Download The Public Finances and Governance of a Free City

The Public Finances and
Governance of a Free City
Fred E. Foldvary
Santa Clara University, California
www.foldvary.net/works/
free-cities.html
The Future of Free Cities
• Roatán, Honduras, 4 April 2011
• Panel 2, 11:00 to 12:30 PM
• Conference organized by Universidad
Francisco Marroquín, Guatemala
Elements of a free city
• Economics: population density and public
goods generate land rent.
• Ethics: a universal ethic, the expression of
natural moral law.
• Governance: liberty is best secured by
dividing governance into neighborhood
cells, structuring the voting bottom up.
The universal ethic
1. Evil is coercive harm to others.
2. Moral good: a welcomed benefit.
3. All other acts are morally neutral.
Ref: Fred Foldvary, The Soul of Liberty
Two levels of rules
• The constitutional level of choice: when one
joins a group or enters into a contract.
• The voluntariness of a free city is at the
constitutional level of choosing to join it.
• Merely moving in is not a real agreement.
• Free city needs an explicit contract among
legal equals.
Land rent
• Cities have population, commerce, and
public goods; these generate land rent.
• Efficient private communities collect the
locational rents to pay for their works.
• Taxes on labor, goods, enterprise, make
tenants pay twice, once with higher rentals,
secondly with taxes.
• The free city only charges the rental.
Free city governance
• Today’s mass democracies result in
subsidies for special interests at the
expense of consumers, taxpayers.
• Avoid rent seeking: with small-group
voting, bottom-up multi-level.
• Demand revelation: residents state
values, pay for changing outcomes.
Free city avoids pollution
• Charge for pollution and congestion.
• The public finance of a free city:
1. Site rentals.
2. Demand revelation payments.
3. Compensation to avoid negative
externality (pollution, congestion).
Service substitution
• Replace a government service with
contractual service (partial secession).
• Deduct the expenses the city government
saves from tax liabilities.
• Examples: schooling, garbage collection,
street maintenance.
• Secession should be totally voluntary.
Summary
• The principles of economics, ethics, and
governance of a free city are in harmony.
• The policies that are ethical also maximize
prosperity and minimize corruption.
• These complementary principles create a
grand unified field theory of the free city.