National Strategic Planning has a Future – If we keep its goals limited

Imagine the scenario – we only have a lightweight National Statement on Strategic Planning carried out by the National Infrastructure commission

Its roles would be expressly limited to those instances where strategic planning above the city/combined authority level to coordinate with national infrastructure and economic development programmes (the Midlands Engine and the Northern Powerhouse)

It would only:

  1. Deal with the overspill on OAN from the Major cities of London, Greater Manchester, South Sussex and Greater Bristol to broad locations on transport corridors
  2. Provide the national support to a strategy for the Oxford-MK-Cambridge-Northampton-Eastern Ports Arc linked to new rail capacity and existing rail capacity released on the WCML by HS2 seeNational Infrastructure Commission
  3. Release the potential for auction of development rights along HS1 and HS2, Crossrail 2, the Varsity Line and WCML.
  4. Support the Northern Way and Midlands Engine including supporting Major Growth poles for HFE and research
  5. Ensure each of these objectives are achieved whilst securing the strategic purposes of the Green Belt and protecting nationally important landscapes.

 

Is this not the kind of national strategy / strategic planning the May government could stomach?

Indeed the true synergies of this approach in areas like the Atlantic Gateway,  Crewe, Northampton and Lakenheath would be apparent.  The economic growth potential would be increased and environmental downsides decreased through taking a joined up approach.

 

Getting Sober on Wicksell’s Wine Lake – The Financial Instability Hypothesis and the Pool of Funding

A very simple proposition.

The financial instability hypothesis as set out by Minsky and elaborated by Kindelberger, Keen and others is by far the best economic framework to explain business cycles, and especially the major instabilities that come about in ‘balance sheet recessions’ (Koo) and debt deflationary spirals (Fisher/Hoyt).

However the hypothesis is purely monetary.  It depends on Ponzi investors speculating on assets beyond their fundamental value.

This is unsatisfactory as it leaves unexplained the ‘fundamental value’ of goods and assets, and so is a partial rather than a general theory and so not yet up to the wholesale replacement of lame-stream DGSE/NK models.

Let us focus on one moment a potential ‘tipping point’ at the top of the business cycle.

Consider one flawed theory of what causes that tipping, very wrong but in a very interesting way.

That being the ‘subsistence fund/pool of funding’ explanation deriving from classical economics (the Wages Fund) and developed by Bohm-Bawerk, Wicksell and Strigl.  This became one strand in Austrian business cycle theory but by the late 30s had become completely taken over by the even more flawed monetary Austrian explanation whereby central banks create the business cycle.

The funding concept can be very simply explained by the example of a hurricane destroying all fixed assets in ‘Crusoe town’.  To simplify assume no fixed capital.  Then if it took one year to rebuild everything the real ‘cost’ of rebuilding would be the sum of consumption goods needed to provide for the workforce over one year.

The Austrian/Swedish approach went further, consider a choice of techniques of different ’roundaboutness’ that choice is determined by the comparison of the cost of the subsistence fund against the discounted present value of the final output.  In this one good no fixed capital world a more roundabout technique will only ever be chosen unless it is more productive.

Its most sophisticated elaboration was in Wicksell’s celebrated ‘Wine Model’ where there is a single good, wine, used to sustain workers.  In this model Wicksell managed to retain the key elements of Bohm-Bawerk’s capital theory – a subsistence fund and productivity of roundabout methods, even with compounding interest.  However it omitted savings, once that, fixed capital or a capitalist share is introduced the value of the wine depends on the interest rate.  Like Sraffa’s system it cannot be closed without a exogenous interest rate. However subsequent authors (Sandelin) have closed the system by adding a savings function.  In this system the rate of saving, the rate of interest, the economic rate of depreciation and the length of production period are determined simultaneously, however at any one instant in time the pool of funding is fixed and hence causal.  A savings function also enables the introduction of fixed capital by means by the reduction to dated land and labor technique with depreciation (ref Wicksell’s assessment of Ackermans model, and Sraffas correct model of depreciation).  The one thing that cannot survive is a ‘marginal productivity of capital’ as in such a model price and real Wicksell effects are very clear.

The Austrian approach explains the tipping point of business cycles because of a ‘drain’ in the subsistence fund reducing real wealth and consumption.  From the Mises Institute.

When money is created out of “thin air” it leads to a weakening of the pool of funding. What is the reason for this? The newly created money doesn’t have any back-up behind it as far as the production of goods is concerned—it sprang into existence out of “thin air” so to speak. The holder of the newly created money can use it to withdraw final consumer goods from the pool of funding with no prior contribution to the pool. Hence this act of consumption, or nonproductive consumption, puts pressure on the pool of funding. (The consumption is nonproductive because the individual consumes goods without making any contribution to the pool of funding)….

when money is created out of “thin air” it diverts funding away from wealth producers who have contributed to the pool of funding toward the holders of the newly created money. For a previously given pool of funding this will imply that wealth producers will discover that the purchasing power of their money has fallen since there are now less goods left in the pool—they cannot fully exercise their claim over final goods since these goods are not there.

As the pace of money creation out of “thin air” intensifies it puts greater pressure on the pool of funding. This in turn makes it much harder to implement various projects as far as the maintenance and the improvement of the infrastructure is concerned. Consequently the flow of production of various final consumer goods weakens, which in turn makes it much harder to make provisions for savings. All this in turn further weakens the infrastructure and so undermines the flow of production of final consumer goods.

This exposes the deep misunderstanding of bank created money in Austrian economics.  Credit is backed, banks can create ‘money out of thin air’ only so long as they are backed by prior equity and/or future profits.  As and when productive investments lead to the repayment of loans the money is destroyed.  The pool of funding is not depleted, indeed through productivity improvements and economic growth it is enlarged.

However consider a minskyian ‘Ponzie’ investment.  In such a scenario the money is not destroyed, rather it drains the pool of funding reducing aggregate demand. In the dyspeptic wind model where the more wine you drink the more productive you are the economy hits a sobering reality.  Consumers drink less wine, with demand falling debt repayments become unsustainable and the tipping point of the business cycle is reached.

Hence there is a rather deep connection between the different schools of heterodox economics on this issue and a way back in for capital and value theory in the purely monetary post-Keynesian school.

For the issues regarding land speculation in such model see Gaffney and Cleveland under further reading.

Further Reading 

W.O. Coleman,  WICKSELL AND THE AKERMAN AXE MODEL: A RE-EXAMINATION  Australian Economic Papers December 1983

Knut Wicksell Value Capital and Rent – 1970

Richard Ritter Von Strigl Capital and Production – 1934

Bo Sandelin On Wicksell’s Missing Equation: A Comment History of Political Economy Spring 1980 12(1): 29-40;

Eugen Böhm Ritter von Bawerk  Capital and Interest

Mary M Cleveland George International Journal of Socuial Economics  Wicksell and Gaffney: a three‐factor model of the boom and bust cycle 1990

 Mason Gaffney The Amercian Journal of Sociology and Economics Keeping Land in Capital Theory: Ricardo, Faustmann, Wicksell, and George 2008

 

Runnymede Objects to Green Belt Release in Woking

Get Surrey

A neighbouring council has objected to plans to build at least 1,200 homes on green belt land next to the McLaren Technology Centre in Woking .

Runnymede Borough Council (RBC) said the proposed new development at Martyrs Lane next to Woodham and Ottershaw would bring “undoubted urban sprawl” to neighbouring areas should it be built.

Woking Borough Council (WBC) has consulted on the possibility of developing the 112.1 hectare site – dubbed “Woodham New Town” – as it works to towards setting its local plan for development between 2027 and 2040.

Cllr Gail Kingerley, chairman of RBC’s planning committee, said: “At a time when Woking Borough Council has already identified and consulted on sites to provide housing in the coming years, I cannot see why they have put forward a proposal for Martyrs Lane.

She added: “Taking any land out of the green belt should be carefully considered and if Woking has justification for such a move then it should be based on up and coming need.

“Another important reason why such a proposal should be carefully considered is the undoubted urban sprawl it would bring to the communities that neighbour its boundaries in Runnymede.”

RBC has now written to WBC to set out its concerns, warning that the authority has not done enough to work with neighbouring councils and that issues such as increased congestion on the A320 have not been properly considered.

The consultation ended on February 27.

Greater Manchester Struggling with Green Belt Loss – Crewe Garden City is the Solution

It is clear that politically the scale of Green Belt loss proposed as part of the Greater Manchester Strategic Plan (25,000) cannot be contained.

How much will remain is hard to predict – but if Andy Burnham becomes combined authority Mayor then it could be down to less than 5,000.  So where then should the 20 odd thousand go?

The obvious answer is Crewe:

  1. It is the closest Large town on a Plane to GM
  2. It is beyond the Green Belt
  3. With the extension of phase I of HS2 to Crewe, as Jackie Sadik has argued arguably it will be Britain’s best connected town
  4. It is an engine with innovation with Bentleyand other large employers
  5. It has a network of rails lines spanning from it with potential for new stations and local commuter services
  6. It could become the North’s Eindhoven with the right R&D and HFE investment
  7. It is already planned for growth and could further expand to the north east, west and south outside its Green Gaps.
  8. With HS2 it could become a pilot for land auctions of development rights, capturing land value uplift Garden City style – as proposed in the Budget for Crossrail 2.
  9. The Green Belt can be expanded to the South East of Crewe up to the extent of its growth – acting as a ‘Green Belt Swap’ to other areas of Cheshire East and Greater Manchester.

 

 

 

Auctioning Development Rights for Crossrail 2 only makes sense with Green Belt Sites

Hidden in budget

However most of the Brownfield sites along the route already have planning consent for densification

Which leaves sites like

Like Kempton Park

Like Chessington South

Like Enfield Lock to M25

Which could raise hundreds of millions of pounds as preliminary work has revealed

 

Incoming RIBA President – Cut Down Trees in London’s Suburbs and Build 700,000 Homes

Building 

RIBA president elect Ben Derbyshire has called for a building programme in London’s outer suburbs which would see 700,000 homes built over a generation to help solve the housing crisis.

Speaking at this year’s Ecobuild, Derbyshire (pictured), who is also chair of HTA, said the density of homes in the capital’s outer suburbs was so low that “you cannot see the homes for the trees”.

He added: “There are an average of 15 dwellings per hectare, you can hardly see the houses from the trees, we can bring this up to the average and over a generation would yield 700,000 new homes

Slough Proposes Greenbelt Overspill to Bucks – Bucks doesnt like it

Windsor and Eaton Express

Opposition to Slough Borough Council’s emerging local plan has been expressed by both South Bucks District Council and Chiltern District Council.

Slough Borough Council is in early preparation stages for its local plan.

It could mean thousands of homes being built on greenbelt land in South Bucks over the next 20 years as part of Slough Borough Council’s northern expansion.

Areas affected would include east Burnham, Stoke Green, Wexham Street, George Green, Middle Green, Shreding Green and land between Slough and Richings Park and at Taplow and Iver.

Both South Bucks District Council and Chiltern District Council objected to the plans in a joint response on Friday, February 24.

It says the councils cannot sustainably meet their own housing needs let alone Slough Borough Council’s.

South Bucks District Councillor Nick Naylor, portfolio holder for sustainable development, said: “We feel that Slough needs to be looking more closely at what scope there might be within the borough and across Berkshire.”

Click here to see the full response.

The two district councils formed their response from a number of meetings with Slough Borough Council officers, with the most recent meeting being held on February 20.

My take

  • A local plan cannot legally include land allocations in another authority
  • It can include a joint strategy /MoA
  • The scope for overspill in Berks is limited, royal constraints to South, AONB to West, but can take some share
  • Most will have to be to north
  • The South Bucks authorities are DTC stuffed, they need to agree a joint approach with Slough and West Berks.  The Slough housing market area includes large part of teh South of the County