Urban Economics and Planning

Urban Economics and Planning

Applying the Property Rights Approach in Urban Planning to Solve the Problem of Externalities

Document Type : Original Article

Authors
Mohammad Reza Goleij 1
Mohammad Hossein Sharifzadegan 2
1 PhD Candidate in Urban and Regional Planning, Department of Urban and Regional Planning and Design, Faculty of Architecture and Urban Planning, Shahid Beheshti University, Tehran, Iran
2 Professor, Department of Urban and regional Planning and Design, Faculty of Architecture and Urban Planning, Shahid Beheshti University, Tehran, Iran.
10.22034/uep.2022.326173.1181
Abstract
Introduction
Addressing the externalities and the provision of public interests as the key challenges of the public domain are the raison d’être of urban planning and have been placed at the center of its practice. Externalities are the side costs and benefits of individual activities that affect the well-being of other individuals and society. Its value is not calculated and compensated to the injured parties and is not captured from the interested parties. The density and proximity of spaces and activities in the city make the production of externalities more likely. It can be argued that the analysis of externalities lies at the heart of urban economics and planning. So far, urban planners and policymakers have adopted various policy tools, such as development control, taxation, and subsidies, to solve this problem.
The gap between the goals of development plans and the status quo of cities and the inability of applied tools and methods to control externalities has led planners to explore the possibility of using the other options. Given that externalities have multiple legal, economic, and social (or spatial) dimensions, adopting an interdisciplinary approach is an inevitable choice. Therefore, this article aims to identify causal powers and generative mechanisms of externalities and explain the interaction and role of property rights and urban planning institutions in controlling externalities in the city. 
Materials and Methods
Based on purpose, this article is basic and explanatory-analytical in nature. To identify the causal powers and generative mechanisms that produce externalities in the city and to explain how these elements interact with each other in this process, critical realist paradigm and retroductive reasoning strategy were selected. In critical realism presented by Bhaskar, reality is constituted by three layers: the empirical, the actual, and the real. Critical realism holds that science is the identification of the deeper real level, including social structures, constructs, and institutions that form the phenomena.
After a systematic review of resources related to the research issue, a comprehensive typology of various internalization tools was proposed, and the first conceptual framework was developed. Then using the qualitative content analysis method, texts and documents of formal rules and interviews were analyzed, and eventually, the first conceptual framework was revised.
Findings
The first finding of the article is a comprehensive typology of various internalization tools, which results from a systematic literature review related to the research problem (descriptive phase). By using retroductive reasoning, this research tried to go from the empirical layer (examples of externalities) to deeper actual and real layers. Therefore, based on the existing knowledge (literature), a preliminary conceptual framework was developed at first and then modified and finalized after applying the mentioned methods. As the second finding, this conceptual framework (output of analysis phase) identifies the causal powers and generative mechanisms of externalities in the city and explains how property rights and spatial planning institutions interact with each other in this process. Finally, a framework for policies, mechanisms, and tools for internalizing externalities has been introduced as the third finding (prescriptive phase).
Conclusion
The emergence of a new turn in planning theory has been a search for the institutional and legal foundations of spatial planning and an emphasis on the importance and role of institutions in their efficiency and effectiveness. The novelty of this article is in adopting a critical view of the existing approaches to solve the problem of externalities in the city through applying an institutional approach to urban planning. Under the critical realism and retroductive strategy, this article developed a conceptual framework that identifies and explains the allocation of land property rights in the urban spatial planning system as the primary generative mechanism in the control of externalities. This framework shows that the externalities of urban activities and spaces are the empirical layer of reality that institutions and rules of urban planning and property rights constitute its deeper real layer. In fact, the interaction of urban planning and property rules with each other in the process of allocating land property rights in the city is the main mechanism of the physical-activity space production and then externalities. Therefore, planners must put the distribution and allocation of land rights at the center of planning practice, and the emphasis will be placed on applying the property rights approach, which is at the interface between the law and the economics in the urban planning system in Iran.
Keywords
Critical Realism
Externality
Property Rights
Social Cost

Subjects

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Urban Economics and Planning
Volume 3, Issue 2
Spring 2022
Pages 122-135

  • Receive Date 26 January 2022
  • Revise Date 15 May 2022
  • Accept Date 11 June 2022