The Indian Economy Blog

May 4, 2007

Best Laid Schemes

Filed under: Growth — Atanu Dey @ 8:18 am

Planning is uniquely human. Planning shapes not just human institutions and artifacts but indeed creates the future that is unknown and unknowable. Granted, the best laid schemes of mice and men, often go awry, as the poet lamented. When it comes to central planning, or planning by an all-powerful government bureaucracy, you can say that those schemes are guaranteed to go awry. But every failure of centralized government planning can be countered with numerous examples of successful private sector planning. The plain fact is that it is not planning that is a disastrous failure but rather it is centralized government planning that fails.

The Designer City, or DeCi, is the result of planning but not centralized government planning. In the case of the DeCis, the planning corresponds to figuring out the overall rules of the game, not the game itself. The game evolves through the participation of the players playing according to those rules. All of life is in some sense a game which organically evolves from a small set of simple rules. As much as we are compelled to play the game of life according to the rules derived from Darwinian evolution, we are also compelled to play the game of economic life according to man-made rules. If we have, for whatever reasons, a good set of rules, the resulting game is enjoyable. If we get the rule-set wrong, we suffer economic hardship.

Let’s take one example. If the rules do not allow very tall structures, then the footprint of the housing required for a certain population will be very high, leaving little land for parks and roads. But if the rule merely outlined how much open area must accompany how much built up area and for how many people, then how tall are the structures that finally emerge will be dictated by an optimization process which would include the constraints imposed by the cost of construction, the demand for living space, and other factors that no central planner can foresee.

There is a role for government planning, of course. But the level at which the plan is conceived and the granularity of the plan are related. Take for example, an airport. The decision to have an airport, and where to locate it, is part of the planning at the level of the government of the city which the airport will serve. Which private party is actually assigned — or wins the bid — to build the airport is left to market forces and a set of rules. The actual plan for the airport, its capacity etc, must be determined by the private party, not some government bureaucrat who probably did not ever set foot in a well-designed airport. The builder can figure out the details which don’t concern the government. The builder can also figure out how the airport will be financed and how they will recover the investment. This they will do based on what the anticipated demand is, and will be in the future, for air transportation. People whose business it is to build airports know about these things. Otherwise they would not be able to survive in the business.

[This is part three of a ten-part series. The previous part: Designer Cities. Next part: Financing Designer Cities.]

1 Comment »

  1. [...] May 3, 2007 « India Cannot Afford Villages Best Laid Schemes » [...]

    Pingback by The Indian Economy Blog » Designer Cities — May 4, 2007 @ 12:25 pm

  2. Atanu:
    I didn’t realize this was a 10-part series. Take a peek at some municipal codes from the cities in the US.

    You will be shocked by the heavy hand of “central planning” in the American city codes. Yet it works, at least most of the time.

    I don’t think I am your typical NRI wishing that things in India were more like the in the US. I am merely suggesting that even in a country where free enterprise rules, planning is still the government’s job because they know the short-term profit motives and rapaciousness of developers.

    Comment by Sarat — May 4, 2007 @ 4:08 pm

  3. I agree, it is amazing to see what can come together when you spend hours upon hours planning even if the execution only takes a few minutes.

    Comment by Gupta — May 5, 2007 @ 8:23 am

  4. It is a great analogy, thanks. I wish my city did not have the heavy planning that Sarat describes; I do not think the city planning precisely works, more that many cities survive despite them. It makes me wonder how great a place these cities could be if the rules were crafted as carefully as Atanu describes.

    Politically, of course, the incumbent powers don’t want the rules to change. As a very common example, everyone prefers their own property be high-priced, than that their property be at the correct price.

    It would be great if the public understood better how easily political processes get captured for special interests, how hard it is to go back to a competitive approach when the public is crying for someone to take charge and design a perfect solution up front.

    Comment by daublin — May 21, 2007 @ 5:51 pm

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