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Community Boards Face Incentive and Knowledge Problems

by Sandy Ikeda
Sun, 16 Mar 2008 at 6:55 PM

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How effectively can a community board convey the actual land-use preferences of the community it's supposed to represent?

This is the deeper question underlying the debate on Sheldon Solow's $4 billion proposal to develop the site of the old Con Ed power station — on the East River just below the United Nations — reported in Peter Kiefer's article in the Sun. (There was also a lively discussion in the comment section of the related editorial here.)

FYI, there are 59 community boards, created under the City Charter, each with 50 voting members appointed by the president of the borough in which the particular CB lies. According to the official website:

Boards have an important advisory role in dealing with land use and zoning matters, the City budget, municipal service delivery, and many other matters relating to their communities' welfare… Community Boards must be consulted on placement of most municipal facilities in the community and on other land use issues.

Now I've blogged about work that Peter Gordon and I have done on the concept of devolving most political power down to the level of the neighborhood. (Once again, you can read that study here.) I think an aspect of that work having to do with "government-initiated citizen participation" (or GICP) approaches is relevant here.

Unlike CBs, truly private neighborhood associations (PNAs) — apologies for all the acronyms! — are profit-seeking entities, similar to many of the new private housing developments in the West, that approach the efficiency characteristics of any other business in a market economy in that the prices for land-use and services they provide tend to reflect the underlying tastes, technology, and resources of buyers and sellers.

In this context, the first problem with GICP is that it treats land-use decisions as a zero-sum game. In a market exchange prices to help agents decide whether a trade will make it better off, so each side is potentially better off (or else the trade won't happen). But in a GICP what the developer gains, the community loses, and vice versa. Where there are no market prices, it's usually not clear what the relevant trade-offs are — e.g., is a traffic easement more valuable than additional rental space? (In the present case, Solow's company seems to have been quite accommodating. Here's a Sun article that cites some of his concessions.) If either side wins one concession, the economic cost of demanding even more is usually very small. In the market, with the help of money prices you stop making demands when the additional cost would be greater than the added benefit. In a GICP process, when to stop is a political, not economic, matter, so that efficient land use is highly problematic. In economic parlance, rent-seeking trumps profit-seeking.

A second problem is that the voting members of a CB are appointed, not elected. Representation is thus at best indirect and, because voting members are not drawn randomly from the local community, there is a bias in favor of selecting the more politically connected and against the ordinary land-user.

Third, there are unavoidable knowledge problems. Gordon and I cite Mark Pennington's work (see especially his article, "Citizen Participation, the Knowledge Problem and Urban Land Use Planning" — it's the fifth article down.) Here's our summary of his findings:

A democratic process…that tries to get input from as many people and groups as possible must first collect opinions from all these groups [and these] are often contradictory. Then, the decision-making body must condense this large body of often contradictory information into a single policy platform, which will secure majority support. While compromise of this sort is the essence of political solutions, it simply compounds the difficulty of getting at local knowledge relevant to achieving efficient land uses that enhance entrepreneurial success.

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