Why Government Planning Always Fails

A Quarterly Message on Liberty

Winter 2008Volume 6 Number 1

Randal O’Toole has spent more than30 years studying government plan-ning for both environmental and free-market groups. He is one of theCato Institute’s newest senior fellowsand the author of Cato’s new book,The Best-Laid Plans. This article is based on a presentation given byO’Toole at the Cato Club 200 retreaton September 29, 2007.

IN PROVING FORESIGHT MAY BE VAIN;THE BEST-LAID SCHEMES O’ MICE AN’ MEN

GANG AFT AGLEY, AN’ LEA’E US NOUGHT BUT GRIEF AN’ PAIN, FOR PROMIS’D JOY!

urns’s poem perfectly conveys the problem with gov-ernment planning. Government officials claim theirplans will help us live happier lives. But planners’ pre-dictions of the future are no better than anyone

else’s, so their plans will always be flawed and those flaws leadto more “grief an’ pain” than joy.

Everybody plans. We plan our workdays, we plan our ca-reers, we plan for retirement. But private plans are flexible andwe happily change them when new information arises. In con-trast, as soon as a government plan is written, people who ben-efit from the plan form special interest groups to ensure thatthe plan does not change, no matter how costly it proves to beto society as a whole.

RANDAL O’TOOLE

B

Why Government Planning Always Fails

— ROBERT BURNS

2 • Cato’s Letter WINTER 2008

W e now know that NewDeal planning did moreto prolong the Depres-

sion than it did to end it. We know thaturban-renewal planning in the 1950sand 1960s displaced more than a mil-lion, mostly black, low-income fami-lies from their homes and turnedsome inner city neighborhoods intobombed-out landscapes. We knowthat President Nixon’s wage-and-price controls led to energy shortagesbut didn’t stop inflation.

Despite these failures, governmentscontinue to plan. Almost every city andcounty in the country has a planningdepartment. More than a dozen stateshave passed laws requiring local gov-ernments to write comprehensive land-use plans that place strict limitson how people can use their property.Congress has passed numerous lawsrequiring federal agencies to plan, in-cluding the National EnvironmentalPolicy Act of 1969 (which requiresagencies to write detailed plans for anyaction affecting the environment), the Resources Planning Act of 1974(which gives the Forest Service authori-ty to plan both public and private for-

est lands), and the Intermodal SurfaceTransportation Efficiency Act of 1991(which, along with successive laws, re-quires states and metropolitan areas toprepare detailed long-range trans-portation plans).

Of course, government agenciesneed to plan their budgets and indi-vidual projects. They “gang aft agley,”however, when they write long-rangeplans (5 to 50 years or more), compre-hensive plans (which attempt to ac-count for all of the various side ef-fects of agency actions), or plans thattry to control other people’s land andresources. Many plans attempt to doall three.

Who writes these plans? The Bu-reau of Labor Statistics says the United States has about 32,000 pro-fessional planners. Almost all belongto the American Planning Association,which says that two out of three of itsmembers work for government agen-cies. Most of the rest work for privateconsulting firms that either contractto government agencies to write spe-cialized plans or help private develop-ers negotiate the complicated plan-ning mazes that must be followed tobuild any project.

Most professional planners gradu-ated from planning schools closely af-filiated with architecture schools. Thisgives them faith in what is known asthe “physical fallacy,” the idea that

urban design has a huge influ-ence on human behavior. Plan-ners love to paraphrase WinstonChurchill by saying, “We shapeour cities and then our citiesshape us.” (Churchill actually re-ferred to buildings, not cities.)

That arrogance leads plan-ners to propose draconian ruleson private property owners inthe hope that such rules will re-duce driving (which planners

consider bad) and increase people’s“sense of community.” “The most ef-fective plans are drawn with such precision that only the architecturaldetail is left to future designers,” saysone popular planning guru.

As soon as a governmentplan is written, people who benefit from the planform special interestgroups to ensure that theplan does not change.

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WINTER 2008 Cato’s Letter • 3

Planners believe that pri-vate property rights are flexi-ble and can be changed atwhim. The Land We Share, abook promoted by the Ameri-can Planning Association, argues that private property isan “institution that commu-nities reshape over time topromote evolving goals.” If,guided by planners, the governmentdecides that your property has historic,environmental, or scenic value, theycan take from you the right to use yourland without any compensation.

Amazingly, the Supreme Court hasendorsed this view. In 1926, the courtheld that cities could zone land forcertain purposes only to prevent nui-sances. But in 1978, the court greatlybroadened the powers of governmentplanners when it allowed the city ofNew York to prevent the PennCentralRailroad from modifying Grand Cen-tral Terminal, which the city deemed a historic building. Writing for the majority, Justice Brennan specificallystated that because New York hadwritten “a comprehensive plan to pre-serve structures of historic or aestheticinterest,” they could prevent propertyowners from changing their proper-ties without compensation.

Planning also played a role in theinfamous Kelo vs. City of New Londondecision, where the Supreme Courtsaid cities could take property fromprivate owners and give it to other pri-vate parties. New London could dothis, said Justice Stevens, because ithad “carefully formulated an econom-ic development plan that it believeswill provide appreciable benefits tothe community.” As the AmericanPlanning Association gleefully ob-served, the Kelo “decision validates theessential role of planning.” Apparent-ly, all a government has to do is write

a plan and the Constitution goes outthe window.

Given this kind of power, govern-ment planners are good at producingtwo things: shortages of goods thatpeople want, and surpluses of goodsthey don’t want. We can see this bylooking at the congested highways inalmost any major urban area of thecountry. Since 1980, the number ofmiles Americans drive on urban free-ways has nearly tripled, but the num-ber of miles of urban freeways to driveon has increased by only 65 percent.

Part of the reason for traffic conges-tion is financial, but a big part is due to planners who deliberately pro-mote congestion in order to discour-age driving. “Congestion signals posi-tive urban development,” say plannersin Portland, Oregon, and any effort torelieve congestion “would eliminatetransit ridership.” Similarly, TwinCities planners decided to stop build-ing roads. “As traffic congestionbuilds,” they commented hopefully,“alternative travel modes will becomemore attractive.”

One way planners create conges-tion is by diverting an ever-increasingshare of highway user fees to expensivelight-rail and other transit projects.But planners’ hopes for transit haveproven unfounded. Even while high-ways are crowded, transit buses andrailcars in most cities run around near-ly empty. In 2005, the average publictransit bus had room for 60 people but

Planners believe private property rights are flexibleand can be changed atwhim.

“ “

carried just 10. The average light-railcar had room for 175 people but car-ried just 25. As The Onion satirically observes, we persist in building expen-sive rail systems because “98 percent ofU.S. commuters favor public trans-portation for others.”

Transit advocates will point outthat the autos driving on congestedurban highways often have only oneoccupant. But that is exactly the point:If modern life is sodecentralized thatcarpooling makesno sense for mostcommuters, howare giant buses andhigh-capacity trainsgoing to work?

Planners oftenargue we shouldn’ttry to relieve conge-stion by buildingnew highways be-cause those new roads themselveswill quickly becomecongested. Only agovernment plan-ner would arguethat we should not spend user feesbuilding things that people use and in-stead spend tax dollars buildingthings that people don’t use!

The recent housing bubble is also aresult of planning. More than four outof five Americans say they prefer ahouse in the suburbs to higher-densityhousing near jobs, shops, and transit.But planners believe a greater share ofAmericans should live in high-densityhousing, partly because planners erro-neously think people living in higherdensities will drive less.

Starting with Hawaii and Califor-nia in the 1960s, an increasing numberof states have passed laws encouragingcities to limit low-density suburban de-

velopment. This has made single-fami-ly homes in those states very expensive.Meanwhile, many cities have subsi-dized high-density housing to encour-age people who would rather live insuburban homes to live in apartmentsor condos instead.

By 2000, Arizona, Connecticut,Florida, Maryland, Massachusetts, Minnesota, New Hampshire, New Jer-sey, Oregon, Rhode Island, Vermont,

and Washington hadjoined California andHawaii in passing“anti-sprawl” laws.These states sufferedthe greatest housingbubbles, while less-regulated fast-grow-ing states like Geor-gia, North Carolina,and Texas enjoyedonly modest increas-es in housing prices.

A standard me-asure of housing affordability is themedian home pricedivided by medianfamily income. At a

price-to-income ratio of 3, a medianfamily could pay off a mortgage on amedian home in about 15 years. At aratio of 4, it would take more than 30years. At a ratio of 5 or higher, it be-comes almost impossible. As of 2006,the average price-to-income ratios inHawaii and California were more than8. Ratios in most other states withstrict planning laws were between 4and 5. Meanwhile, ratios in Georgia,North Carolina, and Texas remain between 2 and 3.

Most people know the housingbubble is sending tremors throughoutour economy, but few realize it was ulti-mately caused by planners trying to so-cially engineer our cities. Yet that social

4 • Cato’s Letter WINTER 2008

WINTER 2008 Cato’s Letter • 5

engineering isn’t working:whereas dense housing mayattract people who don’t want to drive, studies show it doesn’t significantly changethe travel habits of peoplewho prefer to drive.

Planners also argue thatwe need to limit low-densitydevelopment to protect openspace. But 95 percent of theUnited States is rural openspace. Given that unafford-able housing and congestion hit low-income families the hardest, govern-ment efforts to protect open space area tragic misplacement of priorities thatsimply exacerbate housing, mobility,and other serious problems.

Urban planners admit they want toemulate European cities with theirhigher densities and intensive transitservice. Yet they are following modelsthat have already failed. Europeangovernments emphasized high-densi-ty housing in the 1950s and 1960s. By1970, western Europeans were sick ofgovernment housing and began de-manding more privately owned single-family homes. Three out of four homesbuilt in Sweden in the late 1960s weremultifamily apartments; by 1980, threeout of four were single-family.

After the fall of the Soviet empire,eastern Europeans also began aban-doning the high-density housing proj-ects communist planners had built forthem. Recent high-density develop-ments in Portland look nearly identi-cal to housing projects built in easternGermany in the 1960s. The differenceis that (despite high vacancy rates)Portland is subsidizing more of themwhile Germany can’t tear them downfast enough to keep up with peopleleaving for single-family homes.

Europeans’ apparent fondness fortransit is also an illusion. Though Eu-

rope spends roughly $100 billion ayear subsidizing urban transit and intercity rail, they are losing marketshare to the automobile. Americansdrive for 82 percent of all their travel;Europeans for 78 percent. If densehousing and huge transit subsidiesdon’t work in Europe, how can theywork here?

Urban planners have given us surpluses of condos and apartments,shortages of single-family homes; surpluses of open space, shortages of developable land; surpluses of pub-lic transit, and shortages of highwaycapacity. These are only some of thesurpluses and shortages governmentplanners have foisted upon an unsus-pecting public.

Public or private toll roads can re-lieve congestion. Privatized transit systems can provide mobility for those who can’t or prefer not to drive.Restoration of people’s propertyrights will allow developers to meetthe demand for housing and otherland uses. Various fees and other market mechanisms can protect airquality. Private, voluntary efforts can protect critical open space. Such mar-ket-based solutions will do far more toimprove our quality of life with farfewer unintended consequences thanthe policies that result from govern-ment planning.

“Public or private toll roadscan relieve congestion. Privatized transit systemscan provide mobility forthose who can’t or prefernot to drive.

“

6 • Cato’s Letter WINTER 2008

What do you see as the most important consti-tutional problem today?Too many Americans have little understand-ing of the Constitution and the kind of gov-ernment it authorizes. Politics today is main-ly about “problems” the country faces andwhat government should do about them—often personal problems like how to pay for health care or education. That’s not the Founders’ vision. They saw governmentas a “necessary evil,” instituted to secure ourliberty against foreign and domestic threats,mainly by protecting our natural rights ofproperty and contract, leaving us otherwisefree to plan and live our lives and responsiblefor solving our own problems, alone or withothers. That’s the limited government theConstitution authorizes, not the leviathan we have today. Col. David Crockett put itwell: “Government big enough to give youeverything you want is also big enough totake away everything you have.”

How is Cato’s Center for Constitutional Studiesworking to address this misconception?It’s a huge problem. The Progressive Eramarked the main turning point, when thepush for big government took off. Eventual-ly, following Franklin Roosevelt’s infamousCourt-packing scheme, the New Deal Courtessentially eviscerated the Constitution’s re-straints. As a result, we have today a vast bodyof redistributive and regulatory “law” not re-motely authorized by the Constitution. Sincethe main problem now is educational, the

center publishes the annual Cato SupremeCourt Review, which critiques the Court, soonafter the term ends, from a Madisonian per-spective. We publish books, studies, and op-eds; hold conferences and forums; give lectu-res and testimony; make media appearances;and file briefs with the Court on importantcases. Shortly, for example, we’ll be publish-ing a wonderful book by Cato senior fellowBob Levy and Chip Mellor, president of theInstitute for Justice, The Dirty Dozen: HowTwelve Supreme Court Cases Radically ExpandedGovernment and Eroded Freedom, a non-lawyers’ guide to the worst Court decisionssince the New Deal.

What Supreme Court cases look to be significant in 2008?The challenge to the D.C. ban on handguns,D.C. v. Heller, is the case to watch, not simplybecause it’s the brainchild of Bob Levy, butbecause the Court should decide whether theSecond Amendment protects an individualright to have a gun or only a “collective” right,a dispute the Court has never decided.

What are the long-run objectives of the Centerfor Constitutional Studies?That’s easy. To encourage a climate of ideasconducive to limited constitutional govern-ment—government confined to its author-ized powers, exercised consistent with ourrights, enumerated and unenumerated alike.We did not lose the Constitution overnight.We will not regain it overnight.

Cato Scholar Profile:ROGER PILONROGER PILON is vice president for legal affairs at Cato andthe founder and director of Cato’s Center for ConstitutionalStudies. He holds the B. Kenneth Simon Chair in Constitution-al Studies and is the publisher of the Cato Supreme CourtReview. Prior to joining Cato he held five senior posts in theReagan administration, including at State and Justice. Heholds a B.A. from Columbia University, an M.A. and a Ph.D.from the University of Chicago, and a J.D. from the GeorgeWashington University School of Law.

WINTER 2008 Cato’s Letter • 7

l Brown has been a loyal Cato Spon-sor for many years. Back when helived in D.C., he attended a Cato

event practically every week. Now that he livesin Annapolis, he visits Cato’s website just about every day. Last year, Al and his wife Mardy attended a Benefactor’s Summit in Florida. Al commented that it was a “delightful andprofound experience.” Askedwhat he finds most com-pelling about Cato, he re-sponded, “Liberty and free-dom, not just words, butbacked up by sound reason-ing and credible data.”

A couple years ago, Al be-gan to consider ways that hemight give something backto Cato, something aboveand beyond his annual mem-bership. In an era of low in-terest rates, Al was attractedto Charitable Gift Annuitiesbecause this unique planning device melds together a charitable gift for Cato and an en-hanced flow of income for him.

The workings of CGAs are pretty straight-forward: a donor transfers either cash or secu-rities to Cato in return for a promise to pay the donor (the “annuitant”) a fixed incomestream for life. Al chose to transfer appreciat-ed mutual fund shares and, in return, receivesa 10.6 percent annuity. Annuity rates are basedon tables that take into account the age of the annuitant.

Al also received an immediate income taxcharitable deduction for the gift portion of thetransfer. The “gift portion” of an annuity is es-sentially an actuarial calculation of what willbe “left over” after payment of the annuity

stream. What’s more, by giving appreciated se-curities, Al took advantage of “deferral,” a clas-sic tax planning strategy. Rather than sellingthe shares and paying his capital gains taxesupfront, Al gifted the shares with the resultthat his capital gain will be spread over theyears of his annuity payments.

Al signed up for his first CGA with Cato alittle over a year ago. He waspleased enough with the ex-perience that he came backand signed up for a secondCGA at the end of 2007.

Although CGAs are not“right” for all donors, they area popular and flexible devicethat can suit anyone who

■ would like to make a giftto Cato;■ can use a little extra cashflow;■ can take advantage of anincome tax charitable deduc-

tion (i.e., you must itemize your deductions);and■ would like to defer capital gains taxes (as-suming that appreciated securities will be thesubject of the gift).

Cato recommends a minimum investmentof $10,000 for an initial CGA. There is noupper limit on amount.

Cato has been a part of Al Brown’s life fordecades. His two CGAs will allow him to makea lasting gift to Cato, a gift that will ensureCato’s voice is heard for generations to come.As Al said, it’s all about liberty and freedom.

For more information about charitable giftannuities and other planned gifts, contactCato’s director of planned giving, Gayllis Ward,at 646-717-2080, email gward@cato.org.

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The Best-Laid Plans: How Government Planning HarmsYour Quality of Life, Your Pocketbook, and Your FutureBy Randal O’TooleSome people think they know all the answers. They know how far you should livefrom your job. They know how big your backyard should be. They know howcities and forests should grow. Government planners claim to know all that andmuch more. But O’Toole reveals the truth: that government planning inevitablydoes much more harm than good.$22.95, hardback, 978-1-933995-07-6

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