METROPOLITAN DEVELOPMENT AND THE CALIFORNIA ECONOMY

Judith E. Innes and David E. Booher, AICP
Copyright 1997 Innes and Booher

"Efficient firms cannot function for very long in inefficiently configured metropolitan regions." Richard H. Mattoon, Federal Reserve Bank of Chicago.

The Economy or the Environment

Planning and planners have historically been criticized in many quarters as being an obstacle to jobs and economic well being. According to this critique the "free market" is the best "regulator" for development, and planners only detract from consumers choice, or worse, prevent the creation of jobs, new tax revenues and affordable housing. Moreover, according to this view even the promotion of more efficient land use patterns is not a desireable objective of planning [Gordon and Richardson, 1996]. On the other hand, planning and planners are attacked by many environmentalists as not doing enough to prevent escalating damage to the environment.

This dichotomy reflects a broadly based misunderstanding of the metropolitan development system. The emergence of new understanding about complex systems provides planners with new tools to better understand the interrelationships of economics, public finance, and the environment in the metropolitan development system.

Growth, Efficiency, and System Performance

Recognition is increasing in many quarters, including the business community, that appropriately designed growth management is supportive of a state or region's economy rather than harmful to it. Efficient metropolitan land use patterns have been shown to be closely linked to competitiveness and productivity in regions across the country [Mattoon, 1995 ]. They also have been shown to save significant fiscal resources1 Successfully meeting the challenge of devising growth management policies that can have such consequences however, requires planners to recognize that metropolitan growth patterns and economic efficiency are linked together within a nonlinear, complex system involving the structure of governance in a state, its fiscal arrangements, infrastructure investment patterns, and regulatory arrangements, among other factors. If we are to make headway as planners in establishing growth and development patterns that support rather than constrain the economy, while they also protect the environment, then we must understand and act in this larger complex system. We cannot afford to focus narrowly on only one or two of its elements, such as the transportation-land use connection, jobs-housing balance, or the management of one or more environmental systems. One cannot confine the purview of planners to developing the ideal physical patterns of development, nor to working toward economic development, because both of these are profoundly affected by such questions as which level of government regulates which aspects of development and by the incentives and disincentives for development offered by tax policy.

Linkage of Growth Patterns to Sustainable Economic Development

Few participants in the metropolitan development system understand that inefficient land use patterns, such as sprawl, not only are typically detrimental to the environment but that they also are damaging to economic productivity. >2 In recent years the linkages between inefficient land use patterns and constraints on economic productivity were identified in several attention-getting reports. The Bank of America, along with the California Resources Agency, challenged conventional wisdom in the development industry when they released a report early in 1995, arguing that "...unchecked sprawl has shifted from an engine of California's growth to a force that now threatens to inhibit growth and degrade the quality of our life." Another study commissioned by the American Farmland Trust [American Farmland Trust, 1995] found that urban sprawl in the Central Valley of California for example, would consume much more farmland, cause greater reduction in agricultural commodity sales, and dramatically increase the costs of public services than would compact growth. The state's Little Hoover Commission, whose mission is to investigate government and make recommendations to promote efficiency, economy, and improved service, concluded that the current processes of decision making in land use are resulting in conflicts which are costly to the state because they are preventing the achievement of more efficient growth patterns which are "...essential to the State's economic and environmental health" [Mattoon, 1995 ].

Finally, lest we think only California voices are making this case, a recent Federal Reserve Bank report [1995 ] documented the importance to the midwestern economy of achieving alternatives to the existing growth patterns currently "...leading to urban sprawl and the inefficient delivery of public goods and services, that will ultimately undermine the economic prospects of entire metropolitan regions." Business consultant Michael Porter has provided insight about the possible linkage between development patterns and economic competitiveness in a recent article in the Harvard Business Review [1995]. He points out that efficiency in the use of the environment (resource productivity) is associated with both environmental improvement and economic competitiveness. Hence, from a system point of view, it can be argued that inefficient development patterns create waste thereby reducing productivity, innovation, and ultimately the profitability of businesses. This system works in many ways to produce wasteful consequences. For example sprawling land use patterns lead to higher costs in the provision of infrastructure and services to a metropolitan area. These costs in turn are passed on to individual taxpayers and businesses and act as a drag on profits and real income. Such patterns also contribute to a lack of affordable housing, long and expensive commutes, and problems of traffic congestion and air quality. These in turn limit the productivity of workers and the ability of business to recruit the workers they need.

Taking a Systems View

Implicit in all these analyses is the central idea that business functions as part of a complex system of linked factors in the physical environment and the governmental context, as well as in the economy. In particular, the patterns of land use often have effects on business efficiency and competitiveness which neither planners nor the business community have fully recognized. Indeed the business community has often regarded growth management as a cost to doing business and a hindrance to competitiveness. Nor has either the business community or the public sector understood how many public and private actions indirectly result in these inefficient land use patterns and in turn how these actions and the patterns may affect the economy. These patterns are the product of such things as the location of freeways and sewer systems, the needs and opportunities for revenue generation of local governments, and the policies of local, state, and federal regulatory agencies. The strength of a metropolitan economy is in turn influenced simultaneously by such things as the affordability and availability of housing, the ease of access and transport, the quality of the environment, and the quality of education. All of these factors are ultimately linked together through the structure of governance and methods of financing the public sector. [see figure 1]

In this context actions that will make a difference and produce more efficient patterns are related to the improvement of system performance rather than simply to the performance for a short time of one aspect. Sustainability is essential to a healthy economy, but it is a description of a whole system, and we can only work toward it by thinking in system terms, which are largely unfamiliar to planners. A well performing, sustainable system, for example, may be one which shows a high degree of adaptability to global and technological change and one in which the economy moves to higher levels of productivity rather than stagnating or collapsing into chaos. At the local or regional level a sustainable system is one where the various jurisdictions work together to meet regional needs for water, transportation, housing, economic development and revenues over the long term and where they have the capability both to look collectively at the interactions and relationships among these subsystems and to act at a system level. This becomes a problem of information and getting feedback so we can get a glimpse of system performance and the direction it is taking. It requires multiple indicators and sophisticated understanding of many interrelations and many ways of learning what directions it may be going. 3

FIGURE 1. This is a schematic map of the factors. The reader needs to imagine a web of relationships superimposed over this graphic.

FIGURE 1. This is a schematic map of the factors.

The schematic diagram in figure 1 is a simplified view of this metropolitan development system. Each of the variables in this model could be further elaborated to show its relations to the others. Each of these factors is deeply interconnected in a web of relations to the others. A change in any one factor will have consequences for the others that will reverberate through the system. These reverberations will in turn cause reactions and new adjustments to other parts of the system as different players feel and adapt to the effects. Thus a failure to consider the system implications of policy change can mean that policies actually have long term counterproductive effects that can decrease rather than improve system performance for the economy.

For example, if one locality permits a large regional shopping center, this increases the demands on the transportation infrastructure that are borne by the state and other localities. While the shopping center may optimize a local economy, its external costs may be high for the larger region, and its location may not be the most efficient one. Yet that decision makes sense for the locality, as the sales tax is one of the few opportunities for local revenue growth. This example shows us too that policies such as using the sales tax as the principal form of new revenue generation, when looked at in the systems view, have unanticipated side effects. The importance of this tax today to local government in California means localities are less likely to favor manufacturing or housing than retail land uses. Such policies when cumulated on a metropolitan level, have consequences for the state's economy. The response to this problem thus far has been for policy analysts to propose new ways to allocate the sales tax revenue. Yet experience tells us that any new allocation system will in turn have its own unanticipated side effects. 4

Role of Planners in Complex Systems

The first step is for planners to educate themselves on how this complex system works. Planners are in a unique position to provide leadership in this context. They are trained as interdisciplinary problem solvers and boundary spanners. They have always known everything is interrelated and everything is continuously changing. The new concepts and insights of complexity theory5 offer them the opportunity to develop more powerful and effective responses to this reality. This emerging area of complexity theory provides potential insight to understand and develop the capacity to work with the metropolitan development system. Complexity theory is the study of system behavior at what has been called the "edge of chaos." Systems in this state somehow balance order and chaos. The network of components never quite come into static order, but somehow also do not devolve into chaos. Instead they are characterized by self organization, spontaneity, adaptiveness, decentralization, and constant motion as the components revise themselves and recombine.

Some of the insights of complexity theory that give us a new perspective on planning are:

The urban and natural systems as well as the policy world that planners face all have the characteristics of complex systems. Indeed, this complexity has always been planners' greatest challenge as they tried to apply expert analyses, incrementalism, mixed scanning, or comprehensive planning tools. It is only recently that scientists have developed conceptual handles on complexity, which we as planners know about experiencially.

One of the ways planners have been working with these complex systems is to establish multistakeholder and interagency consensus building processes. 6 Experience has shown that many consensus building processes themselves have similar properties to complex systems-- self organization, decentralization and adaptiveness [e.g. p.45 in Innes et al, 1992]. Because consensus building maps so effectively onto these complex systems it can be a particularly powerful planning method [Skaburskis, 1995]. Another possibility for working effectively to produce efficient metropolitan development is to develop new types of indicators appropriate to complex self organizing systems. These indicators, instead of being designed for hierarchical or linear command and control objectives, would be used to provide rapid feedback on the workings of the system to participants and policy makers [Innes, forthcoming].

Ultimately the only way to deal with this complex, changing system and to achieve metropolitan growth patterns that have potential for sustainability and long term economic growth is to bring together those with the first hand knowledge of the systems and with differing values and interests in continuing dialogues to work out how to act, at what point in the system to intervene, and how to monitor and adapt in response to feedback from the system. The actions might include changes in the tax structure or in the allocation of land use control responsibility or simply a decision on the location of a development. These participants will understand as a group at least some aspects of the effect of the change. There will be no right answers but there can be better and worse ones, and ones that improve some values more than others.

A new type of leadership is required for this complex and dynamic metropolitan system. This leadership requires such traits as reflexivity [Soro, 1997], the ability to draw on many disciplines and skills, special training in ad hoc problem solving, mastery in establishing and managing social learning processes, and communicative practice. These are obviously traits which skilled planners possess. Planners can help provide the needed leadership if they choose and if they are capable of adapting to the more ambiguous and uncertain universe of complex systems.

References:

American Farmland Trust. 1995. Alternatives for Future Urban Growth in California's Central Valley: The Bottom Line for Agriculture and Taxpayers. Washington, D.C.

Bank of America. 1995. Beyond Sprawl: New Patterns of Growth to Fit the New California. San Francisco, CA.

Burchell, Robert W and David Listokin. 1995. Land, Infrastructure, Housing Costs and Fiscal Impact Associated with Growth: The Literature on the Impacts of Sprawl vs. Managed Growth Working Paper, Lincoln Institute of Land Policy. Cambridge, MA.

Ewing, Reid. 1997. Is Los Angeles Style Sprawl Desirable? Journal of the American Planning Association 63, (1):107-126.

Godshalk, David R. 1992. Negotiating Intergovernmental Development Policy Conflicts: Practice Based Guidlines. Journal of the American Planning Association 58, (3):368-78

Gordon, Peter and Harry W. Richardson. 1996. "The Case for Suburban Development," Report prepared for the Building Industry Association of Northern California and the Home Ownership Advancement Foundation, March.

Innes et al. 1994. Coordinating Growth and Environmental Management through Consensus Building. CPS Report: A Policy Research Program Report. University of California at Berkeley: California Policy Seminar. 270 pg.

Innes, Judith. 1992. Group Processes and the Social Construction of Growth Management: Florida, Vermont and New Jersey. Journal of the American Planning Association 58, (4):440-53.

Innes, Judith E. Forthcoming. Indicators for Collective Learning and Action: Rethinking planning for Complex Systems.

Kaufman, Stuart. 1995. At Home in the Universe. London, Viking.

Kelley, Kevin. 1994. Out of Control: The Rise of the Neo-Biological Civilization. Reading, MA. Addison-Wesley.

Little Hoover Commission. 1995. Making Land Use Work: Rules to Reach our Goals, Sacramento, CA.

Mattoon, Richard H. 1995. Can alternative forms of governance help metropolitan areas? Economic Perspectives, Federal Reserve Bank of Chicago, 19, (6):20-32.

New Jersey Office of State Planning. 1992. Impact Assessment of New Jersey Interim State Development and Redevelopment Plan. Trenton, NJ.

Porter, Michael E. and Claas van der Linde. 1995. Green and Competitive: Ending the Stalemate, Harvard Business Review, 73, (5):120-123.

Skaburskis, Andrejs. 1995. The Consequences of Taxing Land Value, Journal of Planning Literature, 10, (1):3-21.

Soros, George. 1997. The Capitolist Threat, The Atlantic Monthly, 279, (2):45-58.

Waldrop, M. Mitchell. 1992. Complexity: The Emerging Science at the Edge of Chaos. New York, NY. Touchtone Books. Simon and Schuster.

FootNotes

1 The impact assessment of New Jersey's State Development and Redevelopment Plan estimated that if this form of growth management were implemented it would save the state $400 million per year [New Jersey, 1992].

2 We note that we are in disagreement with virtually every claim of Gordon and Richardson [1996], finding the premises, evidence and argument deeply flawed as they try to make the case for sprawl. The present article is however focused only on the linkage of land use patterns and the metropolitan development systems. See also Ewing 1997.

3 This argument has been made in Innes, forthcoming.

4 In another example, jobs-housing balance is an idea that sounds as if it would reduce travel demand and congestion, but when one examines other elements of the system, such as the changing location of jobs, two-worker families and changing patterns of commercial development, one finds that locating housing near jobs makes relatively little difference to overall travel demand.

5 An introduction to some of these ideas can be found in Kelly, 1994, Waldrop, 1992 and Kaufman, 1995.

6 Examples of these are described in Innes et al. 1994, Godschalk, 1992, and Innes 1992.

 Judith E. Innes is Director of the Institute of Urban and Regional Development and Professor of City and Regional Planning at the University of California, Berkeley.

David E. Booher is a Sacramento based planner and policy consultant and Visiting Scholar at the Institute of Urban and Regional Development