Cities as Firms
: The Coasian Case for Private Urban Development

Student thesis: Doctoral ThesisDoctor of Philosophy


This dissertation looks at market-based urban planning through the Coasian lens in order to understand the phenomenon of private cities. The Nobel-winning economist Ronald Coase explained the economic rationale behind firms — hierarchical entities emerging like “islands of conscious power in this ocean of unconscious co-operation” — by the need of entrepreneurs to minimise transaction costs inevitable in the market economy. The prevalence of transaction costs in urban development suggests a market opportunity for entire private cities similar to the Coasian firms. The emergence of private cities-as-firms as an alternative to conventional, publicly governed ones would create a profit opportunity for developers, a wider choice of rules of cohabitation for citizens, and an accelerated institutional evolution for the benefit of the society.

This thesis aims to answer the following question: Why is there no apparent market for private cities? To do so, it looks closely at four real-life examples of cities built by commercially motivated developers: Irvine (U.S.), Lavasa (India), Próspera (Honduras), and Masdar (UAE). All four can be considered semi-private cities in the way that they share certain crucial aspects of hypothetical ‘pure’ private cities. Through in-depth case studies of these four projects, the thesis explores the motivation of developers, the challenges they face at different stages of the process, and the strategies they apply to address those challenges. In parallel, the thesis analyses the context — economic, legal, and political conditions — that affects the possibility and profitability of cities-as-firms.

A historical overview and analysis of contemporary projects highlight the three categories of obstacles common for privately developed cities, which can be broadly defined as economic, regulatory, and political. The first category includes transaction costs related, for instance, to land assembly and master planning, and appears the least prohibitive. The second category includes transaction costs incurred by the need to bargain with regulators, comply with democratic procedures, obtain the necessary permissions, etc. It represents a bigger challenge, especially in countries with weaker institutions — and those, paradoxically, are the countries with the highest demand for alternative urban governance models. Here lies what the author calls the “Catch-22” problem of private cities: it is the same institutional weakness that creates a demand for private cities that eventually makes such projects less feasible.

Yet the experience of the four cities in focus demonstrates that the first two categories of obstacles can be regarded as different types of transaction costs and eventually overcome in the Coasian manner. It is the third category — political obstacles — that represents an ultimate roadblock. Even projects that successfully address economic and regulatory costs get disrupted by politically driven campaigns. Unlike typical interest groups, ideologically-motivated movements are rarely open to bargaining and negotiations — they are inherently opposed to the very idea of private cities. Dealing with ideological opposition requires profoundly reframing the debate about private cities.
Date of Award1 Jan 2023
Original languageEnglish
Awarding Institution
  • King's College London
SupervisorMark Pennington (Supervisor) & John Meadowcroft (Supervisor)

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