Structural inadequacies in urban environmental management

REGIONAL

AND URBAN ECOk;OMICS - Vol. 3. No. 1 (1973)

63-82

STRUCTURAL INADEQUACIES IN URBAN ENVIRONMENTAL MANAGEMENT

Michael O’HARE* Massahmds

Institrcte o.,fTd~nology

Received 11 October

1972

.%. :rnor~-: Some fundamental questions are raised with respect to the problems and elements af environmental economics; tentative answers are suggested.

1. Introduction

With growing consciousness that the human environment is not all that we would like it to be, much interest has been generated by alternative methods of controlling its development. Most of this debate has centered about pollution and overextraction of the natural environment. Typically discussion has been couched in legal or quasi-economic ’ ‘welfare’ terms, but many economists have been anxious to demonstrate that pollution is an externality and a bad and that market imperfections account for its distribution (Solow, 1971). The argl.:ment us;lally suggests that mechanisms that attach the costs of these externalities to the producers, and compensate the consumers as nearly c?sthey can be targetzd, would produce a self-controlling and self-optimizing system to deal with the problem. As this view has not yet won over all participants, it is not surprising that other attitudes are alro advanced. Some economists have looked at environmental damage 3; a problem in control theory, under the assumption that “tr.adition;i’ remedies proposed for simple cases of market failure may be inadequate . . . where matters of pollution are concerned” (Zeckhauser et al., 1970). There is nothing new about environmental management, even in the non-trivial sense of conscious direction of the amenity of our surround* This research was supported by the Eoston Development Strategy Research Project. Urban Systems Laboratory, Massachusetts Institute of Technology. Appreciation is also due to Annie Bloch and Aaron f:leisher for their help in the preparation of this paper.

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ings Most of our experience in this area, however, has been in the control of the immediate environment of the majority of western populations, the home and city, rather than the rural or wilderness environment we collectively visit relatively rarely. This paper will look at some interesting aspects of the existing control system for the urban environment, taking general results from cuntrol theory to evaluate qualitatively the likelihood that our present methods are good enough to preserve, and pointing directions for useful applied research. Most of the examples will be generic in nature but based on North American practice. Six basic prefatory questions present themselves; examples illustrating them will be drawn from more familiar environmental issues. How is the objective function for the system in question generated? Many modes of environmental control are designed to serve objectives ,which are established at levels far removed from direct political control. For example, the limits on low-level radiation leakage from nuclear electric plants are set administratively by a staff hired by appointed AEC commissioners. Even when objectives are nominahl,r set by elected officials or representatives, the alternatives from which the choice is made or the specific proposal enacted are prepared by staff work, and many important decisions are made at this level. Objectives that are set by legislative action may still be the ‘wrong’ ones. Policies that correct environmental damage commonly provide small benefits to a great number of people and impose large costs on a fr ‘N.For example, disposal of non-returnable drink containers on public rights-of-way represents a small cost to any single citizen, but removing this cost by taxing *one-way’ bottles (as Vermont has just done but Massachusetts has not), represents a large cost to glass and container manufacturers. Olson has shown that the balance of incentives favor active intervention on the part of the strongly affected, small group and discourage organization of the large group even though the total benefit to society of instituting a program of this kind may be large (Olson, 1969). How do the objectives change over time? Objectives set long ago are often difficult to change even when the global objectives which they represented have changed. A government mortgage policy developed in the 1930’s and intended to encourage the construction of single-family detached homes has, in years of operation,

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caused the growth of interest groups who will oppose its amendment. In any case, political inertia, other things being equal, always favors the status quo as opposed to other preferable alternatives; we might expect that if there has been any change in the conditions that gave rise to a given :*et of environmental objectives, the objectives in force at any time will always lag behind these changes, and the time average of the in-force objectives will be suboptimal. How are the objectives used for control related to tk global objectives on which we can expect poIitica1 agreement or explicit compromise? Our ideal for air quality control, for example, is to have an objective function that would give us the value of general welfare for every possible combination of pollutant levels and associated costs, so that we could choose the state of the system for which this value is highest. There is no social control system for which this correspondence has been unambiguously identified, and for most systems the assumed relationship is very much open to doubt. In most cases, measurable variables related as closely as possible to the system under control are chosen and combined in some way. The resulting ‘operating’ objectives are hoped to have maxima at the same point that optimizes the hypothetical system whose objective function is ‘general welfare’. The paradigm in the political process is roughly the following: An environmental condition develops which causes, eventually, such. high perceived costs to a group or groups that they obtain legislative or administrative action to change it. The argument ir, usuaiiy couched in terms of something that can be both measured and easily understood, and the message received by political actors is that general welfare will increase if, say, air concentration of sulfur dioxide (s) is reduced. If we posit w (general welfare) as a function of the variables of the whole environmental system (a, 6. c ... s ... z), w,(s(tO)) < 0 b-Jiiereto is the present time. The resulting political perception is often that W?< 0 over the whole range of s. In the case of dirty air, the generalization is probably reasonable. In another case, where s = salt used on icy streets, buss< 0 and there may well be values of s for which w, > 0. Few existing control systems recognize that optimal conditions may occur aw:l$ from the zero or infinite values of the state variables being measurer\. There is a closely related problem: How well do the system eyrrutions implicit in our control s);sterns model the real world? If in the air pollution example above s (Sf0, concentration) is related in fact to L’(the cost of electric energy, for example) by f(c, s) = 0, control on s will

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f (s,c)= -1-e

c-_

0

contours of w = constant direction of increasing

w

Fig. 1. If the constraint f(s, c) = 0 has a larger slope than the contours of constal. v, as occurs in this example for low values of s, control on s will eventually produce diminishing w.

move the system alongf = 0. In particular, (fig. 1) if

(,the slope of the constraint f = 0 is larger than the slope of the contours of w) in the region of operation, control applied to reduce s will reduce w. Where this region exists depends on the curvatures off and w; typical second derivatives off describe a law of diminishing returns, so even if we increase w with the first stages of control, the cost of reducing s further may drive w down faster than the benefits from cleaner air raise it. Ma;:1 industrial processes have this property, and in fact it is so general that any control system whose model indicates end-point optima i.e., 1~js maximized at extrema of any state variable - ought to be immediately suspect. Such models are usually valid only in a finite region around the value of the state variable that obtained when the control mechanism was instituted, and this region may be very small.

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What allowance has been made for the dynamic properties of’ the q’s rem 3

There are cases in which a certain state different from the status quo is clearly optimal but in which the cost of moving from present conditions to this optimum may outweigh the gains inherent in the optimal state; alternatively, the costs, while smaller than the potential gains in moving to a new state, may be visited on a small fraction of society. A good case can be made that Los Angeles i&in the wrong place, and-one might imagine movirrg the city to another location where water is abundant, earthquakes are rare, and the air seldom stagnates. The dynamics of this problem obviously dominate other considerations. ’ As an example of the second type, consider a law that prohibits waste discharge into a river. It may bankrupt the manufacturer who has been behaving exactly as he has been rewarded to do until the law is passed, and must compete in a market most of whose participants (in oti;er states) do not have to pay for pollution control. A gradual change to new rules may permit an adjustment impossible in a short time. Another way to look at the last example is that unless movement to a lowpollution state is accomplished by a national or (for markets with large shipping cost/value ratios) regional program, the costs of change as new rules are applied to firms one-by-one may be more than the new state provides in terms of benefits. Zeckhauser et al. (1970, pp. 5 ff.) have modelled control systems (with plausible assumptions for very general pollution problems) that maximize a discounted time-stream of utility. Their results point out indirectly the long-term costs of incautious controls and the necessity for considering dynamic effects even in very general policy problems. What arc the income-redistributive or consumer-preference conytraints in the system? Environmental controls typically cast their :?.et

broadly, and stream channelization * has been attacl-ed (Emerson, 197 1, p. 325) for destroying the nctural environment enjoyed at least by city people rich enough to fish and hunt in the co!,l,try. Suspending the program will impose large opportunity costs on some farmers whose land is now marginal because of flooding, and may raise food prices w elfect whose disutility may be greatest for poor people whose food budgets are a large proportion of their incomes. Does the system optimize or I’sa tisfice “? Many control systems specify standards for environmental variabit-s, suck as water quality or building densitieis. A regional water quality boa,& f )r example, specifies the allowable concentration of pollutants in the outfall from a factory. If

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the concentration is below this level, no action is taken; if it is above, legal procedures are instituted to reduce it. The implicit objective function distinguishes only two values of system states: ‘acceptable’ or ‘unacceptable’; if the variable of concern is in the acceptable region, no control is applied. This “satisticing” model implies that no further benefits are provided as the standardized variables moves beyond the standard into the acceptable region, and that all unacceptable states are equally bad. It is difficult to find an environmental variable for which this curious ‘one-step’ behavior is even a passable model. One justification for it is that the standard is the optimal state, and that economic pressure holds the value of the variable from rising beyond this optimum value and causing costs. More likely, this mode of control is used not because the standard defines an optimum, but because the proper objectives are so poorly understood that the optimum cannot be defined and the standard level is at least acceptable, because standards are easy to understand and comy)rehensible to a public accustomed to binary models fcr logic and morality, and/or because they appear to leave little scope for the judgment of administrators. The most convincing arguments of economists in this area 1.-ve been those proposing market control mechanisms3 where absolute prohibition or obligation aie now used. In cases where, even though we are unclear about the correct objcctives, we do have a good idea of the slopes of the welfare function, there can be serious costs in applying all-ornothing controls based on a one-step objective function. Briefiy, these include the loss of price information derived from market behavior that would serve to sharpen our understanding of the objectives that in fact obtain; the costs involved in setting poor precedents for subsequent policy decisions, the loss of equity when everyone is forced to buy the same market basket; and the flexibility that is lost because the only parameter subject to occasional adjustment is the value of the standard (if information about slopes is lost when the legislation is first enacted, it will be much harder to introduce it administratively or by amendment, than in the case of an ordinance which contains a way of dealing with several parameters at the start). In the remainller of this paper, we will Jook at building codes and zoning practices. ?utatively these are directed towards health, safety, and some aesthetic values. In simplest terms, codes intend to protect people from the most direct assaults on their health and safety, such as disease, fire, collapse, and entrapment. Zoning, on the other hand, is directed towards costs of health and safety which result from more

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subtle influences, such as overcrowding, noise and odor pollution resulting from living near industry, and interference by excessive building density with light and air, free circulation, and psychological well-being. A typical zoning ordinance also has profound effects on the property values of a community, and it is possible that aesthetic controls, whether explicit or (more commonly) implicit, contribute to these effects.

2. Building Codes From our general discussion under the last question above, we can expect several kinds of costs to result from our present construction control system of building codes. First, we can note that all users of residential space within broad categories are presumably forced to buy the same amount of safety. 4 Neighborhoods tend to consist of a typical mode of construction: single-family masonry; high-rise apartments, or some other. The consumer basing his choice of residence on neighborhood amenity - convenience, schools, government services, or whatever - faces a very narrow choice of building cost/safety trades;it is not unusual for a consumer to have to choose only among housing units in, for example, three-family frame buildings. Each of these buildings must satisfy the same code; there is no source of information for the cons;lmer about different safety levels (a dimension of housing usua!ly hidden from the naive observer behind a literal screen of finishes and a figurative screen of Pechnical detail) in different buildings above the minimum required, and consequently no incentive for a builder *LO provide more of it. Furthermore, the conceptua; framework in which public debate on this policy issue is embedded strongly suggests that buildings are - or the codes should make !!it*n - “safe enough”‘. If there is a level of safety that is “enough”, tnere will be little pressure for more than this amount. In this matter we have little evidence to suppor “Jrdirectly challenge the status quo. It may be that research on construction practice - if a conscious concern for safety can be identified on the part of consumers - inside and outside the physical domains of building codes would reveal some helpful data. Are rural homes more variable in safety than urban ones? Without this stutly we can only seek hints from other markets. For example, some people drive cars with worn-out tires and some spend money for the safety provided by new ones. Some people undergo the inconvenience and discomfort of wearing a helmet when

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they drive motorcycles, and some do not. Some people buy a fire extinguisher for their kitchens, and some do not. It would not be surprising if, left to themselves, different consumers would buy different amounts of safety in their homes. Starr (1969) has looked at this question of risk-aversion and its demand price in a gross way, and his results are remarkable rather for the disparity in behaviors recorded than for the consistency he infers from his data (see Starr, 1969, p. 1232). The economic conclusion {the fact that constraints on consumer sovereignty cause inefficiency does not require proof here) is that economic efficiency is probably lost by a levelling control system. There is a moral issue as well. Leaving aside infants and incompetents, the right of the government to regulate individual k,ehavior whose costs are principally to the actor himself is, to say the least, open to challenge. If we assume an insurance system that prevents a person who injures himself from becoming a public charge, and if we permit to parents the broad rights to make decisions for their children that we seem to allow at present (education, moral guidance, medical care, religious instruction, etc.), we can look at a choice between home sar3ty purchased at a cost, and other utilities available for the same price, as a choice which the government may have no business making for its citizens. This ;ssue takes on more urgency if we consider the effect on the poor of a building code that demands a level of safety found acceptable by the middle class (which generally determines legislation of this kind in western countries). Do we really want to say to a poor man who ha? to think carefully about each dollar, “Unless you are willing to pay for a house safe enough for your employer’s tastes, you may not have any house at all”? It is not hard to imagine such a man replying. “If I had more money, I would certainly behave like a person with more money. But with my budget, I would much rather take the dollars you want me to spend to decre .lse the probability of accident to my family (from x (my choice) to y (your choice)) and buy a refrigerator instead so I can serve my family unspoiled f&d”, nor is it hard to imagine that he is often correct in this judgment. * A defense for regulation of this kind might be that people have better things. to think about than an evaluation of buildings according
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safety resulting from a small increase in cost are large, and which represent a smal! fraction of disposable incomes altogether, like food, drugs or possibly electrical appliances. Insofar as the good in question represents a large fraction of the consumer’s budget, the decision to purchase is made only infrequently, 3nd the savings in cost for a given increment in risk may be large, the defense suggested here loses force. Housing certainly has the first two of these characteristics, and may satisfy the last - but houses are so much alike that we can’t easily observe the predicted savings from varying their safety. The fact that we don’t know about the last indicates yet another cost cf our control system: we don’t have the information that a market typically provides, and SO cannot even estimate how much our policy is costing us! Let us now assume, against the force of the arguments presented here, that a single standard for housing safety is appropriate, and consider whether current values for this standard are correct. Are houses too safe? There were 8400 deaths of building occupants in fires or by electricity in the U.S.A. in 1967. 11 000 people were murdered, and 57 SOcl died in transportation accidents. ’ Some rough estimating will put these figures in perspective: 2 X 108 Americans annually dispose of 1.8 X lOI* hr per year. They spend about a third of this total sleeping, and perhaps another third indoors otherwise occupied. This leaves 0.6 X 1012 hr; assume that they spend all this time transporting themselves from place to place. In 1968, fire and electrical accidents killed 7 X 10-q per person-hour; transportation accidents accounted for 97 h 10-q per person-hour (more than 90% of these were in motor vehicle accidents). So travelling seems to be abol;t fourteen times. as dangerous on a per person-hour basis as occupying buildings; an American is seven times more likely to die travelling ‘ban ile is in a building. Extending the latter non-hourly measure: he is ;.‘nout 200 times more likc!y to die of disease than in a building accident ‘j; the death rate per capita in buildings is about 1% of the added dedti’n rate middle-aged cigarette smokers suffer as compared to the midtiiz-aged population as a whole. ’ Little can be concluded, but much can be wondered, about these figures. Before we wonder, we should dispose of a stumbling block to intelligent debate, by agreeing that human life is not priceless. A particular human life - a mountain climber whose name i$:known, injured on a glacier - may be considered worthy of almost any expenditure on a rescue effort, but Abraham has observed that this case does not affect discussion about the death that we know will occur to an unknown

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victim in a traffic accident that will occur next week. * Not only is the life of this unfortunate (or the probability that any one of us will be he) not priceless, but it is not even up to us to decide whether it is priceless or not: the same dollar we spend to protect him (i.e., to reduce the probability that death in traffic may occur to each of us) can be spent to check more carefully the engines of an airplane and buy a certain reduction in the probability of another type of fatal accident. Thus, even the moral purist must agree that life has a price if only in terms of other lives; though we may avoid the question of whether life has a finite value in terms of the utility that makes life worth living, we must, to be responsible, consider that if a given amount of money is to be spent on saving lives, it can be spent wisely or foolishly. The econc;mist at this point is quick to look at the cost of the marginal life in e&h of the several kinds of risk at issue, and demand Paretooptimality by adjusting investment until they are equal. The corresponding policy question is, “Could we save more lives by spending $1 OQO on housing safety than we could spending it in some otll 8~way?” The answer IO this is that there are probably better places to spend it than on housing, but we certainly cannot now be confident that our present allocation is efficient. The “marginal life” has been priced normatively by Abraham - who deserves spetial credit for attacking this extremely sticky problem with enough courage to present a figure - at about $30,000 for a Frenchman. He comiders loss of production, immediste costs of death, and an estimate of subjective costs. Taking the ratios of per capita GNP’s as a rough conversion index 9, an American should ask himsell’, “Is there a way to distribute $50,000 over American housing in such a way that we would be virtual@ certain to save one life?” Abraham’s analysis, and thus his tigu.2, is open to attack on many grounds, principal among which is the Inclusion of direct costs of death (medical, emergency care, etc.) and figures for ‘pain and suffering’ (since no expenditure will prevent a given individual’s death, but will only delay it until the ‘normal’ time, it can be argued that these last occur upon natural as well as premature death and therefore should not be counted). But even if the figure is changed by halving or doE_lblingit, the:: is serious doubt that we expect the answer in-the question posed above to be “Yes, there is such a way’. Still another approach to the general question requires that we look more closely at the nature of .the utility being bought for money spent

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on safety. Perhaps we are buying a subjective feeling of cmfidence, enjoyed every minute by all buildin:; occupants, rather than some number of ‘extra’ productive or enjoyable years for the few whose lives we save. If this is true, and I believe it is, we are irrevocably thrown back on the spotty data we can derive from observed behavior in cases where peop!e have choices to make, or on some sort of survey research which asks, “If someone offered you a house 10% less likely than your own to have a fire next year, but otherwise exactly like your present one, how much more would you pay for it each month than you pay now?” The author would pay very little: perhaps $2.00. The reader is invited to supply his own figure as an indication of how likely it is that we are overspending on housing safety. Which attack among these is appropriate I do not pretend to judge. All are fraught with risks and complications. The conclusion I am pointing to is simply that present circumstances do not give us any confidence that our present control system on building safety is operating at the point we would choose if appropriate experimentation and adjustment were permitted. There is good reason to believe even from the scantiest evidence that not only are buildings not different enough from one to the next, but they are probably ‘too safe’ and in general, this waste is directly attributable to the incentives and market paralysis inflicted by a one-step control system. We have challenged the objectives implicit in conventional building codes. In closing, we may also challenge the mode! of reality they are based on - the ‘system equations’. A code enforcement system assumes that when the value of ‘safety’ in a building is below the acceptable level, a control (legal sanction) is applied, and t; .? safety index is raised. In reality, other things occur that confound tar: model. If a building is occupied by people who simply cannot pay the ccqt of housing which meets the code, enforcement may make then homeless, either by producing an eviction in favor cf wealthier ten? iis or by causing the owner to abandon his building. Such displacement on a large scale is unthinkable, so a tacit understanding among the various parties is usually reached whereby buildings housing poor people are not inspected and the code is therefore not enforced. (As regards new construction, housing for the poor is simply not provided except when subsidies are available.) In the caie of owner-occupied housing, there is very little occasion for a homeowner to invite the inspector - or welcome him if he arrives - into his house. The flaws he finds may be expensive to carrect but, manifestly in view of the recent past experience of living satisfactorily in the hous?, do not damage its livability.

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A state of affairs in which a law is not enforced because it would cause unthinkable hardships is not a happy one. In this case, it results particularly in the loss of arzy control over the safety of older housing (since the inspector’s role does not include the privilege of compromise) and in an apparent deprivation of the poor from equal protection of the laws. Furthermore, this necessary laxity of enforcement clouds our understanding of the true state of affairs in an important public policy area; when code enforcement projects (with subsidies for required repairs) were instituted in several American cities, housing officials found that the cost of correcting violations (a measure of their extent and seriousness) was much greater than they had expected (see Bryan, 1970, p. 305).

3. Zoning We now turn to the zoning laws which deal more generally with the activities permitted, and physical forms allowed to house them, in different areas of the metropolis. In its simplest form, a zoning - rdinance applies theoretically infinite control to satisfy a one-step objective function, just as the building code does. It does, however, permit trades between some variables: while no bui1dhT.gcode will permit undersized roof beams because the foundations are built solidly, the objective function implicit in the volume restrictions of many zoning ordinances integates ;-1(proxy for a) benefit over the volume of the site. It permits ;within limits), for example, one part of a lot to be densely developed if the remainder is left open, such that the total building mass is less than the legal floor-area ratio times the site area. Zoning regulations are typically exceptions to the principle that the exterior and use of a building are the fee simple property of the building’s owner. Thus, in a certain zone of a city, one may build anything he likes except that it shall be so-and-so many feet from the lot line, less than so tall, etc., and he may use it as he likes ex”ce/)f that he may not manufacture in it, etc. There are ahnost no prescriptive ordinances for those purposes, except the occasional ‘colonial’ or other ‘style’ covenants in some suburban communities, arid the lists of approved materials and methods iniplicit in most building codes. The history of zoning in this country has been one of gradual encroachment on the absolute property rights of landowners. (Since land law is derived from a rural tradition, it should not be surprising that the existing legal struc-

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ture for environmental control in cities should sometimes appear inappropriate to its task.) Such a control system seems appropriate in :+‘~2 society with a high regard for property rights, but it also requires that one can identify noxious consequences (that can be avoided by proscription) to be discouraged. It is, urlfortunately, easy to; find exampks in which great benefit2 are lost unless property owners a’o a specific thing, and no prohibition can be phrased with any ease that will obtain these benefits. For example, the great squares and crescents of Georgian London and Dublin or the admirable facades in the South End. of Boston are civic amenities that can only be achieved if thl,..various property owners obey a subtle but stringent discipline to use a common vocabulary in the design of their facades. The subtlety rests in the fact that the individual facades are generally not identical on a street, and never identical across a street or from block to block; consequently even the prescription that might obtain these benefits is not a simple one to draft. More generally, the failures of our present control system for the exteriors of buildings (the interiors of streets) probably lie in three areas: The first is our poor state of knowledge of the relationship between environment and behavior - our inability to state a clear objective function. The second is the lack of congruence between the patterns of interaction between people and environment, on the one hand, and lhe simple geometric rules by which property ownership is divided, on the other. The third is the lumpy and restricted modes of control applicable under the present legal structure; the control va;iableq are too few and their values too constrained. Considering the first of these: Certainly, sn*j,t. measures of welfare implicit in present regulations are reasonable, 11crude. ‘Light and air’preserving setback rules and on-site parking requirements all serve to protect health and safety or prevent congestion of public ways. HOW ever, many others are a melange of half-undera;r,Dd, well-meant or cynical, proximate measures that are used with tl’a\ intention of optimizing poorly understood or questionably related dimensions of the quality of life. For example, minimum lot requirements serve principally - whatever their intention - to regulate (at first remove) the income, and (at second) the social characteristics, of the residents of .t district. This is a means of preserving a good (homogeneiiy of neig+bors) that cannot t z purchased with money alone but requires the ass’stance of some such legislation. lo We may not wish to encourage this exclusivity protection, but even if we do it seems quite costly to achieve

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it by means that simultaneously insure that open ‘land will be divided into small strips around houses that are difficult of upkeep and inefficient for recreational use. Surely some people who would rather enjoy their open land in other forms might be perfectly socially acceptable or is the acceptability in fact contingent on their taste in landscaping (as defined by a certain type of plot plan) rather than their behavior or upkeep of the house’s exterior? Density, lot coverage, or floor/area ratio restrictions rest on an implied association between intensity of land use and welfare; it seems likely, however. that a given quality of life can be achieved by a designer over a wide range of densities, and we know that a given density can provide amei.?y ranging from Park Avenue to a dismal slum. There is reason to believe that we don’t want to regulate density per se, but that we control it because we think it to be correlated wit:1 something else. If the correlation is very poor, why do we continue to control it? If, as appears likely? there arc characteristics of the environment that are important to social welfare, and if these can only be achieved by legislatiorl rather than by encouraging a market of diverse alternatives, then proper environmental management in this sphere demands a careful review of what we know about these characteristics and research program that will fill in the large existing gaps. The flaws in the market for the man-made environment market are a matter which is so complex that we cannot do more here than point to the importance of lenders’ conservatism, and descriptive rather than performance-type building codes, as inhibitors of in;:ovation that might provide variety in shelter. Public spaces obviously have no market in the usual sense, and the need is for CJther incentives for flexibility and innovation on the part of political and economic decision-makers. Locking now at the second mode of failure, the misfit between use and ownership geometry: Even with a better sense of our objectives, we will find it difficult to control the development of the environment as long as the legislative tools are imbedded in present prhciples of ownership. It may be worth investigating whether the exteriors of building are not, by first principles, public property. Some European cities have established historic districts (in Rome, this is the entire central city) in which it is forbidden to alter, or to fail to maintain, the exterior of any building without the express permission of the appropriate government commission. Often, maintenance is assisted by a program of government grants. In the USA, we have taken halting steps toward historic preservation,

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usually without recognition of the economic costs that are imposed, in the competitive marketplace of a city, on the owners of the few important landmarks that are singled out (Miner, 1969). Where the European method tends to preserve too much, iLmerican methods that identify specific buildings fail systematically to preserve buildings of quality in that dangerous period when they beco,,>e examples of a style that has ju,st passed out of fashion. The penultLrate mode of building is usually the least popular, and when important buildings are not protected through middle age they will often not exist in the years when they are again appreciated. If we are going to apply public funds to the preservation of valuable buildings, we should perform some analysis on the costs and benefits involved. The benefits of having an environment which has not forgotten the past can be roughly estimated in various ways, especially by studying cities which have, and do not have, a visible history still existing. The costs are not difficult to assess. However, the benefits of a preservation entered into now will ,principally accrue to future generations, and this delay raises special problems usually found only in ecological questions of natural resource depletion or preservation of species. In general, how should we regard future generations? After all, “posterity never did nuthin’ for us”, as the rustic sage has it, and because previous generations did do something for us (or to us) seems insufficient reason, on the face of it, to return to the favor to generations unborn, or even to our children. We can distinguish, roughly, four time scales that will be important in this discussion. First, there is ‘political future’ - the time in which the political decision-makers of the present will still be seeking reelection or reappointment. Whatever their own feelings about posterity, their decision-making, if they value their careers, -;
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the preceding period. If we are young now, the events of the ‘near ‘uture’ will happen to a middle aged rjerson; if we are middle aged, they wil happen to an old one. This time is also beyond our political memory of any but unusual heroes and villains. The events that occur after we die, for perhaps another forty years on the average. seventy years at the outside. occur in the ‘next pdhulation’. They affect people we will have known (children certainly, grandchildren probably) but whom we probably do not know now and certainly whom only the young among us know as adults. Finally, there is the ‘distant future’. Noone alive in this time will be known to us during our lives. We know they will exist; we may know them for our descendants, but we cannot know their names, faces, or habits, and certainly not their desires. The economic theory of discount rates for future goods probably serves us as a reasonable guide to behavior as regards our perception of e\lents in the political and (perhaps) the near future. We make decisilons -.as individuals - of exactly this kind now; agreeing to or rejectir.g a twenty-five year mortgage on a house at a certain ir terest ra’te; choosing to attend or not attend college for a complex of reasons which include future earning power and social position. The principal problem in policy analysis for these time periods is the existence of varying discc:mt rates among different members of the population. Obviously, if t;l?re were a perfect capital market, and everyone’s utility curve for capital were concave, everyone would borrow or lend until we all had the same discount rate, but there is good reason to believe that this perfec?t market does not exist. Various aspects of the behavior of the poor, for example, indicate that (whether because they are excluded from this market, or have no experience of it and therefore cannot consider it m their subjective calculations) they behave as though they have a hi&er discount rate than the rich (see Banfield, 1970, pp. 45 ff.). If the rich make the decision, then we would expect that more will be saved for the future - at a higher present price - than the poor would wish. When we look at event*
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Another challenge to the discaunt rate model comes from a comparison between different times in the future. Even if a 1000 benefit occurring 75 years from now is worth $26, is if really worth only $7.70 if it occurs twenty-five years later? It seems more likely that at such distances in time, we regard that benefit as being of nearly equivalent value at both seventy-five and one hundred years distance. (It is not necessarily relevant that to the people of seventy-five years from now, $26.00 in their future will probably seem to be worth $7.70.) Finally, we may well suspect the analogy between a benefit that the decisionmaker receives at a later time and a benefit someone else receives. We might discuss these time periods better in terms of present benefits resulting from having ‘done something for posterity, but we will not pursue the ramifications here. The balance to be struck between possible benefits received bypeople who aren’t yet alive, and whom we may never see, and the certain cost5 these benefits incur now, is a difficult question. There is obviously a continuity between the end of the ‘discount rate’ period and the beginning of any flat rate period. If the model suggested above is correct, then we can expect a curve Zke fig. 2, where the present value of $1 levels off at some time to constant levels in the next population and distant future. (To make the integral of utility converge, a termination date, possibly with delta functions for later specific events, is required.) Important as preservation may be, it seems unlikely that environmental quality worth preserving or encouraging is found only in old buildings. If we think of other characteristics of the built public environment that provide amenity, it is clear that historical preservation PV

1

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Fig. 2. Present value of $1

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is only a si,nall example of the kind of controls that will have to be exerteci to achieve the benefits that are available. This is not the place for a discourse on architectural standards; we will limit ourselves to justifying the need for public controls of a type that fit poorly with present concepts of ownership by making two points. First, a public space is perceived not only as a succession of individual buildings, but as a whole, and the buildings that define it Lontribute to that impression through a range of qualities from their physical envelopes to materials and details. Second, even if the quality of the public space on which it fronts is an important component of the profitability of a building (and this may not be so), the owner has no incentive to cooperate in deu4oping that quality (even in the presence of a coordinating advisory agency) unless he is assured that other neighbors will do so as well. In the case where he fears non-compliar?ce by his neighbors, existing incentives favor a building which differentiates itself as much as possible (in the kingdom of the blinding - the strip development - the fastest-blinking, brightest, most frantic display is king). In this unstable non-zero-sum game, sophisticated controls are necessary to avoid the minimax strategy which makes the public the biggest loser. *I The nearest approach to variable control in the USA occurs through the design control function of a rc3evelopment authority. Zoning ordinances have the effect, principally through floor-area-ratio specification. of having seized from property owners at the time of enactment a certain fraction of the economic value of many properties. In renewal areas, the good possessed by the city further includes a (conditional) title to the land itself, including the value added to a set of properties by their having been assembled into a large package. When development of a given property is in question, the redevelopment authority can, with greater or lesser effect, hold out the carrot of increased density or even acceptance of the project to developers who will provide amenities. The amenities desired vary from project to project, and include such things as additional parking space, or a complete redesign to move a building mass across the site from a narrow street to a wide one. The power of the authority is even stronger in renewal areas: in these cases the control function operates over the entire range of feasible projects, since the genemtion of design occurs at the first level, in preparation of the ‘developers +it’ which asks for proposals, I2 Many urban renewal projects have revealed what may be a wide split between the objectives held by the public and those served by the redevelopment authority. Although the administrative control process

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described above seems to satisfy many of the implied desiderata listed in sect. 1, it raises serious questions (principally because of the separation of the agency from public control) about the effective objective function being maximized. The feedback required to keep the prof’essionals in the authority attuned to public trades and prices may be available simply by requiring any development plan to be publicly presented in three versions, with the specific benefits given highest priority in each version (revenues, public open space,.traffic simplification, etc.) clearly identified. Until some effective feedback system is developed, it seems hard to argue that redevelopment authorities, or any professional design regulator, should be given more power to control urban development.

4. Summary We may best summarize by observing that the state of our urban environmental control systems conceals much of the information we need in order to know just how bad it is. The uniformity of regulation, added to the patchwork and publicly unresponsive modes of modifying it, makes it very hard to find existing alternatives from which to extract data to scale the status quo. Even so, we have found numerous examples of control methods which can, on theoretical considerations alone, be expected to suboptimize. The danger signals pointed out here, and others I have omitted, should be investigated c~ri;:Pti!!ywith an eye to allowing experimentation and variety which - aside from the economic efficiency and public responsiveness to be expected - will provide the data with which the control system can be continuously improved and, through it, the environment of the city brought progressively closer to a reflection of the popular will.

Footnotes ’ There are values of the societal discount rate that overcome any transition costs; the question of discounting is discussed below. 2 A U.S. Soil Conservation Service program of straightening and deepening meandering rivers, to prevent tlooding, which has been accused of damaging the local ecology disasciously. 3 E.g., taxing externalities, selling rights to pollute, defining a series of violations whose penalties follow the damage they represent, etc. 4 Industrial consumers of space have a much more sophisticated market in safety, in which diff.
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’ Statistical Abstract of the United Stetes, U.S. Dept. of Commerce, (1970) p. 57. ’ Idem, p. 58.

’ Idem, 9. 82. ‘C. Abraham and J. Ihedid (1969). Le pr.:: d’une vie humaine dans les dtcisions &onomiques, Rev. Franc;ais de la Recherche Operstio&le 111,p. 157 ff. (As this article went topress, the author’s attention was drawn to further discussion of this matter by Iribarne, Abraham and Thedie’ in: Analyse et Prevision Vi1 (1969) and X (1970). 9 Statistical Abstract of the United States, U.S. Dept. of Commerce (1970). p. 813. lo Presumably, the presence of an undesirable in a neighborhoud is a ‘public bad’. ” This class of problem is discussed elegantly and at length in T.C. Schelling, On the ecology of micro-motives, Public Interest (Spring, 1972). I2 R.I. Kroin, Boston Redevelopment Authority; personal communication (1972).

References Banfieid, EC. 1970. The Unheavenly City (Little, Brown, Boston). Bryan, J. 1970. Concentrated code enforcement, Journal of Housing 27,6, 300-309. Emerson. J.M. 1971. Channeiization: a case study, Science 173,325-326. Miner, R.W. 1969. Conserva_ion of historic and cultural resources, American Society of Planning Officials’ Planning Advisory Service, March, p-244. Olson, M. 1969. The Logic of Collective Action (Schocken, New York) ch. 1, II. Solow, R. 197 1. The economist’s approach to pollution and its control, Science ‘73,498-503. Starr, C. 1969. Social benefit vs. technological risk, Science 165, 1232-1238. Zeckhauser, R., M. Spence and E. Keeler. 1970. The Optimal Control of Pollution, Kennedy School of Gc,vernment Public Program (Harvard Universitjl) p. 1.