Accounting for transaction costs in planning policy evaluation

Abstract

The costs incurred in the design and implementation of planning policy instruments are not always considered sufficiently. In order to increase the efficacy of planning policy instruments, these transaction costs need to be taken into account. While such transaction costs are expected to vary according to their institutional design and arrangements, up to now there has been no systematic research concerned with how planners should consider transaction costs, and other institutional aspects, as evaluation criteria in planning policy analysis. This paper investigates how, and in which stages, these costs can be included in planning policy design and analysis. Using the literature of transaction costs and new institutional economics, this paper proposes a framework for integrating these costs into evaluating planning policy instruments. This framework consists of different factors that influence transaction costs in designing and implementing a planning policy instrument. Although some researchers have discussed the influence of factors concerning the characteristics of transactions and transactors, there has been limited consideration of the importance of factors related to the characteristics of a policy. This paper argues that policy characteristics, such as, simplicity, age of the policy, precision of the policy, policy approach, public involvement and participation, and policy credibility and consistency, can affect transaction costs in any policy. Therefore, the paper concludes that, in addition to transaction and transactor characteristics, a ‘policy characteristics’ category should be included to emphasise the importance of policy selection and design in transaction costs of a planning policy instrument.