Academic journal article The Town Planning Review

'Pure' and 'Impure' Coasian Solutions in Planning

Academic journal article The Town Planning Review

'Pure' and 'Impure' Coasian Solutions in Planning

Article excerpt

There has been a recent increase in the application of the Coase Theorem to planning. The principal objective of this article is to explore further the role of such solutions by setting out our interpretation of the conditions necessary for the achievement of 'Pure' and 'Impure' Coasian solutions when legal entitlements and property rights are established in a planning context. It explores the potential of negotiated solutions in relation to development control and as a theoretical basis for community gain. Finally, it outlines a number of case studies examining whether 'Impure' Coasian solutions have delivered community gain through directly and indirectly moderated negotiations.

A small but increasing number of planners and economists have sought to improve planning research and practice by applying economic theory to planning problems. While mainstream economics, in particular welfare economics, provides a theoretical basis for economic analysis of planning, there is limited but increasing literature on the topic of planning and economics generally. The recent application of economic theory to planning (see, for example, Evans, 2004; Heikkila, 2002; Mason, 2001; Oxley, 2004; Pennington, 2001; Webster, 1998; Webster and Lai, 2003) has led to increased academic debate into the potential role of economic theory and market-based instruments in planning.

A number of authors cite the potential of negotiated solutions to overcome environmental and planning problems (see, for example, Ennis, 1997; Sagalyn, 1997). Numerous authors also cite the potential of community compensation (Mitchell and Carson, 1986; Kunreuther and Easterling, 1990; Frey et al., 1996; Frey and Oberholzer- Gee, 1997; Jenkins et al., 2004), and environmental compensation (Rundcrantz and Skarback, 2003; Whatmore and Boucher, 1993; Wilding and Raemaekers, 2000) to make developments more acceptable and overcome welfare losses through compensatory measures. Community gain (also referred to as planning gain) has also become a significant issue within planning literature (Claydon and Smith, 1997; Crow, 1998). Although not specifically identified in much of this literature, planning solutions derived through negotiation can be related to the Coase Theorem.

Most of the planning literature relating to Coase is written in the context of undertaking analysis of the use of zoning (see, for example, Fischel, 1978, 1980, 2000; Goetz and Wofford, 1979; Lai, 1994, 1997; Mills, 1989, 1990, 1991). However, the theoretical understanding and application of the Coase Theorem may have broader applications within planning. More recent planning literature has identified the relevance of the Coase Theorem to the resolution of planning and development problems (see, for example: Lai, 1994, 1997, 2007; Lai and Lorne, 2006; Lai et al., 2008; Webster, 1998; Webster and Lai, 2003; Webster and Wu, 1999a, 1999b, 2001).

The principal objective of this article is to add to this literature by exploring, using practical and illustrative examples, how negotiated solutions relate to development control in the case of small numbers and, in addition, examining whether the Coase Theorem provides a theoretical basis for community gain in the case of larger numbers. In order to structure our analysis we first develop two typologies of Coasian solution and explore the role of these 'Pure' and 'Impure' solutions in delivering directly and indirectly moderated outcomes.

The article proceeds as follows. The first section considers the origins, theoretical development and alternative interpretations of the Coase Theorem. The second section explores the literature on the Coase Theorem applied in a planning context. The third section examines the 'small numbers' case and development control. The fourth section sets out the institutional context for the Irish planning system from which the illustrative examples in the article originate. The fifth section examines the 'large numbers' case of community gain and sets out a typology of Coasian solutions. …

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