The Completely Decentralized City: The Case for Benefits Based Public Finance

American Journal of Economics and Sociology, The, Jan, 2001 by Fred E. Foldvary

Crime itself is divided into two types, crimes with victims and victimless crimes. Decentralized governance would let the local voluntary association determine how it deals with victimless crimes. Some associations might wish to outlaw nudity, gambling, intoxicating and narcotic drugs, pornographic literature and performances, and prostitution, while others may wish to have some of these legal. Competitive communities would thus provide choice in law along with other collective goods. Communities which decriminalize victimless acts would have lower law enforcement costs as well as possibly less violent crime. The private provision of police services would in many instances be more focused on the protection of property and personal safety and less on the enforcement of cultural standards such as what people read or whether they spend money in gambling.

B) Slums and Poverty

Poverty, which is basically a low wage level, can be remedied by increasing labor productivity and reducing the cost of employment. Ways to do this include removing legal barriers to employment and enterprise, increasing skills and improving work habits, and eliminating taxes and other imposed costs on wages. By seceding from government with its restrictions and taxes, civic associations also withdraw from restrictions on enterprise and labor, such as not allowing jitneys or vans to provide for local transit (Klein et al. 1997). Devolution would also substitute local assessments and fees for income and sales taxes, a shift that would reduce the social burden of public revenues. This would include reducing the high tax rates for those escaping the welfare system, which adds the loss of benefits to the taxes on wages.

The property tax, as practiced in most of the world, imposes a burden on real-estate improvements. Whenever owners put up buildings or improve property, they get slapped with a tax increase, as though being punished for doing something bad. This is one reason why poor neighborhoods deteriorate. With control over their finances, a low-income community that chose to attract enterprise and development could exempt all buildings and other improvements from an assessment based on real estate.

As noted, increased productivity also comes from better human capital. If the city school system is costly or ineffective, families would be able to substitute private and home schooling, with tax substitution for the tuition. Some associations could provide schooling as well.

C) Sprawl

Urban sprawl consists of a wasteful use of land for urban expansion due to a greater amount of land usage than would exist in a pure free market. As defined here, sprawl is a function of interventionist policy which subsidizes land holding, rather than the result of purely voluntary choices to live in a low density environment.

Rather than develop compactly with gradually decreasing density, sprawl leapfrogs over developable land to further locations. Cities then build more costly infrastructure, and commuting times get longer and longer. With a low density, public transit is not economical, and there is more automobile congestion.