Hayek on Urban Life
It’s not by mistake that you’ll hear talk of property rights more in the country than in the city, since it’s clearer who owns what in the wide open range. I’ve thought about this a few times but the brilliant economist Frederich Hayek thought about it more intensively in his work The Constitution of Liberty:
“In many respects, the close contiguity of city life invalidates the assumptions underlying any simple division of property rights. In such conditions it is true only to a limited extent that whatever an owner does with his property will affect only him and nobody else. What economists call the ‘neighborhood effects,’ i.e., the effects of what one does to one’s property on that of others, assume major importance. The usefulness of almost any piece of property in a city will in fact depend in part on what one’s immediate neighbors do and in part on the communal services without which effective use of the land by separate owners would be nearly impossible.
The general formulas of private property or freedom of contract do not therefore provide an immediate answer to the complex problems which city life raises. It is probable that, even if there had been no authority with coercive powers, the superior advantages of larger units would have led to the development of new legal institutions—some division of the right of control between the holders of a superior right to determine the character of a large district to be developed and the owners of inferior rights to the use of smaller units, who, within the framework determined by the former, would be free to decide on particular issues. In many respects the functions which the organized municipal corporations are learning to exercise correspond to those of such a superior owner.”