Green Belts and the inefficient allocation of land

Abstract

Land is an economic resource, so the efficiency with which it is used is essentially an economic problem. This paper, therefore, approaches the issue from an economic perspective. Having surveyed the economic definitions of efficient allocation, both static and dynamic, the paper then examines the evidence from land markets relating to how Green Belts in England — and by extension, in other countries with similar policies — affect the efficiency with which land is used. Evidence is presented that they generate substantial price distortions, and these indicate not just inefficiency in land use but provide incentives for wasteful activities, the under-provision of land for housing and the over-provision for some other land-intensive uses. There is, moreover, evidence that they damage the allocation of resources over time, leading to lost economic growth. Economics is clear not only that green space generates benefits, especially when it is accessible and close to where people live, but that unregulated markets will not generate enough of it. Green Belt land is intended to prevent people living in it and provides no access or environmental protections. The most important land use in English Green Belts is intensive agriculture; one of the most environmentally damaging land uses. Evidence shows that Green Belt land does provide some benefits, but that these are highly localised; since those living close to or surrounded by Green Belt land tend to be richer, in aggregate Green Belts not only damage economic efficiency but redistribute welfare and housing assets to the relatively rich. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/business/.