It was John Ruskin who claimed that the "measure of a city's greatness is to be found in the quality of its public spaces." Looking around the London landscape - the 200-strong herd of fibreglass elephants currently roaming the streets, Banksy's signature graffiti, the production line of fourth plinth sculptures - it's hard to imagine the city even registering on Ruskin's fastidious scale of "greatness".

The question of our public spaces - their function, aesthetic form and social value - is something of a hot topic during this, the week of London's biennial Festival of Architecture. With the Olympics spawning architectural and environmental regeneration across the capital, as well as bringing its own spin-off Cultural Olympiad, London's public spaces are coming under new scrutiny.

This scrutiny was given particularly vigorous voice on Monday night. White Cube's Director of Exhibitions Tim Marlow marshalled a six-strong panel - including Janet Street-Porter, Sir Ian Blair and Marc Quinn - through a debate on "The Politics of Cultural Disruption", teasing out the central issues of public art: Should it be community or artist-driven? Who has aesthetic ownership over public space? Where is the line between provocative and outright offensive?

The first of three debates organised by Artichoke, the company behind live art projects The Sultan's Elephant and Anthony Gormley's One and Other, it was more an evening of questions than answers - a pattern Britain's arts organisations and institutions have long struggled to break.

The traditional touchstones - aesthetic subjectivity, funding, value, function - all came in for predictable multi-directional attack, with temporary installations emerging as an unlikely communal point of compromise, a disposable, wipe-clean solution for the products of a disposable age.

Most striking though was the pervasive public concept of art as social functionary. Sarah Gaventa, director of CABE Space, the government's advisor on urban public space, spoke of being issued with a brief to create an art-work that would "reduce anti-social behaviour", and Street-Porter railed at the use of art as an aesthetic sticking-plaster, dismissing artificial attempts to build community through art as the "Angel of the North factor".

Yet this transitive, consumerist culture of art is not easy to escape. Gaventa herself, writing in Monday's Guardian described public space and its associated art as an "essential natural health service, the ultimate drop-in centre - preventative healthcare that is far cheaper than the NHS and without a waiting list."

The responsibility of public art to "disrupt", "amaze", and "create a moment in your day that is unforgettable", was a point of general agreement. Asked for encounters from their own experiences, the panel's examples included participation in London's 1968 anti-Vietnam march, spending an hour as the "exhibit" on the fourth plinth, and a kiss with a girlfriend in a public park - crucially all experiences both interactive and personal.

Hoping to capture some of this same amazement are the entrants for RIBA's Forgotten Spaces competition, currently staged as an exhibition at the National Theatre. Inviting proposals to rework neglected pockets of London land, the competition shortlist includes a light installation on the underside of the M4, a speakers' forum in Brixton and a series of gardens along disused Circle Line ventilation shafts. Only slightly less unusual is Gort Scott's winning project "Reservoir Roofs", which involves the spatial development of reservoirs in the Lee Valley.

One of the competition's guiding principles was the notion of creating new community "hubs", places for recreation, stimulation, and of course interaction. Perhaps, then, this is the beginning of an answer to the fraught question of public space and its art: an understanding that success lies in embracing its uniquely contingent, reflexive relationship with viewers and keeping artistic daydreams of the Kantian thing in itself for the gallery and studio.