Private Cities Are A Needed Experiment

They are an opportunity to restore personal and economic freedom in ways that normal cities do not

Cities have long been a balance between top-down and bottom-up authority.

The top-down part is governmental and oversees the provision of core infrastructures like roadways and sewers. The bottom-up part is market-based, the work of millions of private actors.

Liberty-minded Americans are rarely comfortable with the top-down part. At best, it represents a politicized and inefficient monopoly. At worst, it over-regulates and stifles the ingenuity of the bottom-up part. Prime examples abound within planning bureaucracies that write comprehensive zoning codes and transportation departments that block private transit from using right-of-way.

Replacing these top-down systems with privatized ones might seem radical to people because it’s uncommon—cities worldwide are still overwhelmingly public entities with public services. The private sector can only function, the thinking goes, because large government entities provide infrastructure for it.

Some cutting-edge thinkers are challenging this idea, offering private or quasi-private models meant to ensure economic and personal freedom better than city governments do.

Hypothetical Private Cities

Many different alternative models could fit roughly under the “private city” definition. A foundation called Startup Societies advocates for some of them, such as special economic zones (SEZs), microstates, seasteads, and eco-villages. The “charter cities” concept, pioneered by NYU economist Paul Romer is another popular example.

The idea behind these models is to let certain territories be carved out and exempt from the rules of their surrounding jurisdictions. That way they can experiment with self-autonomy, maintaining democratic governance but pushing for more liberalization.

A more explicitly private version comes from Titus Gebel, who runs the website Free Private Cities. As the Amazon.com description for his book states:

Imagine a system in which a private company offers you the protection of life, liberty, and property as a “government service provider.” This service includes internal and external security, a legal and regulatory framework, and independent dispute resolution. You pay a contractually fixed fee for these services per year. The government service provider, as the operator of the community, cannot unilaterally change this “citizens’ contract” with you later on. As a “contract citizen,” you have a legal claim to comply and a claim for damages in the event the provider does not perform…Disputes between you and the government service provider are heard in independent arbitration courts, as is customary in international commercial law. If the operator ignores the arbitral awards or abuses his power in another way, his customers leave and he goes bankrupt.

This sounds like one of those old U.S. company towns, but less dictatorial. The management company specializes in service provision and faces legal and financial trouble if it fails at this. Meanwhile, those living in the city are granted freedom and security, so long as they don’t impinge on others. It sounds like a hyper-capitalist paradigm, although the organization itself claims that no true examples of a Free Private City exist.

Actual Private Cities

There are cities that fit a less extreme definition of “private.”

The most famous are city-states—like Hong Kong and Singapore—or designated growth areas within countries, like Shenzhen or Dubai. They usually have traditional governments, and many elements of their systems are socialist, but they all reflect a more privatized version of urban development. By ensuring high economic freedom through low taxes, fewer regulations, and streamlined bureaucracy, these cities almost always become havens for business activity and capital inflow. Interestingly, they’ve seen rapid and highly vertical development, reminding us of the prosperity and urbanism that results from the liberalized model.

Other cities worldwide have an ever more privatized system but are smaller and lesser-known. The U.S. has many examples. Reston, VA, and Irvine, CA are proprietary communities that have standard municipal-style governments but were created by companies. Both have been named among America’s best places to live.

Some retirement communities are private, such as Sun City, a 37,000-person unincorporated community outside Phoenix developed by Del Webb. Sandy Springs, GA, which for decades fought off annexation by Atlanta, gained fame by contracting many services out. In Texas, the state allows Municipal Utility Districts or unincorporated areas that are built privately and make their own decisions on infrastructure and land use.

Most examples are more every-day and granular. Just consider that the U.S. has 351,000 homeowners associations, representing 53% of America’s owner-occupied households. Those too are private communities.

What’s implied by all these examples, whether they’re linked to libertarian ideology or not, is a loss of faith in democratic governance, namely at the big-city level. In democracies, mayors and councilors are elected by the people and represent the people in their decisions. It sounds high-minded.

What actually happens is flawed governance that would be predictable to those familiar with public choice theory. Interest groups (business coalitions, home voters, labor unions, welfare recipients, etc.) demand their own special favors. Politicians, wishing to stay elected, capitulate to their demands since it presents no cost to the politician. This leads to NIMBYism, corruption, regulatory capture, unfair subsidies, and poorly-run services. The entity known as “the public,” which is often loosely-organized and not as powerful as the collection of interests, must fund it all through involuntary taxation, even though the system works against them.

This doesn’t mean democracy is a failure; not when compared to other systems, but democracy can still be used to trample the rights of the individual. (That’s why we have a Constitution.)

It would be nice to see more private cities that offered consumers an alternative, especially if advertised as pro-liberty corporations. The pitch would be that people could live in places that are dynamic, but that protect your economic and personal freedoms, rather than subjecting those rights to politicians.

If current history is an indication, cities like this would get a lot of customers.