Urban Problems and Economic Theory

  • Graham Hallett


The problems of allocating urban land uses are basically the same as those of allocating food, clothes, cars or anything else. Economic textbooks begin by pointing out that all societies, whatever their political and social organisation, have to answer three economic questions. What is to be produced? How is it to be produced? For whom is it to be produced?1 In the urban field, this means such questions as: How many houses, shops, offices are to be built? Where and how are they to be built? Who is to obtain the use of the houses, shops and offices?


Market Economy Welfare Economic Negative Externality Urban Renewal Market System 
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    P. A. Samuelson, Economics: An Introductory Analysis Chap. 1.Google Scholar
  2. 2.
    Many books critical of private ownership and market forces lay _ considerable stress on the communal landownership of nomadic peoples (e.g. R. W. G. Bryant, Land: Private Property, Public Control Montreal, 1972). The same nostalgia for a communal Golden Age is found in poets since Virgil. But this system is possible only in a situation which pre-dates not only urban settlement but even settled agriculture, and in a society dominated by totem and taboo. Thus it is hard to see much direct relevance to modern societies in primitive land tenure systems (although much can be learned from some ‘primitive’ peoples in their general attitude to life). It is the life of present-day Russians or East Germans that should be studied as the alternative to a market economy, not that of 18th century American Indians.Google Scholar
  3. 3.
    For a typical example see After the Planners by Robert Goodman, Penguin Books, 1972, particularly the introduction by John Palmer. The philosophy is an amalgam of ideas from Marcuse, Sartre etc., and Professor Galbraith. Galbraith’s term ‘technostructure’ is used to designate the crypto-fascist alliance of property developers and government officials which has imposed town planning on the people. Professor Galbraith, who can be forgiven much for the wit which — in his earlier works — he brought to economics, has suggested in The New Industrial State that ‘conventional economics’ treats externalities as a minor blemish on a well functioning market mechanism, whereas the truth is that the ‘technostructure’ has interests contrary to those of the public. If only it were so simple! Technocrats can certainly develop toys which benefit few apart from themselves or a small elite if they are given the public funds to do so. But once a project has then started, workers also acquire vested interests, which are then reflected in the political process: witness Anglo-French jingoism over Concorde. It is vital to initiate a frank and informed debate before large public investment projects are started. However, in most cases technology, which can be so destructive in many directions, is catering for genuine public wants. People want to own cars.Google Scholar
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    Socialism’ is used here to mean — in the words of the Labour Party constitution: ‘the public ownership of the means of production, distribution and exchange’; in the presenh case the public ownership of land, houses and other buildings. It has, of course, been given other definitions, some of which — e.g. that given by the late Mr. Anthony Crosland in The Future of Socialism (London, 1956, p. 103ff) (concern for the underdog, a desire for harmonious relations in society, etc.) can inspire anti-socialists as much as socialists. ‘Persuasive definitions’, which flit between some unexceptionable moral objective and a specific system of economic organisation, obscure the question whether the one is best calculated to achieve the other.Google Scholar
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    A brief account of the ‘Lerner-Lange’ model is given in Scarcity Challenged Heinz Kohler, New York, 1968, Chap. 20.Google Scholar
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    Graham Hallett, Housing and Land Policies in West Germany & Britain 1977 Pt 2.Google Scholar
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    See The Theory of Public Choice by J. M. Buchanan and R. D. Tollison, Michigan U.P., 1972.Google Scholar
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    In the early 1950s, the centre of Gloucester was an area of considerable historic interest and charm, with a variety of old timber-framed buildings. In the 1960s the council adopted a policy of expanding shopping and council housing in the town centre. This involved massive demolition — in twenty years, 60 per cent of the timber-framed houses listed by the Ministry of Housing were demolished. By 1972, the centre of Gloucester consisted of an isolated cathedral surrounded by supermarkets and car parks, which destroyed the charm of the city without preventing serious traffic congestion. At the centre of this devastation was a small undistinguished pedestrian square, which could have been in any American suburban shopping centre: opening it, Mr. Peter Walker, Minister of the Environment, stated that the redevelopment of the centre of Gloucester was ‘an example to the country’. If it had been Lord Butler, one might have suspected irony.Google Scholar
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    In 1971, some people living near Orly Airport, Paris, successfully sued an airline for disturbance. In the USA, some airports are engaged in million-dollar lawsuits, and have had to buy up large areas of nearby land. This legal pressure, together with widespread protest against noise, has wonderfully concentrated the minds of airlines and manufacturers on the need to develop quieter planes, and striking progress has been achieved, although it will take a decade for the fleet to be changed. In the UK the right to take legal action was abolished by the Civil Aviation Act, 1949 (passed when Parliament had no inkling of the noise nuisance which would develop).Google Scholar
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    F. A. Hayek, ‘The Use of Knowledge in Society’, American Economic Review, September 1945, pp. 519–530.Google Scholar
  19. See also S. C. Littlechild The Fallacy of the Mixed Economy, Hobart Paper 80, I.E.A. 1978.Google Scholar
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    A. J. Harrison, Economics and Land Use Planning, Croom Helm, London, 1977, p. 35.Google Scholar
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    Ibid. p.. 87.Google Scholar
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    G. Stigler, The Theory of Price rev. ed., 1952, p. 43.Google Scholar
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    The theoretical difficulties are pointed out in I. M. D. Little, A Critique of Welfare Economics 1950, and Charles K. Rowley and Alan T. Peacock, Welfare Economics: A Liberal Restatement 1975. More readable and forthright is P. Self, op. cit.Google Scholar
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    This is not formally as correct as the rules given in e.g. I. M. D. Little, A Critique of Welfare Economics Ch. VIII. But the formal rules are very abstract, and hard to apply directly to the urban market. Little’s rule (II)G will be met if prices equal the lowest possible construction costs for any type of dwelling, plus land costs (on the assumption that land is freely interchangeable between uses, or that any planning controls correctly take account of externalities). To assume that people make choices in line with their preferences is, in practice, the only possible assumption, since consumers’ preferences can only be deduced from what they actually do.Google Scholar
  28. 26.
    Like an elephant, a ‘shortage’, ‘surplus’ or an equilibrium in housing is difficult to define but easy to recognise. However, some attempts at definition can be made. If population, and the demand for housing, were constant, definition would be easy; the condition for equilibrium would be the usual one, that there would be no economic incentive to increase or reduce the supply of housing. But if population, or the demand per head, is rising, the equilibrium will be a moving one, with the supply curve moving to the right at the same speed as the demand curve. Additions to the housing stock will earn only a ‘normal’ profit. A shortage can be indicated by various signs: an acceleration in the rate of rise in prices; vacant houses being snapped up very quickly; evidence of families being forced to share houses, etc. A surplus is indicated by a flattening-off of prices, difficulty in selling houses, etc.Google Scholar
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    This is the virtue of Professor Nathaniel Lichfield’s ‘planning balance sheet’, especially, perhaps, in the simple form in which he originally put it forward in The Economics of Planned Development 1966.Google Scholar
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    See New Roads in Towns. Report of the Urban Motorways Committee, HMSO., July 1972.Google Scholar
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    K.E. Boulding, Economics as a Science, McGraw-Hill, 1970, p. 91.Google Scholar
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    Honor Croome, ‘Progress Without Tears’, Lloyds Bank Review July 1959. It can be argued (Little op. cit. Chap VI, VII) that compensation cannot be divorced from equity i.e. perhaps those who suffer from expropriation should suffer. There may be rough justice in this approach when the issue is a major dispersal of property ownership e.g. land reform in South America. But when real property is more widely distributed, the arguments are stronger for treating seperately the questions of compensation and policy on the distribution of ownership.Google Scholar

Copyright information

© Graham Hallett 1979

Authors and Affiliations

  • Graham Hallett
    • 1
  1. 1.University CollegeCardiffUK

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