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Reason: Local government as postmodern pluralism

June 10, 2009

Welcome to the New–and Private–Neighborhood: Local government in a world of postmodern pluralism is a Reason Magazine article from a few years ago which displays just the type of crazy thinking we love around here, applying the logic of competition and market forces to local government.  The author, Robert Nelson, is the author of Private Neighborhoods and the Transformation of Local Government.  He begins by describing the rise of private community associations:

In 1965 less than 1 percent of all Americans lived in a private community association. By 2005, 18 percent—about 55 million people—lived within a homeowners association, a condominium, or a cooperative. Since 1980 about a half of all new housing units in the U.S. have been built within such associations; in California, the figure now is at least 60 percent. Such communities can be as small as a single building or as large as an entire city, but they’re often about the size of a neighborhood.

And then connects it to postmodernism, which I’m not sure I believe:

This shift came as we entered the postmodern era, a time of increased suspicion toward the conventional narratives of scientific and economic progress. There is less convergence of basic beliefs about the best forms of society and less expectation of such a convergence. Instead, there is a preference for pluralism—for multiple, overlapping identities and communities through which individuals can find meaning and comfort.

I wish I thought that in the current era there was a preference for pluralism and a lack of expectation that we’ll all agree about the best form for a society.  But unfortunately while that may be Change I Want, it isn’t Change I Can Believe Is Happening, given how DC continues to vacuum power and control of money from the rest of the country.

Regardless of preferences, there is the question of whether local, state, or federal governments most need improving.  In the past I have argued that local government is the worst place to privatize, because government works best when it is small, and most tax and regulatory burden is at the federal level.  But Nelson makes a good point that the scope of local government consists of the most easily privatized activities:

Relegating a large part of U.S. local government to a private status would reflect the fact that much of what local governments do is business-like. The federal government spends most of its funds on two functions: national defense and redistribution of income. Whatever the Constitution might say to the contrary, state governments in many respects evolved in the 20th century to become the federal government’s administrative apparatus, controlled by significant federal funding and requirements. Local governments, however, engage in a much different set of activities—picking up the garbage, policing the streets, running the schools—that could be and often still are provided privately in other circumstances.

Nelson has unfortunately not encountered seasteading, or he would know the solution to his lament about how fixed territory makes exit difficult:

The unit owner in a neighborhood association is not only a customer but an investor—indeed, his home often constitutes a significant portion of his total financial assets. In an ordinary business corporation, mergers, acquisitions, and divestitures are a routine part of life; stockholders who disapprove of the way a corporation is managed can exit the organization simply by selling their shares on Wall Street.

The territorial aspect of a neighborhood complicates such processes of entry and exit. In a private community, a split of one group from the association would require a large supermajority vote and perhaps unanimous consent. In the public sector, such a rift would amount to an act of secession. Most states have provisions for “detachment” from the municipal corporation, but few detachments have occurred over the years, due in part to the high transaction costs associated with getting the state government’s approval.

However he correctly points out that even with difficult exit, there is still competition.  Furthermore, we can improve competition by making boundaries more flexible, which brings about a feudal-like system where neighboring associations compete for border territories:

In principle, the industrial organization of local government could be determined by a process of competition in the marketplace. Indeed, some students of urban affairs believe that a key to improved delivery of local public services rests in much greater flexibility among municipal boundaries.

The best way to resolve such tradeoffs, Oakerson argued, would be through an evolutionary process driven by competition among governmental forms within an overall framework of metropolitan governance.

He brings in Charles Tiebout‘s Pure Theory of Local Expenditures (which deserves its own post), and Bruno Frey’s Functional Competing Overlapping Jurisdictions, which sounds an awful lot like a rediscovery of market anarchism by a Swiss economist.  And finally, he ties it all together into something that should sound quite familiar to readers of Let A Thousand Nations Bloom:

Put together these trends and speculations—the rise of private communities and Dell governments, the push for more-flexible municipal boundaries, the possibility of FOCJ-style governance—and what picture of the postmodern political order emerges? We’d have a world where the size and functions of local government would be determined by a trial-and-error process of competition. Different institutional forms would contend with one another; rather than following a central administrative plan, the nature and tasks of local government would be determined by a private market. The “governments” themselves would be more private than public, facilitating a routine flow of mergers, breakups, divestitures, and other organizational rearrangements.

Speculating more boldly, we might see the total privatization of American local government. Postmodern local government would fall under a brand-new legal category: the exercise of a collective private property right in the manner of a private club. We would return, in effect if not exact form, to an older model, under which local “governments” were private institutions operating for many centuries under the same basic legal status as private business corporations. Radical though it sounds, such a revolution is already quietly emerging in thousands of condos, co-ops, and homeowners associations across the United States.

Sounds fabulous to me!  All we need is a place with a lack of pre-existing power structures and a terrain suitable for a routine flow of not just organizational but geographical arrangements.  Hmm…

One Comment
  1. Ron in LA permalink
    June 10, 2009 9:34 pm

    You can’t use the phenomenon of homeowners’ associations in California as some indication that there is a groundswell for for some micro-local, responsive government that is impelled by market-like forces to craft a hospitable set of rules. These HOA’s are mandated by the state as a condition for permission for subdivision. The structure of an organization of your neighbors with the right to micromanage your home life leads to incredible restrictions like what color you can paint your house, whether you can put up a flag, get a satellite dish, hang out your laundry, etc.

    There is an irony that the smaller a unit of government becomes, the more likely it is to be oppressive. Even ‘conservative’ communities will, at a sufficiently small local level, vote in severe rent control, building moratoria, bans on liquor stores, etc. Libertarian relief from these local busybodies is much more likely to come at the state level.

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