Arnold Kling  

Charter Communities

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Robert Nelson, a public policy professor at the University of Maryland, gave me a copy of an argument he submitted on behalf of a Montgomery County neighborhood (his) that was attempting to incorporate in order to have jurisdiction over some services.


Some government functions, such as water and sewer, police and fire, major roads, the criminal justice system, and others are best provided by a wider unit of government such as the County. These would remain County responsibilities under the Rollingwood municipal incorporation proposal. Education would also remain at the County level.

Other local services have more of a neighborhood character such as leaf and garbage collection, snow plowing, street cleaning and repairs, social events, supervision of tennis courts and other common facilities, local parks, supplementary security patrols, and others. Rollingwood proposes specifically to provide services of this localized kind.

The County Council refused to allow the citizens of Rollingwood to bring this to a vote. It seems to me that the solution is for the citizens of the County to use the initiative process to amend our charter to take away the County Council's veto of incorporation proposals.

This set me to musing on what would happen if across the United States people were allowed to form charter communities, analogous with charter schools. Suppose that there were a mechanism by which I could band together with other citizens to form a unit that provides government services, and that we could reduce our tax payments by the amount that by which we thereby reduce the cost to the relevant government jurisdiction. Charter communities also could have some freedom to alter regulations. This would be a "bottom-up" way to get to competitive government.

What intrigues me about this charter-community concept is that it need not be limited to geographically contiguous areas. For example, in our County, some people might wish to belong to a charter community where trans fats are banned in restaurants, and others might wish to belong to a community where they are not banned. Both groups could be satisfied under a charter community concept. My neighbors could be in one community, and I could be in another.

Ultimately, perhaps the charter community concept could embrace people from different states. That way, one might be able to implement something like the Free State Project without having people physically move.

I have talked about this sort of virtual federalism before, and I cannot seem to resist coming back to it.

What Professor Nelson's story suggests to me is that virtual federalism might emerge naturally if we could remove some of the barriers to incorporation by citizen groups.

Addendum: A recent paper by Professor Nelson is From BIDs to Rids: Creating Residential Improvement Districts.


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CATEGORIES: Political Economy



COMMENTS (8 to date)
DJH writes:

And how would the restaurants which are in the region covered by both communities be constrained? They too choose their community, inevitably the less restrictive one?

Is the design intended to prove the folly of restrictionist communities by depriving them of vendors?

B.H. writes:

I believe Tiebout worked all this out about 40 years ago.

It was the political equivalent of perfect competition. All labor and capital was perfectly mobile; obviously land is not. There are no unique factors of production. Each jurisdiction sets whatever policies it wants, and there are a variety of policies. Each sets taxes as it pleases subject to the intertemporal budget constraint. Each provides its own set of local public goods.

The solution is efficiency. Everything is capitalized into land values. Capital and labor are taxed only for services that they receive; they cannot be exploited. People sort themselves out according to the type of public goods that they prefer. The model does not actually require ballot democracy, but only voting with our feet.

The limits of Tiebout: imperfect mobility of labor and capital, lack of information, increasing returns to scale, and externalities across jurisdictions.

Jeff Hallman writes:
and that we could reduce our tax payments by the amount that by which we thereby reduce the cost to the relevant government

There's the rub right there. Even in the unlikely event that the government agreed to this in principle, in practice you can be sure that it will underestimate how much you are reducing its costs, while you will have an incentive to do the opposite.

Jim writes:

If 'Charter communities' tied to a particular location would be anything like most small communities with high degrees of self-governance, they would be extremely keen to keep out, through land use regulations and the like, anyone likely to dilute the tax base, ie poor people. It would be an interesting test of how much most libertarians really believe in liberty.

R. Richard Schweitzer writes:

This tracks nicely with the works of Douglas North, et al. on "Limited Access" social orders - and on considering why there are limts on the forms and strengths permitted in forming organizations.

8 writes:

If 'Charter communities' tied to a particular location would be anything like most small communities with high degrees of self-governance, they would be extremely keen to keep out, through land use regulations and the like, anyone likely to dilute the tax base, ie poor people.

You mean like San Francisco?

Jim writes:

You mean like San Francisco?

No, I mean places that start off low density and with prices out of the reach of those on low incomes, and aim to stay that way. As opposed to a city that has housed millions of poor people over its lifetime and has tens of thousands in public housing / Section 8 accommodation to this day.

D. Oakey writes:

DJH writes: "And how would the restaurants which are in the region covered by both communities be constrained? They too choose their community, inevitably the less restrictive one?"

Inevitably is too strong a word. Disneyland chooses to restrict itself from serving alcohol, some other amusement parks do not. Restaurants would pick the restrictions that get them the most customers, taking into consideration what other restaurants are doing, and after considering whether resisting a trend will get them loyal customers in a certain niche. I mean, unless the restaurateurs are foolish.

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