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April 13, 2006

privatizing the neighborhood

My colleague Bob Nelson has an article in Reason that's derived from his book, Private Neighborhoods and the Transformation of Local Government. Nelson makes proposals that will appeal to Reason's core audience of libertarians; but they could also attract some lefties.

Today, local governments are creatures of the states, assigned exclusive duties and powers over a defined geographical area. Originally, Nelson argues, municipalities were corporations that formed as voluntary associations and held many of the rights we now associate with businesses: the rights to merge or divide, to purchase other entities, to contract out particular services, and to buy or sell property rights.

Nelson thinks that governmental entities should be granted similar flexibility. Then neighborhoods could secede to satisfy their residents better, or governments could unite to gain economies of scale. The two things could happen simultaneously. For example, neighboring governments could sell their transportation functions (including eminent domain) to a regional entity that would provide economies of scale, but turn their schools over to small nonprofit corporations at the neighborhood level.

Districts could even sell themselves wholesale. For example, residents of the Sursum Corda housing project in Washington, when granted collective property rights over their whole facility, sold it for $80,000 per unit, plus the rights to buy apartments at a discount in the new building constructed where theirs had been.

Lefties should be interested in Nelson's idea because poor urban neighborhoods would gain economic benefits and opportunities for participatory self-government--opportunities that they are denied within big cities. Nelson's proposal has much in common with the various forms of "democratic, community wealth-building institutions" that my progressive colleagues, Gar Alperovitz and his allies, advocate.

My main concern has to do with the effects of secession. The Sursum Corda residents got (and deserved to get) a good deal when the land where they lived appreciated rapidly thanks to the opening of a new Metro station. But most poor urban neighborhoods don't have a whole lot to offer on the market. Meanwhile, I can imagine my own Washington neighborhood deciding to handle local services, including education, by itself. The median income in our yuppie area is so high that tax rates could be set very low and there would still be plenty of cash for trash removal and police. Many families use private schools already. Others send their kids to public schools only if they believe that the percentage of "out-of-bounds" students is low. They would love to keep the neighborhood school for yuppie neighbors only. The result would be a lot less redistribution to other parts of the city.

That said, many of the services that our DC taxes provide are of bad quality. More affluent parts of the city still receive much better services than poor ones. And middle-class families still move across the state line to avoid redistribution. So perhaps radical decentralization would work better.

Posted by peterlevine at April 13, 2006 07:14 PM

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