The Paradox of Harnessing Economic Benefits from Green Space
Updated: Nov 24, 2020
by Joel Luna
At a recent talk and panel discussion, JLPD was invited to discuss the economic benefits of urban open space. It was a topic that was more difficult than it seemed and one that highlighted a constant struggle faced by planners and designers advocating more open space in urban settings, moreso planners who had to work within the rigorous boundaries of efficiencies, cost and ROI metrics of corporate real estate.
The common conception about green space is that they need to exist without need for economic justification. This remains largely true. It is sacrilegious to think about open space as something that can be harvested for financial gain. After all, in the world of nature, man and his desire for consumption-driven material wealth are the intruders and are often the cause of many of society’s problems. Thus, the topic is an ironic provocation that required an inquiry on the real and broader contributions of green spaces in the context or urbanization.
Can you harness economic benefit from open space? And if you can, should you? The idea of getting a financial return on open space is not new. The idea of utilizing green areas to prime prices and generate value has been a motivation for many property developers. The fundamental attractiveness of the natural environment and man’s biophilia. Thus, cities, for all their attractiveness as engines of economic growth, are made even more attractive and meaningful by the green spaces located within them. Open spaces are often the physical venues that symbolize the highest aspirations of our humanity: centers of government, shrines of our heroes, sacred places and gatherings of communities for rites and rituals are often framed by open space, as they have been throughout civilization. Open spaces have the ironic stature of both being highly treasured and yet without any value at the same time—effectively being price-less. And once in a while, when an enterprising developer establishes an edifice or commercial development on or near open grounds for economic gain, it is considered a desecration which attracts controversy and public furor (e.g., Torre de Manila, Ayala Triangle development). Access to open space is viewed as a fundamental right of urban citizens--something that has to be provided and once provided, has to remain available in perpetuity regardless of ownership of land, value or allowed use—an irrevocable and inalienable asset that that cannot be monetized just to benefit the few. Herein lies the paradox of quantifying the economic benefit of green spaces—putting a price tag on something that is nominally without value while at the same time symbolically priceless. One thing is hardly argued, however: that urban parks create value.
Sources of Economies of Green Space
More often, though, urban open space has created economic value through one of the following means:
Contribution to efficiency and function—savings in the cost of operating cities through the use of green infrastructure (e.g., storm water detention), preservation of health and safety, climate resilience of cities, etc.
Economies through priming—creation of views (e.g., golf courses), provision of amenities for recreation to seed higher order land uses (e.g., recreational spaces in real estate projects, golf courses being an example), or open spaces as magnets to attract markets.
Economies through value exchange—more complex systems of transferring inherent value from open spaces through mechanisms such as air rights transfers or carbon offsetting.
Economies through place making and enhancement of social capital of cities--the indirect impact of open space in the context of urban development where green spaces contribute to growth in an urban area’s level of innovation, creativity and therefore economic productivity and wealth creation.
Is There a Correlation Between Green Space Provision and Economic Prosperity?
The short answer to the question is it is not direct and not immediate.
Studies that directly link open space to wealth creation are not abundant. A cursory review of wealthiest cities (based on GDP or GDP per capita) and cities/nations with the highest proportion of open spaces or even cities identified as having the best parks show no definitive correlation, much less any causal link. Even the most livable cities do not necessarily have the most or best parks. Curiously, the wealthiest city in the world at present, Shanghai, is also among those that offer the least amount of public green space. While a more in depth study using larger data sets is probably needed to establish correlation, this initial overview tends to support the idea that the economic contribution of open space to wealth generation is indirect and not immediately realized. And one possible paradigm is to view open spaces not as points in space but as integral parts of social networks. Extensive research of cities all over the world by Geoffrey West of the Santa Fe Institute has revealed the scaling consistency of cities in terms of efficiency and productivity. Essentially, he has quantified that the increase of a city’s population and density leads to a decrease in necessary per capita services such as utilities, police, schools, roads, etc., while exponentially increasing GDP output both on a collective as well as individual level. In short, increasing a city’s population leads to an even higher increase in economic output. This is the efficiency of agglomeration at work: bringing people together in cities reduces costs while increasing innovation and creativity (measured through number of patents applied) which lead to increases in overall as well as individual wealth.
This has led Geoffrey West to state that cities are comprised of two networked systems:
Physical infrastructure (roads, buildings, utilities, etc.)
Socio economic dynamics (innovation, ideas, wealth creation, social capital, culture, etc.)
So, what is the role of open space under this framework? Well for one, urban open spaces are both physical and social infrastructure. If one is to view open spaces as physical nodes that attract people to a place to such an extent that the social capital in such place increases as the number of interactions increase, then open spaces by extension, can provide the setting that allow networks of creativity and innovation to flourish and therefore for prosperity to grow. This is premised on the law of preferential attachment in networks: the more connected a node is, the more likely it is to receive new links. People attract people. And creative people bundled together become more creative.
Is that all there is to it?
Cities attract people, people beget more people in a virtuous cycle of increasing population, density and productivity. And building urban open space will eventually trigger the necessary productivity that will bring wealth and prosperity to any city, right? Build it and wealth will come? Well, unfortunately, it is not that simple.
Providing open space is not the silver bullet that will guarantee prosperity. History has shown that many places designed with abundant open spaces eventually fail to reach a critical mass of social capital. Brasilia, a built example of the Garden City movement, has turned out to be unsuccessful as an urban experiment. And again, we can go back to the city of Shanghai, the wealthiest on earth, but with the least amount of open space. So, what gives?
In the end, urban open space is just one element in a complex web of interrelated ingredients that allow a city to attain prosperity. Other crucial ingredients to thriving societies such as diversity, security, high level of openness and tolerance, liberal governance, strong institutions and many other factors play more fundamental roles in wealth creation. Open space, however, presents the opportunity to manifest and express these attributes by encouraging the growth of social capital that foster innovation and growth. The hypothesis is that if open space contributes to attracting a diverse and large enough population sufficient to evolve a micro-culture that encourages the growth of networks, then it can reach a point of emergence where the social capital created results in increased economic output and therefore prosperity. Many open spaces fail to reach this point of emergence. Either the population they attract is too homogenous (not diverse enough), or both micro and macro environments are too restrictive, or the surrounding uses are not of sufficient density or mix to catalyze further growth. Or it could simply be in need of more time.
A more cryptic way of summarising this is urban open space can contribute to economic growth IF it is part of a diverse and mobile macro-environment that can scale past a point of emergence.
The benefits of urban green spaces are among life’s intangible necessities whose benefits are difficult to isolate and quantify. Their contribution arises from the very complexity that makes them necessary. Their value is derived from the meaning they give life, in both the day to day existence of the individual and in the collective interaction of a city’s population.