Lecture 4

Question 1

Needham et al. talk about balancing Planning, Law and Economics. Which 3 legal approaches do they name?

Answer 1

1. Passive planning
2. Active planning
3. Structuring the market

Question 2

van Bavel argues that markets can cause their own downfall. These markets are influenced by 2 factors. Name these 2

Answer 2

1. Familial relations (traditions)
2. State legislation

Question 3

van Bavel mentions Institutional Sclerosis. What does he mean by this?

Answer 3

The process by which market institutions become rigid, less adaptive, and ultimately counterproductive as a result of the concentration of economic and political power among elites.

“The process engenders growing political inequality, as new market elites translate their economic wealth into political leverage, and it leads to institutional sclerosis. As the organization of factor markets thus becomes less favourable, and more skewed towards the interests of the market elites, economic growth stagnates or even turns into decline.”

Question 4

How does planning law affect economic welfare according to Needham et al.?

Answer 4

1. Optimizes resource use
2. Reduces negative externalities
3. Creates public goods

Question 5

How does spatial planning address negative externalities? (Needham et al.)

Answer 5

Through tools like zoning laws and regulations, which mitigate problems like traffic congestion, pollution, or overcrowding.

Question 6

There are three types of law specifically relevant to spatial planning. Which three types are meant here? (Needham et al.)

Answer 6

1. Planning law
2. Laws guaranteeing property rights
3. Laws guaranteeing citizens’ rights

Question 7

What does Van Bavel argue is a key feedback mechanism leading to the decline of market economies?

Answer 7

Wealth concentration leading to political inequality and institutional sclerosis.

Question 8

How do institutions affect the functioning of markets, according to Van Bavel?

Answer 8

Institutions define the rules of exchange and allocation, shaping market dynamics.

Question 9

What does Van Bavel argue about the development of markets over time?

Answer 9

Markets are cyclical, rising, stagnating, and declining due to internal dynamics.

Question 10

van Bavel talks about output markets and factor markets. What are they?

Answer 10

Factor = Markets where factors of production (land, labor, capital) are traded.

Output = Markets where goods and services are sold to consumers.

Question 11

Needham et al. name two types of economic interventions. What are they?

Answer 11

1. Structuring
2. Regulating

Question 12

Needham et al. highlight that market outcomes (prices, quantities, etc.) do not always accurately reflect economic welfare, especially under certain conditions in spatial planning. Name these 5 conditions.

Answer 12

1. External effects
2. Monopolies
3. Non-excludability
4. Non-rivalry
5. Transaction costs