PLANNING AND COMMERCIAL POLICY DISCUSSION PAPER

Should an authority intervene in the market place to limit commercial uses? This is a good and relevant question that has been addressed many times in many jurisdictions. The rationale comes from an understanding of how retail centres function, the relationship among them and with the marketplace, and, at the heart of the issue, a political belief in the role and ability of the government to shape market forces. The basic argument supporting use of central place ideas in regional planning is that a system of centres arranged in a hierarchy provides an efficient way of arranging distribution, collection, and administration within regions...identification of a network of centers and the scale of activities appropriate to each level makes possible the proper location of new facilities, or where the scale of enterprise is changing rapidly, a systematic base for rationalization. (A Bunch of American Academics, 1988) Planners, however, have tended to use the hierarchy in a normative fashion, specifying systems of retail concentrations within urban areas which appear to satisfy consumers requirements for access to shopping...This specification usually involves an intimate relationship between the size of a shopping area and the extent of its catchement (A Brit, 1994) Hierarchy, or the ordering of a set into a series of levels which implies a progression, is a very long standing and powerful concept in most social sciences, but especially geography. The hierarchical organization of places (central place theory) is also one of these venerable ideas, credited to German academic Walter Christaller in the 1930s. He came up with a central place system which is organized on a hexagonal lattice. This hierarchy is commonly applied to retail location, according to the belief that each retail outlet (or more often, each type of outlet eg. fast food restaurants, grocery stores, department stores, specialty shops, etc) has a market area which does not overlap with another outlets market area or catchment area. The central notion to planning policies that limit the number of commercial locations based on this theory is that the market can be predicted and planning policies can provide certainty such that retail centres will be ensured of a market share. There are many central place theories explaining retail location, almost all based on complex economic models. The most serious problem with these and other central place theories is they make a lot of assumptions. They assume rational consumer behaviour, ideal and identical infrastructure and transportation costs, identical advertising, and so on. As for hierarchies, they assume absolutely divisible categories, and that retailers only belong to one category. When a function carries over categories, the spatial hierarchy falls apart. In summary a retail hierarchy is a useful tool but one which is often subject to error due to its rigidity and oversimplification. It has been the experience lately that a commercial

policy hierarchy is increasingly irrelevant as new forms and formats of retailing, together with corresponding changes in consumer behaviour, are introduced. Why Should Planning Polices Direct Commercial Development - the ProIntervention Argument Planning intervention is beneficial to the market because it can improve the efficiency of its operation...where strategic land use planning can reduce uncertainty about future patterns of population and employment change within specific areas. (Guy, 1994, 71) Planners also justify intervention where they feel that the operation of an uncontrolled market is likely to lead to inequities in the level of service to the local population. The most frequent reason for intervention is, however, that a retail proposal may have external effects...a particularly important negative effect, which at times has tended to obsess planners, is the competitive impact of new developments on existing retailing. Planned, managed and controlled markets are a necessary means of working out the complex relationship between consumption and society. The details of the market regulations & planning procedures reveal the priorities of the society... (Jones and Simmons, 1991, 417) Planned function is intended to protect the integrity of a currently functioning retail system. It also protects the market share of existing land owners, though this is often an effect rather than a cause of the policy. One author compared that argument to squatters rights - if youre there first, you deserve protection. Planned function is also seen as necessary to prevent harmful over-competition, which would be economically unprofitable. The assumption is that a new retail outlet might just end up losing more jobs than it introduces by diluting market share so severely that noone can survive. This concern is especially valid in low mark-up businesses such as supermarkets, who often have profit margins of less than 5% and cannot tolerate pricewars, unless a chain has the financial clout to absorb losses in the short term in order to gain a larger share of the market.

Why Government Should Provide Opportunity, Not Restrictions - The AntiIntervention Argument Everyone benefits from having a better place to shop. (Jones and Simmons, 1991, 427) Generally, planning in Britain and many other western countries has tended toward less intervention in the last twenty years. The traditional justification of sustaining existing retail hierarchies, both to ensure community stability and to contain the sprawl of urban areas, is being replaced by a more open attitude towards developers. A British

academic named Ross Davies wrote an entire book on alternatives to the existing planning processes for retail location in Britain. He sees too much centralization in retailing and too much decentralization in wholesaling, and argues: Services have been variously dealt with according to the planners perception of where their natural spatial affinities to the other two categories of trade (retail + wholesale) lie. This simplistic approach to locational needs has meant that a number of requirements to the idealized patterns of organization assumed have been forced into inappropriate environmental settings and excluded from certain parts of the city altogether...it should be a major goal of retail and commercial planning in the future to be more sympathetic and receptive to inherent market forces. (106) There is a large literature of justifications, philosophically, against market intervention in the philosophical sense. The traditional trust the invisible hand notion started with Adam Smith, who believed the market would find equilibria which would permit the continued accumulation of wealth in society. Interference only upsets the equilibria. In Canada, we interfere with the free market because the economy by itself does not always work toward our collective goals. There is a greater good or public interest. However, the neo-conservative viewpoint is that over-intervention has dampened business by limiting its freedom to expand. My personal experience is that planners should not regulate competition but rather focus on providing a match between land use and infrastructure, which will minimize negative externalities (great lingo for bad consequences). The locations provided by planning should enable rather than restrict competition. Bob Lehman