in public affairs in Brussels and also as an analyst within the management consulting industry.