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Urban and Environmental Economics Study Notes First Year
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A look at pre-modern concepts based upon urban and environmental economic ideas and influences.
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Lecture 1Introducing the Market
Planning in itself is a market economy that is affected by market forces.
So what is a market economy?
‘’A market economy is an economic system where to forces known as supply
and demand, direct the production of goods and services. Market economies
are not controlled by a central authority and are instead based on voluntary
exchange’’.
The idea of a market is voluntary. Nobody is forced to contribute to a market.
For example, when I purchased an apple macbook apple have not forced me
into buying the product I myself have made a voluntary exchange by
purchasing the product within the apple store. People engage with markets as
they wish to.
The two forces of supply and demand are what determines how successful or
how unsuccessful a market is.
Demand: For a particular good or service, the quantities that the individuals,
organisations and institutions which compromise the market are willing to buy
at any given price.
If the price is too high, demand falls.
Supply: For a particular good or service, the quantity that producers are willing
to supply to the market for any given price.
The government does not control the market, however they may try to
influence it.
Market failure
Market failure is said to occur where the market does not allocate scarce
resources efficiently.
In recent times we have seen some clear examples of market failures. One
case in the UK right now is the soaring energy bills. Another example was with
,toilet paper during the Covid-19 pandemic. The demand for toilet paper was
high as people panicked due to their seeming to be another lockdown on the
horizon. This meant that the toilet paper companies could not keep up as the
demand was far greater than what they were able to supply. This led to empty
shelves and caused people to begin selling toilet paper for far more than the
actual price that would be sold in stores.
The most common form of market failure is where the actions of one agency
have a negative impact upon others with no compensation - this is called a
negative externality. The externality of gas prices rising is that we are all
paying double this winter than what we paid last winter.
In what kind of markets do planners intervene?
1. Land
Only 5.9% of UK land is considered ‘built on’ the rest is considered to be rural,
national parks, farmland etc. Most of the land in the UK is nationalised
meaning that it is owned by the state. Planners play a huge role in the way in
which land can be used and what can be built upon certain areas of land.
2. Housing
3. Transport and Transit
4. Maritime and waterways
5. Industry
6. Energy
How/why is the market economy changing?
The younger generation have a different set of market ethics compared to the
older generation. I.e We care much more about the environment, this may
mean we push for a new type of market such as electric cars.
,As society changes our market ethics change too and that therefore changes
how we intervene in these markets.
UK supply and demand example
Supply: Land, New homes built on that land
Demand: Growing population, more households, large economies in major
cities.
The effect of these trends in the UK is rising house prices.
Is intervention by planners over time to blame for this?
In 1980, prime minister Margaret Thatcher introduced a policy called ‘right to
buy’. This meant that if you had lived in a council house in the UK for a certain
period of time you could gain the right to buy it from the state. However,
thousands of people in the UK took advantage of this policy. People who
would gain the right to the home from the state took a house out of the system
leading it to become a private commodity. This meant that when the owners of
the home decided to sell it they simply would sell it to another buyer they
would never choose to sell it back to the state, this is money therefore lost
from the state. This added lots more pressure onto the supply and value of
housing.
Sometimes what we believe is a good policy/intervention can have negative
consequences.
Some of the most recent housing interventions come from the labour party
with Jeremy corbyn vowing to ‘take on dodgy landlords’ with rent caps.
Who builds homes in the UK?
, Private market - 150,000 homes a year.
Try to locate the local plan for the local authority of your hometown.
Lecture 2
Understanding local economies
In the UK we have what is known as a mixed economy. This includes a free
market and a command economy, the UK has a mixture of these two.
What is a free market?
- Believe that the forces of supply and demand should be allowed to run
free and determine prices within the market. If prices are high that is
because there is sufficient demand and supply is limited.
- Entrepreneurs can keep any profit that they make.
- Freedom to establish any business. If there is a gap in the market a free
marketer believes you should not be stopped from establishing that
business.
- All businesses should be privately owned. The state should not own any
form of business.
What is a command economy?
- More emphasis on the way the government intervenes and controls the
economy.
- Taxation on entrepreneur profit/earnings to reduce inequality.
- Taxation on undesirable goods/activities. I.e In the UK the government
places a tax on cigarettes.
- The government provides lots of public goods. I.e Transport, education,
health. The government pays for these things.
Since 1841, the UK economy has changed massively.
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