In urban spatial economic analysis, two largely disjunctive pro-market approaches influenced by Ronald Coase and Joseph Schumpeter have emerged in the discussion of spontaneous cities. They are transaction cost–based Coasian analysis and innovation-based Schumpeterian analysis. As an original attempt to contribute to planning theory using Coasian and Schumpeterian economic concepts, this article reviews the relevant literature, elucidates the conceptual differences between the two approaches and argues that they are not only theoretically compatible but also practically inseparable. An attempt has been made to pin the two approaches down using standard economic concepts with reference to the writings of Schumpeter. Three groups of actual examples from land law and property development are used to demonstrate and elaborate on this argument.