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Economists vs. Planners? Complements, Not Substitutes

Often, planners and economists seem to be at odds. Actually, a better description would be talking past each other—literally two ships passing in the night.

Planners often think economists are too narrowly focused on dollars, cents, and rational decisionmaking. Economists can’t understand why planners don’t recognize the real world of markets and why incentives matter—a lot.

Samuel Staley | March 15, 2008, 1pm PDT
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Often, planners and economists seem to be at odds. Actually, a better description would be talking past each other-literally two ships passing in the night.

Planners often think economists are too narrowly focused on dollars, cents, and rational decisionmaking. Economists can't understand why planners don't recognize the real world of markets and why incentives matter-a lot.

I'm not sure it's worth going into this discussion in more depth except to say urban economists have an important virtue that is critical to successful urban policy and even place making. At the heart of urban economics is a strong empirical bent-they don't just hypothesize about cities, they evaluate their theories empirically.

I was reminded of this while reading the most recent working paper by one of the nation's foremost urban economists, Harvard's Ed Glaeser. "The Economic Approach to Cities" is a working paper that is slated to become a chapter in a forthcoming book. It's one of the best and most accessible summaries of the "state of knowledge" in urban economics I've seen.

Glaeser distills the economic "approach" to cities into three overarching ideas, or "pillars". Two of these pillars "help us understand the world" while the other "helps us to offer policy advice".

These pillars are:

  1. People respond to incentives, but not just financial incentives. Ultimately, individuals are bound by their world view, experience and knowledge, and they make decisions based on what they believe makes them (and others) better off.
  2. There is no free lunch. In other words, everything has a trade-off, and we make rational decisions based on how we evaluate these tradeoffs. Combined with the incentives, economist can make predictions about individual behavior as well as how the entire system might work.
  3. Good policies increase the range of choices that an individual can make. This is a basic tenet of the economists world view and is deeply rooted in mainstream ideas of social welfare and welfare economics. More choices allows more individuals to obtain higher levels of individual welfare tailored to their own needs and aspirations. If the set of choices expands (subject to Nos. 1 and 2 above), then society is better off as well.

Glaeser than uses the bulk of his paper to explain how these pillars work by summarizing the most recent empirical research on urban migration, commuting, crime, congestion, externalities, and lots of other stuff. It's well worth a read, but I won't summarize the research here to save space.

Besides, I think there is another more important point that might be a bridge between economists and planners. Glaeser notes (on page 9) that economists depend a lot on general models of human behavior to understand cities. A

model's strength lies in its ability to make predictions that hold generally, not it its ability to explain the exact peculiarities of particular places. While some disciplines place great value on adding complexity and nuance, economists like the ability to produce general rules that hold most of the time. Economists are usually more interested in common patterns than in particular idiosyncracies.

Here's where I had my "ah-hah" moment.

Glaeser's right. Economists-their models and methods-are really good at assessing general patterns. But planners and planning, for the most part, are enmeshed in place making-the particulars of what makes a good neighborhood, street, district. The planners' role is very much in adding value to the particulars of place.

At the end of the day, the two professions are asking different questions. We shouldn't be surprised that their answers to major questions of urban policy might also differ. Economists are generally not concerned about urban sprawl because they find that improved housing affordability and access to better public services (e.g., education) on a regional scale are beneficial to the growth of cities. Planners are generally more concerned about urban sprawl because they see low density, single-use zoning and land use regulation detracts from urban character and place. This is a stylized and simplistic summary of the debate, but it helps explains why economists rarely criticize sprawl while planners have combating sprawl a central part of their policy agenda.

So, is one better than the other? No. They complement each other. The particulars of place matter to economists, but they are not a focus of their professional inquiry. Economists don't have much to say about place, at least in the way planners conceive of it. This is where planners can provide an important substantive contribution to urban economic analysis. Economists, for their part, can provide an important reality check on the claims planners make about how and why cities grow and prosper.
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