CAN PLANNING BE JUSTIFIED AS INTERVENTION DESIGNED TO DEAL WITH LAND AND BUILDING
MARKET IMPERFECTIONS?
Ari Widyati Purwantiasning
Jurusan Arsitektur Fakultas Teknik Universitas Muhammadiyah Jakarta
ABSTRAK Hampir setiap negara di dunia mengantungkan perkembangan ekonominya pada prinsip-prinsip pasar untuk mencapai distribusi dari faktor-faktor produksi dan komoditi. Meskipun tingkat dari masing-masing prinsip tersebut bervariasi sesuai dengan kebijakan dari setiap daerah, namun tetap saja muncul masalah-masalah utama dari pasar yang berhubungan dengan sistem perencanaan. Tulisan ini akan membahas tentang kasus dan masalah dalam perencanaan lingkungan baik di perkotaan maupun di daerah pedesaan yang berhubungan dengan pasar lahan perkotaan dimana pasar tersebut berkaitan dengan konsep permintaan dan penyediaan (demand dan supply).
A. INTRODUCTION
Almost all countries in the world relied their economy development upon the market principles to govern and to fully handed the distribution of factors of production and commodities. Although the degree of those principles to which the market has been allowed to operate under the conditions of the local policy has varied. There are still appear main problems and issues of the market which relate to the planning system.
In this discussion note, it will discuss about the cases and issues in planning of environment whether urban or rural in relation to the urban land market to which the market dealing with demand and supply concept. It is attempt to exercise whether the planning can be justified as intervention designed to deal with land and building market imperfection.
In England particularly, land and building market have historically been the social and trading focal point for whole area within it. Finally this discussion note will be ended with discussion point relating to the subject in the current economic aspect of town planning policy.
B. MARKET FAILURES AND PLANNING SYSTEM
The market system is the method of allocating resources and distributing income according to the preferences of the consumers on the one hand and the costs of production on the other. (Newell, 1977, p.4)
Basically, the physical planning is determined by economic thinking, for planners as a profession in the UK particularly have been carried up become idealistic tradition and are by nature suspicious of the pragmatic economist armed with respect for the market system. (Newell, 1977)
Although there are market forces to which deal with the property market which can be described as an economic mechanism rationing land between competing and occasionally conflicting users, it is one of the most imperfect markets and one of the most susceptible to change in underlying conditions. Despite of all the market forces, it must be recognized that there is a ‘market failure’ which always occur in many type of markets and consequently some form of government intervention is often justified.
An economist has a point of view to which the role of planning in market system basically arises due to the problems of market failure. Because in most real market systems imperfection or failure of various degrees will arises and sometimes there is an issues for government intervention to correct or improve if those failures are significant.
The important problems in the planning of environment-whether in urban or rural - is that, if there is no or without intervention in the development market forces and the price mechanism would mean that unconstrained development would give rise to considerable of social cost.
The market failure occurs when producers or consumers, pursuing their own objectives of profit and welfare maximization, affect the production abilities or the welfare of others. For example, (see figure 1) a city which is expanded by a property developer, might impose external costs such as social cost (SC) which will be greater than the private costs (PC), because it may create a traffic congestion which will produce great pollution or obscure public views of historic building. On the other hand, the same planner and the same property developer might provide the development city to which outstanding architectural merit, and by enhancing the welfare of the entire community. This condition would clearly produce the social benefits (SB) might be outweigh the private (developer) benefits (PB).
Another example shown in figure 2 which provide caricature about the neglected area of housing which surrounding by factories. This example explain about the development of housing area within industry area which surrounding by factories. This development will pollute a river which is located in front of the housing area, as a by-product of the manufacturing process. This has no direct negative consequences on the firm but has wider implications on surrounding community who live within it. Thus the social cost (SC) is greater than the private cost (PC).
As an intervention, planners have to abroad their knowledge to concern about environment aspect which will affect social welfare, such as pollution, transportation system and infrastructure
The land and building market which are known as the property market, is one of the least efficient markets of all. The imperfect factors such as the imperfect of the knowledge of buyers and sellers, the uniqueness of each site and building, etc. will prevent land from the transferring smoothly to its most profitable use.
The pattern of land use changes only slowly over a long period and at no time is the market in a state of equilibrium with all resources being optimally used. Despite these imperfections, the market still try to attempt to assert itself, albeit inefficiently.(Balchin,1995).
Murray found although equally the fact that planning is concerned with values, goal setting, welfare and redistribution, has meant that economist who regard their discipline as positive and value free and who consider that redistribution is by and large best carried out by central governments, have been slow to involve themselves with planning. (Stewart, p. 205, 1973)
It is also clear that there are many issues which come out and which planners are concerned about and will require the process of economic at work. These issues more formally expressed as: migration flows, housing markets and labour markets.
The change and the increasing of population number in one area will given a burden to this area over and over and will affect the natural growth of the area. This condition will encourage the people to move to other area and will continue from suburban area to other suburban area or to urban area depends on the condition of the area : the growth of the incomes and the demand of the open space areas.
This symptom will affect to the implication for the housing market, which is essential that the problem of housing not just from supply but also from demand viewpoint. How is the market will operate in relating to the supply and demand through housing price.
If there is a change to the demand or supply, it will affect the condition of ‘market equilibrium’ to which move to ‘a disequilibrium’. This condition shown in figure 3, which describe the P as price and Q as quantity, S as supply and D as demand, which known as ‘the Cobweb Theorem’. (Myers:1994, p.72)
On the other hand, the increasing of population number will affect the labour market, which is also concerned by planners for long time. There should be an idea of a balance between the availability of jobs and the number of people.
Because the un-balance condition also will give other issues as complex economic issues which is called as ‘market imperfections or market failures’. This condition show that there is an excess in supply or excess in demand without equilibrium in both of them.
There should be a policy which force and regulate the planning as intervention designed in their market and hopefully that will handle the imperfections and failures in land and building market. The government try to produce some option as an alternative to solve the issues of those imperfections and failures, by introduce land rules. The Secretary of Urban Task Force, Jon Rouse said,
” In some areas of extreme market failure, we may want to adopt special approaches and mechanism for land use planning and land use assembly.”
(Planning, 15 January 1999)
Although he said that before, on the other hand he (Jon Rouse) made an argument that “special” approaches and mechanism will be needed in the planning and land assembly fields in areas of “extreme market failure”. (Planning, 22 January 1999).
Nevertheless, the Chairman of the Task force, Lord Rogers, said that the city is the framework for health, security, work and leisure which deal with the urban development within communities and the quality and the potential of the market. (Planning, 22 January 1999).
The urban planning system suppose to have a “strategic, flexible and accountable” in promoting positive change, rather than reactive method of control. Because it seem like that the system has become a tool for reactive rather than creative policies, and it will make the urban areas are bearing the burden and force of their failures (Johnston, p15, 1999).
C. CONCLUSION Although all the conflicting and issues of different point of view from the potential values of the planning system’s case have been hinted on briefly, there are also still some issues and problems occured to which always remain uncertainty the true position and appearance of the planning system in relation to its intervention with land and building market.
There are some discussion point which have to be asked in the following questions:
o Is the intervention of the state in the market through the operation of a planning system a move towards existing policies and affect the social cost in the environment communities?
o Is there any particular policies to which the market forces will make the planning system can be justified as intervention designed?
o Do all planners have posses and ambiguous to touch on sufficient information in relate to the current policies and specific knowledge in planning system to make effective interventions in the market?
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Balchin, J.L. Kieve and G.H. Bull. Urban Land Economics and Public Policy.
Macmillan Press Ltd. 1995: 5th edition.
Moor, N. The Planner and The Market. Longman Group Ltd. England. 1983.
Myers, D. Market Failures and Governement Remedies - Economics and Property.
Estate Gazetter. 1994.
Newell. An Introduction to the Economics of Urban Land Use.The Estates Gazette,
London. 1977.
RTPI. Planning for the Natural and Built Environment. Incorporating Planning Week. 15
January 1999.
RTPI. Planning for the Natural and Built Environment. Incorporating Planning Week. 22
January 1999.
Stewart, M. Markets, Choice and Urban Planning. In Town Planning Review. The
Liverpool University Press: Liverpool. 1973 Vol. 44.
Warren, M. Economics for the Built Environment. Butterworth-Heinemann Ltd. Oxford.
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