Some time ago I wrote a short piece on my experiences in attending a meeting of the Planning Board of Hopewell Township, NJ.. In brief, when I asked for the references to support some of the factual claims that had been made in a suggested revision to the Master Plan of the Township, one of the Board members claimed that no such references need be provided, since “Einstein didn’t cite his sources”. The lesson that I learned from this was simple: That people at all levels of government are just that—people, with their own foibles and idiosyncrasies, and the mere fact that they’re in government says nothing at all about their ability to make good decisions on the basis of hard data.

Irfan Khawaja wrote a nice response to this, in which he gently chided me for drawing from my experience the conclusion that we should have less government, not more. I think that his comment here is spot on, although I really intended to make the weaker point that we shouldn’t think (as many people seem to do, although not, I trust, the readers of this blog!) that people in government are any wiser than the rest of us. Irfan went on to make the nice point that maybe more government rather than less could be a good thing in some cases, noting that without Planning Boards developers could just do as they pleased with land that they owned.

Now, a defender of property rights might say that of course developers should be able to do as they please with their own property; a slightly more sophisticated defender of property rights might add a caveat like “provided that they don’t damage the property of others”. And there’s the rub. Imagine that a pig farmer buys a house in a residential neighborhood, tears it down, and installs a small factory farm for pigs in its place. The smell and noise from that enterprise would clearly damage the value of the properties that surround it. In a perfect world we would have a way by which the pig farmer could fairly compensate the owners of the affected properties for this damage, and that this agreement could be reached prior to the development of the property. Now, we might say that we live in a close approximation of that world, since the affected property owners could bring suit against the pig farmer to recover their losses. (Although this is not always the case; many States have “right to farm” laws which shield farmers from such suits.)

But what if the damage brought about by development was less direct? Let’s take Irfan’s example of a developer constructing a city in a field in a rural community whose residents are opposed to the citification of their area. The increase in population that such development would bring would lead to a need for new infrastructure, such as roads and schools. In an ideal world these would be built and paid for privately. But that’s not the world we live in. In our world such amenities will be paid for through tax dollars—including those garnered from the residents who opposed the development in the first place.

Allowing developers to do as they wish, then, could, in our world impose significant costs upon third parties. Planning Boards could thus be said to serve a useful function as protectors of property rights, precluding developments that would impose costs upon third parties. Of course, this doesn’t mean that in practice they achieve this end. And it doesn’t justify their existence in an ideal world in which negative externalities were precluded through clearly defined and defended property rights. But some defense of their existence can be given even if in an ideal world one would wish them away.