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Tuesday, October 27, 2020

Liberland’s Prospective Urban Planning Regime

by architectural guru Patrik Schumacher, London 2020

This is a discussion paper that tries to address the question of Liberland’s prospective urban planning policies. This is not only an important question from an aesthetic and urban design perspective but, more importantly, concerns urban development as a crucial factor in economic development. The critical issue here is the question of how much prescriptive planning, if any, would not only be compatible with the libertarian ideological credentials of Liberland but more importantly how much planning, and what kind, if any, would be optimally prosperity enhancing for Liberland.

The most important proposition of this paper is to recommend for Liberland to start with a simultaneous plurality of approaches, i.e. to work with a plurality of planning regimes rather than with a single regime. The strategic decision would thus be to offer choice to potential developers, investors, buyers and end users. In the overarching context of government as contractually bound service and the pursuit of governance innovation, it is important to experiment and use the initial market feedback from potential investors and then from the measured market performance of built results, for a pragmatic discovery and selection process concerning urban development regimes and policies.

Policy regimes aim at an urban order implying an optimal co-location pattern that maximises positive externalities, i.e. functional spill-overs or synergies, and minimises negative externalities. The maintenance of a nimble, flexible openness to future opportunities is another concern to be considered.

This paper distinguishes, analyses and comparatively appraises three fundamental types of regulatory regimes or planning regimes for urban development, namely ‘sponsored’ versus ‘self-governed’, versus ‘spontaneous’ orders. With respect to sponsored orders the paper distinguishes and compares three subsidiary orders, namely the ‘anticipated’, the ‘curated’ and the ‘rule-based’ form of a sponsored order. The overall system of distinctions developed and employed here reads as follows:

  1. Sponsored Order:
    • Anticipated Order
    • Curated Order
    • Rule-based Order
  2. Self-governed Order
  3. Spontaneous Order

The assumption here is that the various planning regimes listed above are distributed across the land available to Liberland, so that each regime is instantiated and tested in at least one zone or urban district. Regimes can then be expanded or contracted, first based on uptake during the marketing and land sale phase, and later in accordance with the actual urban development experiences on the ground.

In what follows Liberland as initial land owner and contracting party to all initial land sales or leases is here referred to as the ‘Liberland Corporation’, or in short the ‘Corporation’. This phrase leaves it open how Liberland will business-wise be constituted when it hits the ground and concretely implements its preliminary governance software to the material reality of its envisioned territory, i.e. the phrase ‘Liberland Corporation’ leaves it open whether it will operate as, or in analogy with, a customer cooperative, an employee cooperative, a supplier’s cooperative, or as shareholding company, i.e. as an investor’s cooperative. The author has addressed this question in an earlier discussion paper presented at the 2nd Liberland conference. The question of Liberland’s constitution is largely independent of the question investigated in the current paper, namely the question of how Liberland best sets up and orders its urban development space.

The assumption underlying all three planning regimes distinguished above is that the Liberland Corporation will not itself develop and build but sell land parcels to investors, developers or end users. These land assets will be sold with particular covenants that reflect the respective planning regime that applies to the particular land in question. Land sales might be outright sales (free holds) or long leaseholds, e.g. 25, 50, 75 or 100 years, with the option to negotiate lease extensions. The advantage of the leasehold system is that the Liberland Corporation, in the long run, participates in the land appreciation. A further advantage is that the Corporation can redirect land use as land returns at the end of the lease. However, leases are, ceteris paribus, usually less attractive for investors than outright land purchases, and the Liberland Corporation could choose to trust land owners to adapt rationally to unforeseen future conditions. The owners can indeed be expected to redirect land uses in adaptation to new demands and value options, and they would prefer to do this, and might do a better job, without worrying about finite lease terms.  With respect to future openness restrictive covenants or rules that are meant to curb negative externalities are a constraint that might turn out to prevent adaptation. In this case a return of land within a leasehold system might make it easier to reset the rules. Also, the externalities and spill-over effects that motivated the covenants might change and might make the restrictions obsolete. In any event, some way of accommodating such changes should be allowed for.

Properties might have to be re-allocated for the sake of the global city or district benefit. However, eminent domain powers are to be eschewed here, in the context of a libertarian society, in favour of repurchasing rights, perhaps at a pre-established multiples of market value, or of the original purchase price in the absence of a liquid market.

With these preliminary framing reflections and decision in place as underlying assumptions, we proceed with the theoretical exploration of the various regimes or orders distinguished above:

Zaha Hadid Architects – Beethoven Concert Hall Bonn, Germany

1.Sponsored Order

The Sponsored Order implies that the Liberland Corporation is acting as authority just as municipal planning authorities do now everywhere. The crucial difference to normal practice here is the general difference that sets the whole idea of Liberland as ‘free private city’ apart from all existing governments: the institution of an explicit “social contract” that clarifies the rights and obligations of the parties without customers or citizens being subject to one-sided changes of the overarching terms of the agreement. This ‘enhanced rule of law’ contrasts with all current systems of government, including democracy, where individual citizens’ are never safe from unilaterally imposed changes to their economic rights and obligations.

With respect to the Sponsored Order we can distinguish three sub-variants, namely the anticipated, the curated and the rule-based order. In all three sub-variants order is maintained by the Corporation acting as authority. However, the three sub-variants, while often blended in practice, exhibit important differences that deserve to be distinguished.

Anticpated Order

In both the Anticipated and the Curated Order the Corporation generates a relatively detailed master-plan that operates via positively imposing building functions, building types, building lines, maximum heights etc.

In the Anticipated Order this master-plan becomes the basis for the reliable anticipation of how each parcel sold is embedded in a larger context. The master-plan reliably anticipates the road network, public spaces, the building forms in terms of building outlines and heights, and possibly further specifications as well as prescriptions of land uses, possibly very detailed.  In the anticipated order only developments anticipated in the masterplan are permitted.

The advantage of certainty for investors, namely that the possibility of unwelcome surprises is excluded, is paired with the disadvantage that the prescribed developments might be coming forth only slowly, if at all, if the masterplan misjudges the market desires. This kind of prescriptiveness puts no brake in development only where the locational attractiveness and the associated development pressure is so high that all uses want to pile in anyway. Then use selection is viable without slow down.

Zaha Hadid Architects – Bergisel Ski Jump Austria

The Curated Order

The Curated Order is more flexible via the discretionary powers granted to the planning authority.

This discretionary regime is thus a response to the disadvantage of the rigidly binding masterplan and offers flexibility via ad hoc adjustments to the masterplan responding to unanticipated demands and market conditions.  Order is here maintained via the Corporation’s case by case appraisal of how a submitted development proposals fits into the overall curated value proposition originally envisaged. The Corporation maintains the right to approve or disapprove each individual proposed development in light of the overall city or district value, thus representing the collective interest of all citizens, resident firms and land owners in general, inclusive of regard for future city development potentials. This implies also the possibility of a shift in the overall urban agenda.

The disadvantages of this approach are well rehearsed: the uncertainty of gaining permission might discourage potential developers to invest in the effort of elaborating a proposal in the first place. Also, even if this 1st hurdle is overcome, the permission and negotiation process is costly and time consuming for both parties. Therefore it is advisable to maintain an evolving up to date masterplan as underlying default option for permissible development.

Further, the possibility of downstream context transformations remains a disadvantage for buyers who value certainty of final global outcome and want to avoid surprises that thwart their long term plans and calculations.

Example: Development in London is subject to strong discretionary planning powers. 

Zaha Hadid Architects – Bora Residental Tower, New Mexico

The Rule-based Order

The Rule-based Order imposes strict rules and development constraints on all parcels.

These rules are usually restrictions rather than positive impositions, i.e. prescribing height or GFA limits rather than exact heights. These rules might be varied per predefined zones, or even per parcel. Everything that is not explicitly forbidden is here permitted.

The rule-based approach is exemplified in the US, for instance in New York. Here the planners have no, or much less, discretionary power in relation to individual developments.  As long as developers stay within the rules they cannot be refused permission. This gives a highly valued certainty to those looking at buying parcels and investing in development, i.e. certainty with respect to whether they can realize what they intend to do, while making less predictable what is happening around them in comparison to the anticipated order.

This certainty about development rights also reduces the transaction costs and the costs of the administrative processes associated with development. This probably also speeds up the development process in comparison with the anticipated order and the curated order.

The disadvantage is that the overall shape and character of the city is less predictable. All we know is that the shape of the city will not violate the general abstract rules imposed. However, to the extent to which we can trust the rationality of the market process as a process that aggregates and coordinates the dispersed rationality and knowledge of individual investors, who come together to benefit from each other in an evolving urban network garnering synergies, we can predict that the overall value generated, possibly via unexpected solutions, will probably exceed any anticipated or curated value proposition.

2.Self-governed Order

The Self-governed Order implies that the Corporation, in the districts so designated, is devolving the planning authority to the landowners or to all property owners invested in the district. This implies a land owners’ or property owners’ democracy, albeit with voting powers best allocated by land share, i.e. in proportion to the size of the property, in analogy to the self-governance rules of share holding companies. These rules will initially be constituted by the Liberland Corporation in order to give clarity to this proposition and to overcome potentially costly transaction complexities. However, the constitution itself might also be allowed to evolve through a self-induced and self-regulated self-governance process.

The main differences to the usual municipal democracies is firstly the fact that a self-governed planning regime is restricted to matters of urban development, secondly that the right to vote or otherwise participate in the governance and decision process is restricted to land owners, and thus excludes resident tenants, and thirdly that voting power is allocated by share rather than according to the one person one vote principle.

This is to avoid the problem of universal suffrage democracy, namely overburdened, uninformed and indeed rationally ignorant voters who are vulnerable to demagogy.

In contrast, the major land and property owners are well placed to discuss and take decisions with regard to appropriate collective action measures for the benefit of all end users of their properties, and this includes the district’s and wider city’s citizens, as well as the future citizens and customers, individual and corporate, the land owners would like to attract. Collective action issues include potential negative externalities of particular potential developments as well as infrastructure investments that are not always forthcoming spontaneously.

Value maximizing decisions are best taken by the stake-holders who have the knowledge and incentive to do so as rationally and as effective as possible, and value maximising decisions are indeed utility maximising decisions, and thus imply the best known overall land utilisation.

Some large investors might prefer the Self-governed Order over the Sponsored Order as it empowers them in shaping the destiny of their district. The advantage of the Self-governed Order over the Sponsored Order is that the rationality of the district development policies can benefit directly from the lived experience, knowledge and incentives of the land owners.

A potential disadvantage might lie in the difficulty and costs of the democratic collective action process that is implied here. Where delegation of powers becomes necessary, due to scale and due to the complexity of collective action issues, principal-agent problems and the danger of corruption come into play.

There are many examples where land owner associations have solved collective action problems and formed for the sake of collective district improvements. However, there is no example the author is aware of where such land owner associations have taken up the full responsibility of urban planning self-governance.

3.Spontaneous Order

The Spontaneous Order regime is the only urban development regime that is not assuming any capacity for any form of centralized collective planning action. The assumption here is that the gains that might be achieved via collective action might not be worthy its costs and inherent dangers and that the spontaneous formation of an efficient order is possible, even likely via the free accumulation of individual choices, each informed by individual knowledge, imagination and incentives. The phrase ‘spontaneous order’ was used by Friedrich von Hayek in a more general sense. While the phrase is used here, in this working paper on planning regimes, restricted to spontaneous urban order, this concept can be understood as falling, as special case or subset, under Hayek’s more general concept, thereby making Hayek’s more general, related insights about the use of knowledge in the economy and about competition as a discovery procedure relevant here. After all land and real estate markets are, first of all, also markets, albeit with some special features.

Under the Spontaneous Order regime land is sold without any use and density restrictions, indeed without any restrictions whatsoever. The respective zone might be referred to as the “wild zone” or the district for a “free for all” form of development. This might appeal to some potential investors and might attract truly creative and entrepreneurial investors, developers as well as resident tenant entrepreneurs.

Total development freedom is conceivable where the traditionally severe negative externalities associated with heavy industry or large scale manufacturing, in close proximity to residential and cultural facilities, is no longer to be expected within an urban area, in the era of the post-Fordist knowledge economy. The Spontaneous Order thus becomes viable in principle when the uses that are to be expected include forms of living, forms of knowledge work and forms of consumption and recreation, without large scale physical production coming into play. Working, living and consuming hardly disturb each other and in fact often desire and benefit each other’s proximity. The need for the traditional segregative functional zoning is thus historically obsolete.

With opting for an unrestricted 1st world urban “wild zone” or “free zone” Liberland could make a mark and stand out distinctively against the backdrop of urban overregulation everywhere in the advanced economies, especially in Europe. The general failure of European democracies to unleash entrepreneurial creativity is especially acute in the urban development arena, where inflexible density restrictions, and strictly prescribed land use allocations, together with prescribed standards, stifle and misdirect development.

There are many considerations that recommend a very high degree of unconstrained urban development freedom. Cities facilitate the sharing of services, the exchange of knowledge, as well as direct cooperation and collaboration. The wild zone allows for creative entrepreneurial energies to be unleashed thereby increasing the likelihood to discover the solutions and at patterns that integrate the many potential purposes, functions and business plans that would most effectively utilize the land resources available. That’s what markets do best. This paper argues that land parcelling in the Spontaneous Order zone should also emerge spontaneously via market demand. This would allow for very small initial investments. This would also accelerate the churning of ventures, giving the whole process its required pace and thus a chance for each or most sites to cycle through a number of trials until uses synergize with the wider context and with each other. 

The freedom of mixing land-uses is crucial for the vitality of the city. Only a creative trial and error process guided by price signals, as well as by the profit-and-loss selection system, can discover and optimize, at each individual site, the most value-enhancing use-mixes that best synergize with the particular urban adjacencies of that site. It is precisely these functional synergies that motivate us to agglomerate in cities in the first place. The planning bureaucracy lacks the requisite knowledge, as well as agility, and often the incentive, to optimize and maximize value.

In the free zone each urban entrepreneur is free to find any available site, and define and calibrate a value-enhancing mix of complementary uses that also complement and synergize with the already existing or planned adjacent uses and their audiences. This way unique and uniquely integrated urban districts have a good chance to evolve, districts with urban mixes that no central curator could have imagined or fine-tuned. However, at a further stage a curator or larger developer can try to analyse and learn from the spontaneously evolved synergy network in order to imitate its pattern and replicate its success. While nuances might be missed or difficult to replicate, the advantage of such an replicating curatorial effort would be the cutting out of the time and resource consuming trial and error discovery process. Therefore, it is advantageous for Liberland to maintain multiple zones, including the free zone laboratory, but probably without universalising the spontaneous order regime.

To bet on the emergence of a spontaneous order implies an earie uncertainty as to what will emerge, if anything worthwhile. The process is far less predictable. This also, on the positive side, entails the potential for radical innovation because the freedom to try new ideas are granted and those ideas are put to the profit-and-loss selection test and winning innovations are allowed to proliferate without restriction.

The unpredictability of the kind of development that might end up working in Liberland is, in any case, inherent in the very idea and unprecedented proposition of Liberland. In these special circumstances total freedom of settlement might be the best strategy to find settlers at all, and any restriction might curtail a potential but unknown development take off. However, suggestive plans of what it might become might be helpful, i.e, a non-binding plausible vision could be provided.

A temporary disorder might result if there is no shared conception of what Liberland might base its economic life on and if very divergent visions start to place their bets and seed themselves simultaneously, without a lot of synergy potentials. Against this potential danger, as well as against the danger of nobody seeing any potential, the non-binding vision, promoted with conviction might be an anti-dote.

A freewheeling trial and error processes can surprise us with unimagined innovative solutions. But they also have their costs: all the failed trials that must be absorbed when safe bets are eschewed before a something finally works and works well. 

This will inevitably take time but massive white elephant losses are avoided. The absence of regulations and permission procedures is also a (trivially obvious but important) accelerating factor in its own right.

There is also another potential mechanism of playing out a nimble synergy discovery process among many potential investors and entrepreneurs, namely via a prior digital city and community building game. Here we can achieve super nimbleness, without necessarily being constrained to small sites or low-rise buildings that are quick to demolish and rebuild. Such a platform could also be layered and involve not only developers playing a competitive and synergetic “monopoly” with each other but could at the same time already involve endusers. The idea here is that all those who consider joining Liberland or this particular district would evolve an emergent order, or multiple possible orders, together prior to purchase and construction.  The multitude of finally dovetailing plans would not have to use investment sequencing in the real world but in a much time compressed virtual planning world where the plan emerges bottom up as a result of a quasi-market process. Whether such a game would be taken seriously enough to inspire credible hypothetical commitments whether something like this could indeed take off is, of course an open question. This tool itself will have to go through iterative trial and error phases to discover the right balance between a deterring lack of generating credible commitments and a deterring strictness of demanding and insuring credible commitments.

Concluding Remarks

This paper is far from being conclusive. It is a discussion paper that presents an initial exploration, taking a first stab at the crucial questions and considerations unfolded here, questions that will have to be decided in one way or another when business has to start.

When venturing into the unknown, facing uncertain risks and uncertain opportunities with all options considered, where pros and cons can be charted but not easily weighted with regard to their significance in the case at hand, it is probably advisable to start with a multi-pronged approach that lets many flowers shoot out to bloom or perish. Therefore the Liberland Corporation should initially make room for all the possible ways to create an urban order discussed here, and, if only tentatively at first, allocate the different ordering regimes to different parts of Liberland.

End.

Zaha Hadid Architects – Beijing Daxing International Airport

Short bio:

Patrik Schumacher is principal of Zaha Hadid Architects. He joined Zaha Hadid in 1988 and was seminal in developing ZHA to become a global architecture and design brand.

Patrik Schumacher studied philosophy, mathematics and architecture in Bonn, Stuttgart and London. He received his Diploma in architecture in 1990.  He has been a partner since 2003 and a co-author on all projects. In 2010 Patrik Schumacher won the Royal Institute of British Architects’ Stirling Prize together with Zaha Hadid.

In 1996 he founded the Design Research Laboratory at the Architectural Association in London where he continues to teach. In 1999 he completed his PHD at the Institute for Cultural Science, Klagenfurt University. Over the last 20 years he has contributed over 100 articles to architectural journals and anthologies. In 2008 he coined the phrase Parametricism and has since published a series of manifestos promoting Parametricism as the new epochal style for the 21st century. In 2010/2012 he published his two-volume theoretical opus magnum “The Autopoiesis of Architecture”. Patrik Schumacher is widely recognized as one of the most prominent thought leaders within the fields of architecture, urbanism and design.

Since 2008 Patrik Schumacher has been increasingly interested and committed to Libertarian ideas and projects. In recent years he has been lecturing widely at libertarian conferences around the world, and is applying libertarian insights to urban development and planning issues.  , In 2018 he published a paper via the Adam Smith Institute entitled “Only Capitalism can Solve the London Housing Crisis” and published “A Capitalist Revolution for Effective Urbanisation” in the Guardian.

Patrik Schumacher joined two Liberland conferences. In the run up to the 1st conference he took a leading role in the organisation and jury of the Liberland urban design competition. At the second conference he presented a paper entitled “Liberland PLC – Corporate Governance Structures as Models for Micro-nation Constitutions”.

Patrik Schumacher is a recipient of Liberland’s ‘1st Class Merit’ award. He received an honorary doctorate in social science from Guatemala’s libertarian university ‘La Universidad Francisco Marroquin’ where he also holds an honorary professorship.


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