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- Info
The economics of zoning laws: A property rights approach to American land use controls
| Author: |
Fischel, William A. |
| Date: |
1985 |
| Periodical: |
Baltimore, MD: The Johns Hopkins University Press |
| Abstract: |
This book is an attempt to persuade my fellow economists that zoning and other local land use controls are most usefully viewed as collective property rights controlled and exchanged by rational economic agents. Such a view allows the application of the modern theory of property rights, which stems from the work of Ronald H. Coase (1959; 1960), to all aspects of current land use issues. This view is thus distinctly different from that usually taken by economists, who see zoning either as an effort by disinterested planners to "internalize externalities" or as irrational rules that impose arbitrary constraints on the land market.
My method of pursuing the primary goal is to demonstrate that the property rights approach provides superior insights into most land use issues. While I was in the process of writing a first draft, two secondary goals appeared. First, the legal and political side of land use decisions requires as much attention by economists as does the private market. Most texts for courses in urban and land use economics devote a chapter to zoning, if that much. I have come to believe that public controls may deserve as much as half of the course. Thus I redrafted this book with an eye towards its employment in courses whose topics include urban economics, land use planning, environment and resources, real estate, and economics of law.
The other secondary goal stems from my discovery that most land use professionals, whose background may be in law, planning, architecture, political science, sociology, or geography, regard economics as largely irrelevant to understanding land use controls. This view stems partly from the highly technical nature of modern economics. Most of it, though, stems from economists' tendency to disregard the institutional structures that land use experts know are important. The property rights approach in this book attempts to remedy both of these problems. I avoid all mathematical formulations, but there are analytical graphs in most chapters. It is assumed that the reader has some elementary economics background; the professional economist will have to bear with the occasional reviews of basic concepts. Substantial space is also devoted to institutional description and analysis. This is central to the method of the property rights approach, which analyzes the institutions within which exchange takes place to see if they affect the outcomes of exchange. The book is divided into three parts. Chapters 1-4 deal with the factual, institutional, and legal setting. Zoning may be thought of as a collective property right, but it is not formally recognized as such, and so it is subject to many constraints. One cannot make accurate predictions or realistic reform proposals without some understanding of the land market and the nature of local controls.
Chapters 5-9 develop and apply an analytical model of zoning based on the property rights literature in economics. My principal device is the entitlements diagram, a hybrid of economists' benefit-cost graphs and property law's concept of divisible entitlements. I apply this analysis to three general issues: the siting of noxious industrial activities, the restraints on housing production in residential suburbs, and the fairness of zoning restrictions on individual property owners. Chapters 10-15 deal with several policy-related issues. These include the influence of the geographic and political structure of local government on zoning; the effects of zoning on the price of housing and the location of economic activity in metropolitan areas; the rationale for the farmland preservation movement; and the relationship between zoning and the provision of local public services. In the last chapter I evaluate current trends and reform proposals.
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