Boris Publishes Replacement London Plan – Asking for JR on Gypsy and Traveller Targets

The Mayor of London has today published the replacement London Plan – coming into force today – following the panel report published earlier this year.

It will require some study but the immediate issue jumping out from his statement of reasons accepting and rejecting the panels recommendations, is the justification he gives for rejecting the panel’s recommendation on Gypsy and Traveller  targets.  In October 2010 Boris deleted the Borough by Borough G&T targets, based on a GTAA, leaving the decision to Boroughs.  He says that following legal advice.

the Panel have given inadequate weight to the clear change in national policy that has been indicated by ministers. The status of guidance issued anticipating the abolition of regional spatial strategies has been resolved by the courts since the Panel’s report was written, and it is now clear that in particular, the letter sent to planning authorities by the Chief Planner at the Department of Communities and Local Government dated 26th July 2010 and other government statements do provide “an indication of the content of the intended new guidance at the time of writing of the (Panel) report” (para 3.104). The weight to be given to this issue is a matter for decision makers. The Mayor believes it should be given very significantly greater weight that the Panel not least because it accords with the Mayor’s own judgement on the efficacy (or lack thereof) of top down strategic targets in this area.

Other points are mentioned but this one is irrelevant.  Something can only be given weight as a decision maker if it is a material planning decision at all, and following CALA II the intention to revoke regional strategies is not material to the process of plan making at all.  The London Plan (SDS), is a development plan, what is more the decision to abolish RSSs is irrelevant as London doesnt have them, it has the London Plan instead. Indeed the Mayor is being entirely inconsistent as the non-applicability of RSS to London, ever, has been used to justify the retention of Borough by Borough housing targets in London.  This argument will not stand up for a moment if challenged.

He seems to be making an argument that the panel report should have been different at the time it was written (pre-CALA II) , irrelevant, what matters are are the findings relevant at the time of the decision (Post).

What is more once the Localism Bill gains Royal Asseent how will the Mayor square this with the duty to cooperate in resolving cross borough disputes – raging for years – about G&T targets.  He can’t duck this as the statutory purpose of the Mayor in the first place is to plan strategically.

What is more the SEA of the change did not appraise against a reasonable alternative as required by the EU directive, that is the alternative of setting borough by borough targets.  What is more the decision statement does not refer to the reasons why the Mayor has rejected some of the findings of the environment report, as also required by the directive.  Not appraising the effects of downgrading of targets in a development plan is already leading to several legal challenges nationally which are likely to be successful.

By being stubborn on this point the Mayor will have likely as not opened up several courses for successful legal action and delayed the much needed replacement London Plan coming into force in full for some time.  This is especially the case as the only recourse of a judge will be to block the publication of the whole plan, there is no provision in the act, as far as I can see, for them to block part of it.

Boris – change your lawyers.

Good case if ever there was one for a binding report on the London Plan.

Entrepreneurial Error and The Business Cyle

‘although entrepreneurs can..make errors, there is no tendency for entrepreneurial errors to be made.’

Isreal M. Kirzner Journal of Economic Literature, Volume 35, Issue 1 (mar. 1997), 60-65

With the greatest respect for Kirzner, who has given us many insights into market process and entrepreneurship, this statement is incorrect.  There are such tendencies, and such tendencies are endogenous to the business cycle.

It is trivial to call a directionality in rising prices, a rising price must one day fall (falling prices are more difficult, they can fall to and below zero – a scrapping cost for outmoded goods).  What is hard is calling when, getting the timing right.

What rules do market participants use to determine well to buy and sell?  Im considering here the non-professional investor, acting without the benefit of sophisticated models.

Let us consider the two main theories for this, both based on different axiomatic foundations.

The Neo-classical – that decision under uncertainty is the choice that maximises the expected value of a  utility function (See Savage 1954 The Foundations of Statistics. New York, Wiley.)

The Austrian – human action is rational but ex-poste the actor may discover they have made an entrepreneurial error.  So economics is not a theory of choice or decision making but on the social processes of coordination, which depends on the awareness the actors show in the exercise of entrepreneurship (see De Soto Socialism, Economic Calculation and Entrepreneurship, Edward Elgar 2010).

The problem is that both theories leave bad decisions unexplained; placed outside the field of analysis of ‘core’ economics.

The kind of bad decisions that saw many Albanian’s investing in a pyramid scheme, that led to economic collapse in 1996.  The kind of bad decisions that see people all over the world taking out credit to get in on housing bubbles, just before they pop.

If such actions are seen as outside the core concepts of economics then economics can tell us nothing.

Of course many decisions are not made on the basis of the calculation of a utility function, in fact outside the blackjack card counter at a casino very few are.  To explain the ‘deviations’ from rationality and the ‘bias’s’ of decision making we have behavioural economics and behavioural finance.  But it is putting lipstick on a pig, but it does not explain the commonality and universality of decisions that vary from the maximising ideal.

The Austrian approach is less flawed – bad decisions are made by those who believe them to be rational – but it tells us nothing about – for example – why in periods of ‘golden’ growth most actors make good decisions, and why in periods of bubble and crisis decisions are bad ones.  We often have a disjunction.  When the entrepreneur profits they are a hero – they got it right.  But when, despite factors beyond their control there are losses and a downturn – they got it wrong – but they contend the market gets in right in driving failures to the wall.  We have a mish-mash here of methodological individualism and hinting at some form of emergent process, which acts above individual will, to restore economic prosperity.

Austrians cannot have it both ways, they lack a coherent theory of how multiple decisions are made with economic consequences.  Entrepreneurship is seen as an impenetrable black box of the not yet foreseen and unknown.  It tells us nothing about economic change other than it is seemingly unknowable and unpredictable.

Consider a third new approach – the Decision Analysis approach promoted by LiCalzi and his co-writers (see Decision Analysis using Targets instead of Utlity Functions Decisions in Economics and Finance, 2000)

This approach extends  the satisficing concept of Simon (1955)

the agent should establish some target t and then pick the first action d which meets the target

As follows:

This simple target-based model is not complete because there may be uncertainty about the target itself. For example commercial firms must usually viewtheir customers’requirements as uncertain…Hence, we relax the assumption of a known target and replace t with a random consequence T . The ensuing target-based decision model prescribes that the agent should choose an action d which maximizes the probability v(d) = P(Xd
T ) of meeting an uncertain target.

LiCalzi shows that aiming for a probabalistic target in this way both satisfys Savages and von Neumann and Morgenstern’s axiomatization.  Indeed rather than using the wooly ‘language of utility’ it enables use of the more objective  ‘language of targets’ – indeed the ‘indifference curve’ between two different decisions can be interpreted (after Pratt, Raiffa and Schlaifer (1995)) , as ‘indifference probabilities’.  No understanding by the agent of cardinal utility, or indeed ordinal utility, is needed, only of whether one event is more likely than another.

But if faced by a decision between multiple options all that is needed is an assessment that one is most likely.  It does not require a-priori a subjective construction of a probability function.

Entrepreneurial decisions, at their most simplistic, are decisions about which choice will make the most profit.  But that doesn’t necessarily require a subjective maximising function, simply a decision choice about which option is likely to make the most.  When time and information is available it might be appropriate to calculate a maximising function, such as through operational research methods such as the travelling salesman for delivery of goods, but most decisions are not made that way, they are a special case of decision making under full information.  Most decisions are made on experience and gut instinct.  Indeed we know from psychological research that most decisions are not even made from a range of options at all.  The experience of the decision maker will be used to rule out certain courses of action in advance.  See my article on action script decision theory – the decision maker has an idea how things work based on the knowledge that has been gained from experience. S/he compares the possible action against what is known to work.

Consider the herding instincts and madness of crowds of markets.  Some may have a simplistic decision rule – my mate has bought a house at a low price, that price rose, they made lots of money, I can too.  In the language of Minsky this could be called a ‘Ponzi investor’.

Many see that as a deviation from the rational actor presumed in neo-classical theory and look down their noses at Minsky’s ideas as a result.  But as it is the simplest economic decision rule does not make it irrational.  For many getting into a market at the right time and right price it was a very rational decision.  But at a decision rule it is incomplete. Others with more experience of real estate markets might add to the decision rule ‘unless that capital value of the house exceeds a valuation dependent on rental yields’  that is one based on economic fundamentals.  But these will always be in the minority in any market involving many actors who are not professional investors.

This of course is one of the reasons why the housing market is inclined to bubble behaviour to a greater extent than other markets, and why the distribution of different decision rules need to be at the core of an explanatory and predictive economics.  Markets do have differential tendencies to entrepreneurial error, errors which, upon study, found to be systemic and predictable to a considerable degree.

Put at its most simplistically a market based on a crude rising price rule will rise exponentially until budget constraints are met, when they are people will borrow until liquidity constraints are reached, then the market will turn.  Interest rate changes explain the changes to the point of inflection, but not the causes of malinvestment.  Austrian theories of the business cycle are one step removed from the agent based process of crowd following that drives the cycle.  They gloss over the systemic entrepreneurial errors.

There is not enough space in this article to examine the parallel process of falling prices, of the meta-decision of when to invest, and the process of homeostatis when there are multiple decisions of multiple actors.  I will return to these.

[Note:  This should not be read as making any assumption either way in arguments about ‘socialist calculation’, it is at a higher level of analysis]

Oldest Pub in England for Sale

For 150k leasehold you can have what is claimed to be the oldest pub in England, Ye Old Fighting Cocks in St Albans, with the main buildings dating from 1539 and the foundations dating back to 739. (Ye Old Trip to Jerusalem in Nottingham is also a contender for the crown.

Agents Davis Coffer Lyons

Wards Corner Refused

Wards Corner has been one of the most disputed sites, and planning applications, in recent years. The site is next to Seven Sisters Station in Haringey, the southern end of Tottenham, quite a deprived area.

It is a classic London case, how much conservation, how much redevelopment, how high, how much of existing or new uses, or for the existing or incoming community, is it viable, is the design acceptable?

I must declare an interest as I wrote the draft Development Brief for the site in 2003, on behalf of Haringey and the Seven Sisters NDC. So it is professional and proper to stay entirely out of the arguments over the current case – which in good part revolve around how far the current scheme meets the brief which requires ‘vital, mixed use, taking its cue from local diversity ‘.  In fact for this reason I refused to take this case on for Planning Aid for London.

The regeneration of Seven Sisters and the redevelopment of the Wards Corner site has been a strategic priority for Haringey Council for a number of years. In 2004 Haringey Council adopted a planning brief for Wards Corner and Seven Sisters Underground in order to help facilitate the redevelopment of the Wards Corner site and the wider regeneration of the area.

In addition to this The Bridge New Deal for Communities and Haringey Council selected Grainger PLC as a development partner to bring forward proposals for the redevelopment of the Wards Corner Site. Following a series of public consultation exercises a planning application was submitted by Grainger to Haringey Council in February 2008.

Grainger PLC have submitted an application, a preferred partner with the council that owns much of the land, but lack of viability of the scheme (simply because this is not a rich part of London) has required a subsidy of around £2million from the Council.

On the 20th the application went to a special committee meeting and after a mammoth  five hour meeting was refused 5-4. It is a particularly interesting case as a previous refusal was the first case ever to be challenged for non-compliance with race relations duties.

The Council originally granted planning permission in December 2008 for the mixed-use scheme; however, following a judgement by the Court of Appeal in 2010, this was quashed. The Court of Appeal ruled that while the Council had evidently followed a thorough and fair procedure to reach a democratic decision, it could not demonstrate that, as part of that decision, it had also had due regard to the need to promote equality of opportunity and good relations between different racial groups as required by Section 71 of the Race Relations Act 1976.

As the original application was still with Haringey Council for determination, Grainger Seven Sisters Ltd submitted new documentation in January 2011 to respond to changes in legislation and policy since 2008 and specifically examine the impact of the application in the context of Section 71 of the Race Relations Act 1976. This allows Haringey Council to re-determine the application whilst having due regard to the impact of the development on local groups

The local campaignagainst the project has been ferocious.  Key concerns have been the level of business rents that would be charged to the occupiers of the replaced market on site – which is a Columbian/Iberian low rent market, the demolition of the original Wards Department store building (in a conservation area) and the lack of affordable housing on site.

In re-determining the application, council officers, in recommending approval had regard to the Council’s obligations under the Equality Act 2010. An independent Equalities Impact Assessment was undertaken by URS  Scott Wilson and it was found that the proposal is unlikely to give rise to major negative equality impacts provided all the measures set out in a proposed s106 agreement are honoured in full and in a timely manner.