What is urban sprawl? This is probably the most important question facing Michigan policy makers, since the answer determines what kinds of issues should be addressed and what types of policies should be pursued.

Property rights are central to the efficient functioning of land markets and to ensuring that all economic resources, including land, are put to the highest and best use.

Many people characterize sprawl loosely as unordered or chaotic suburban development. Webster’s dictionary defines sprawl as "to spread or develop irregularly."[6] Ecologist Holly Madill recently editorialized that urban sprawl is "to spread or develop characteristics of a city irregularly or carelessly."[7] On the surface, this definition is appealing, particularly if one relies on casual impressions of new, large-scale housing subdivisions, malls, and business parks.

But land development, even low-density suburban development, is not haphazard, random, careless, or even irregular. Real estate markets coordinate thousands of consumer and producer decisions each day and signal important information about cost and revenues through real estate prices. The logic of the market works this way: Property owners, such as farmers, sell their land to developers. Developers buy the land because they believe it has higher value for alternative uses, such as homes, office buildings, or shopping malls. Developers improve the property or sell it to businesses and families who are willing to pay the price and develop the land themselves. This is a rational process and is implicit in every market, from food to automobiles.

Indeed, markets create order out of seemingly random decisions every day by matching consumer preferences with products and services supplied by entrepreneurs and producers. These decisions are coordinated through the price system, and substantial empirical evidence supports the role of markets in this function.[8] Markets thus transform land from one use to another using the price system to guide buyers and sellers.

In market economies, the social value of goods, services, and resources are reflected in prices. These values are a product of the choices people and families make about what goods and services they want to buy. This is a dynamic process: Decisions about which land to buy, which land to sell, and at what price, are based on expectations. No one guarantees that these expectations will be met by consumers or producers. Entrepreneurs face uncertainty and risk. Their reward for correctly assessing consumer needs will be profit, provided they produce the goods and services efficiently. Entrepreneurs fail if they incorrectly assess the state of the market. Land developers face these constraints and potential rewards every day, just like other businesses.

The Role of Property Rights

Property rights are central to the efficient functioning of land markets and to ensuring that all economic resources — including land — are put to the highest and best use. Private property rights are traditionally viewed as a fundamental building block for civil and political liberty, but they are also critical for providing economic opportunity and encouraging innovation. The protection of property rights allows people to buy and sell products and services, such as farmland and personal labor, to the highest bidder. It preserves liberty by ensuring that resources are bought and sold as a result of voluntary, individual choice rather than arbitrary and unfair government coercion.

Urban planners have attempted to define sprawl more precisely (see Appendix A on page 55), but, ultimately, "urban sprawl" ends up as an "I know it when I see it" issue. This is problematic from the perspective of public policy. Without an understanding of what sprawl is, a clear policy response cannot be developed. Based on the tenor and substance of the public debate in Michigan, urban sprawl seems to be defined by three major trends and concerns:

  • The suburbanization of people and out-migration from big cities such as Detroit, Grand Rapids, Ann Arbor, and others;

  • The loss of farmland and open space; and

  • The apparent government service costs associated with providing infrastructure for low-density residential and commercial development.

This concept of sprawl is clearly broad. It can include most suburbanization. Yet it is probably closest to what most Michigan residents consider to be "sprawl," and it reflects the factors that have driven current state, regional, and local policy discussions.[9]