The Review of Austrian Economics, 17:2/3, 155–186, 2004.
2004 Kluwer Academic Publishers. Manufactured in The Netherlands.
Spontaneous Catallaxis in Urban & Rural
Development Under Planning by Contract in a Small
Open Economy: The Ideas of Hayek and Mises at
Work in Town & Country Planning in Hong Kong
LAWRENCE WAI-CHUNG LAI
Department of Real Estate & Construction, Faculty of Architecture, University of Hong Kong
Abstract. This paper discusses the espoused and actual achievements of government urban planning in Hong
Kong in terms of the ideas of Hayek and Mises. With reference to observed facts, it is argued that it is indeed
the spontaneous forces of the land market predicated on a leasehold system, a system of “planning by contract”
or “planning by consent,” that have attained what the government planner in Hong Kong has not been able to
KeyWords: Mises, Hayek, planning by contract, Hong Kong, urban and regional planning
JEL classiﬁcation: R14
Preamble: The Concept of Spontaneity and the Contribution of Austrian Economics
“To understand our civilization, one must appreciate that the extended order resulted
not from human design or intention but spontaneously: it arose from unintentionally
conforming to certain traditional and largely moral practices, many of which men
tend to dislike, whose signiﬁcance they usually fail to understand, whose validity
they cannot prove, and which have nonetheless fairly rapidly spread by means of an
evolutionary selection—the comparative increase of population and wealth—of those
groups that happened to follow them” (Hayek 1988:6).
“Our civilization” in Hayek’s statement should refer to the civilization of the human species
in general and not just narrowly to Western society. The recognition of the driving force
of rational spontaneity in human society has been universal and was recognized early by
classic Chinese philosophers. The Book of Guan Zi, written in or around the fourth century
B.C., offers a Chinese version of the Hayekean idea of spontaneity, the Lockean concept of
property, and Adam Smith’s idea of the invisible hand:
To the best of the knowledge of the author, the only published work on Hong Kong’s economy that argues that
it is predicated on Austrian entrepreneurship is that by Yu (1997), which is developed on the basis of his doctoral
thesis (Yu 1995). See Shulman and Shulman (2001). For a critical evaluation of Hayek’s ideas on town planning
speciﬁcally, see Lai (1999b, 2002c). The idea of this paper comes from Samuel R. Staley.