Principles of Planning for Economists

Abstract

The literature in economics and planning contains advice that seems to hinge upon the distinctions between planning and market approaches to public policy. In these distinctions, the planning approach is often characterized as stiffly regulatory while the market approach is characterized as more flexible and thus usually preferable. This distinction, we argue, is false both in its positive formulation and in its normative implication that the market approach is always superior. Instead, we assert planning is not about market failures and regulatory remedies but can be better understood by several other economic principles. These include the Coasian notion of transaction costs, the problem of optimization over time, and the problem of non-cooperative games in which the public sector is but one of many players. We argue plans and planning make sense in both situations where single or multiple actors think before acting, using limited information. When viewed in these frameworks, we argue that research by planners and economists are much stronger complements than they are substitutes.

Publication
Oxford Handbook of Urban Economics and Planning