Achieving a Voluntary Society with Private Communities Fred E. Foldvary Santa Clara University

What is “private”? * The private sector: not government. * Includes private Communities * Government sector: coercive * Private: voluntary, free choice.

What is freedom? Free market = voluntary action. An ethic provides the meaning. Must be a universal ethic. Derived from human nature: Equality and independence.

The Soul of Liberty The universal ethic of freedom and human rights.

The universal ethic 1. Benefit: welcomed by the recipient. 2. Benefits are morally good. 3. Harm: invasion into other’s domain. 4. All acts, and only those acts, that coercively harm others are evil. 5. All other acts are morally neutral.

The pure free market includes self-governance; better coordinates, innovates, liberates; is inherently ethical, because it is defined by the same ethic as that by which justice is judged.

“public” Latin “publicus,” the people. The “public sector,” government, as in “public school” or “public library.” “Public school” originally a school intended for the benefit of the public. In the US it came to mean a school run by government.

“private” “Private goods,” individually used. Public goods = collective goods. The “private sector,” non- governmental. Collective: non-rival Excludable and non-excludable. Club goods: excludable

Private communities proprietary communities: hotels, ships, shopping centers, office buildings, marinas, land trusts. apartments owned by landlords? duplex? condominiums? co-ops? homeowners’ associations?

Condominium governance vs. municipal government Homeowners’ Association, condominiums, housing co-ops Explicit contracts Boards are legally equal with members.

Residential associations Clubs that provide collective goods to their members with rules, CC&Rs: conditions, covenants, and restrictions. Covenant: contract to do or not do.

Government uses force Government is imposed. Governors are tyrants. Therefore it needs to be limited. But voluntary governance can do whatever is voluntary.

Spencer MacCallum: The same agency that performs public services also performs disservices, cannibalizing society with taxation: schizophrenia. Government confiscates property to protect property!

Government versus Private Enterprise Solution: private communities Governance: rules and enforcement. State: government and territory. Club: voluntary, contractual, can be but need not be territorial.

Governments vs. voluntary governance Government: No real, explicit, agreement. Sovereign immunity = inequality. Voluntary governance: Explicit contracts, real agreement. All are legal equals.

Everything can be private Civic associations can federate. Multi level to the continental level. Top level can provide for defense. Most folks are in the network or confederation.

Territorial goods The goods impact territory. Most users are within the boundary. The collective goods generate rent. Local users are not free riders. Who is the free rider?

The public finances of private communities Private communities collect rent. Build if public goods generate more rent than cost. Public goods self-financing. The use of rent is efficient.

Financing private communities The rent reflects the demand for the territorial good. The optimal amount is where MR = MC (marginal rent = marginal cost)

Paying for public goods Example: hotels. Elevator has zero marginal user cost. Hotel provides transit at zero charge. The room pays for the collective goods. Likewise condominiums, homeowner associations, cooperatives.

Private streets and transit * Cars pay congestion, pollution charges. * Private jitneys have curb rights. * Public transit is free if generates rent and is not crowded. * No fuel taxes. * No carpool lanes.

Replace zoning and regulations Covenants and easements. Association deeds and bylaws. Proprietary governance. Transition: allow secession and tax substitution.

Public Goods and Private Communities, 1994.

Public Goods and Private Communities There is market success providing public goods, in theory and in practice. Demand is revealed by rent. No free riders: users pay rent. Proprietary communities and residential associations.

Voluntary-community thought Thomas Spence, 1775, leaseholds. Ebenezer Howard, 1902, garden cities. Spencer Heath, Citadel, Market and Altar, Spencer MacCallum, Art of Community, Grandson of Heath. The Voluntary City, 2002

Market success The doctrine of “market failure” overlooks: Private communities and governance The motivation of sympathy Space and rent

Questions?