Urban Economics and Urban Policy
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Urban Economics and Urban Policy

Challenging Conventional Policy Wisdom

Paul C. Cheshire, Max Nathan and Henry G. Overman

In this bold, exciting and readable volume, Paul Cheshire, Max Nathan and Henry Overman illustrate the insights that recent economic research brings to our understanding of cities, and the lessons for urban policy-making. The authors present new evidence on the fundamental importance of cities to economic wellbeing and to the enrichment of our lives. They also argue that many policies have been trying to push water uphill and have done little to achieve their stated aims; or, worse, have had unintended and counterproductive consequences.
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Chapter 5: Planning and economic performance

Paul C. Cheshire, Max Nathan and Henry G. Overman


We showed in the last chapter how the UK planning system, as in many other countries, restricts the supply of land for housing and how this increases the real price of housing and also the volatility of housing markets. But of course since planning systems allocate land not just for housing but for all other types of land use, they have an economic impact not just in the housing market. In this chapter we look at the evidence as it relates to these wider economic impacts of land use regulation. Planning systems set rules and guidelines that control the supply and location of land usable for a full set of legally defined purposes and so influence the level, location and pattern of activity. As shown in Chapter 4 this allocation is almost everywhere done independently of prices. That is true in Britain but also in most other countries including many in the EU, the US, Australia and New Zealand. The ultimate role of planning is to help promote a balance of environmental, social and economic welfare that meets the needs of current and future generations and offsets the endemic problems of market failure in the use of land. Doing so inevitably involves trade-offs, so any planning system has both benefits and costs. The benefits claimed for the British system have been well-discussed in recent popular debate.

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