The Role of Market and State in Spatial Urban Planning: From Confrontation toward Engagement in New Institutionalism

State and market institutions are among the most important and influential political-economic organizations whose composition and role can influence the integrity of the social system. In the modern planning literature, the nature of urban spatial planning is defined as the rule of place, and therefore the state and the market play a unique role in the process of this type of planning, and understanding how they interact in spatial planning discourses can determine the whole path and expected results of the spatial urban planning.

Therefore, explaining the role and position of state and market in spatial urban planning as one of the key theoretical issues, with emphasis on the New Institutionalism approach, is the main goal of this research.

In this article, with an analytical-descriptive method, while raising conceptual questions at the beginning, after introducing market and state as the two main institutions in spatial urban planning and the capabilities and failures of each in urban development, schools view and various theories of political economy are traced back to the three main streams and finally analyzed in terms of the New Institutionalism approach and Transaction Cost Theory.

From an Institutionalism point of view, planning is a tool for dealing with the unknown future and can be successful when it leads to integration into the existing order. New Institutionalism and Transaction Cost Theory, by rejecting the dichotomy of the market and the state, attempt to portray spatial planning and planning as an aspect of governance that consisting of both the public and private sectors, thereby expressing the existence of plans and spatial planning reduce transaction costs.

The results indicate that considering the shortcomings and capabilities of the market and the state, changing the pattern of their relationships in urban spatial planning should be considered in order to reduce transaction cost in urban development.