Nobel prize winning economist Ronald H. Coase is an icon of economics and political economy because of his insights into how “transaction costs” influence decisionmaking and behavior. His ideas have influenced such disparate fields of economics because of their breadth, including public choice, industrial organization, and market failure. In fact, transaction costs are among the key criteria that define market failure in modern economics.
Extending Coase’s thinking to urban planning would appear to be a natural extension of his ideas. Some academic research has attempted to introduce transaction costs ideas into the professional discussion (including my work on ballot-box zoning and market-oriented reforms). Nevertheless, surprisingly little attention has been given to transaction costs and their role in land development and regulation even though they are implied in reforms such as performance-based planning, market-oriented planning, and most critiques of the planning failure.
This deficiency should largely be rectified by a comprehensive and powerful new book by University of Hong Kong professor Lawrence W.C. Lai. Dr. Lai’s work spans dozens of academic studies and reports examining the land use plannning, sustainability, market failure and reform. Now, much of this work and thinking is distilled in The Ideas of Ronald H. Coase: Market Failures and Planning by Contract for Sustainable Development just published by Routledge. This book should be essential reading for free market advocates and critics of conventional urban planning. While the book itself is academic, the writing is accessible and the math doesn’t require much more than conventional geometry.