Most European countries have implemented some kind of land use planning based on exclusionary zoning principles to achieve spatial goals. This paper argues that, to reduce externality problems, regulatory planning is not always the best planning solution. Therefore, an alternative planning approach, which makes use of compensation rules, is suggested in this paper. This compensatory planning approach is based on property rights theory and refers to recent applications of this theory to planning practice. To illustrate the usefulness of such an approach, it is applied to the planning of out-of-town retail development in The Netherlands. The paper aims to demonstrate how deficiencies in the property rights regime can be repaired to deal with externality problems, achieving a more socially acceptable outcome of out-of-town retail development. The paper concludes with a discussion of the value of spontaneous order solutions for planning practice, by introducing four pragmatic rules on how to choose between different types of government interventions.
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