I am continuing through the book “Public Goods and Private Communities
,” by Fred Foldvary.
book, Foldvary examines and develops private, contractual means to secure and
deliver what many consider to be “collective goods.”
Foldvary distinguishes the contractual community from the
In a contractual community, a
member enters into a contract with the other free agents, and the contract
provides for the ability of a member to withdraw.
In a sovereign community, unless
individuals are legally independently sovereign, the membership is not
contractual, since the sovereign agency may impose laws upon the member without
his explicit agreement.
He identifies the litmus test for a true, contractual
Only when the right of individual,
personal secession is constitutionally acknowledged is the membership
The member must always hold the right to personally
secede. Not to secede only with a
sovereign’s permission; not to secede only for a good reason; not to secede
only if he has a new place to go; not to secede only after paying an exit tax; but
to secede when and if he chooses with no obligations remaining or imposed
beyond that which was explicitly agree to initially..
He calls out Paul Samuelson, in his view of the delivery of
The proposition by Samuelson and
others that provision of collective goods requires government overlooks…the
fact that governance can be accomplished by the contractual means as well as by
an imposed political process.
As noted in my earlier post on this book, Foldvary argues
that the world need not be as simplistic as Samuelson suggests, and in fact is
not as simplistic as this – there are many examples of contractual communities
that can be looked at as models or templates, presenting concrete examples
subject to further practical development.
Foldvary notes the work of Spencer Heath, and his main work,
“Citadel, Market and Altar,” appearing shortly after Samuelson’s work noted
above. This work, not surprisingly
(given the viewpoints), did not attract the same academic attention.
…Heath wrote that the value of
public services is manifested as the rent ‘which attaches to exclusive
locations in proportion to benefits received by or at those locations.’
In other words, the better the services, the higher the
This central idea he obtained from
Henry George….But…Heath turned George’s political paradigm on its head. Whereas George regarded the landowner qua
landowner as a passive receiver of rent which he has no part in creating, to
Heath the landowner as an entrepreneur has the potential of becoming a
‘producer of and restorer of land values.’
Heath saw this in this an entrepreneurial possibility, where
the landowner had the opportunity to increase his rent and therefore his
profits by becoming a more efficient provider of more valued services.
…Heath adds, ‘the balance of the
rent not required for [public services] will be the clear earnings of the
proprietors who have administered and supervised the enterprise.’
Heath offers as an example, the hotel:
‘In a modern hotel community…the
pattern is plain. It is an organized
community with such services in common as policing, water, drainage, heat,
light and power, communications and transportation, even educational and
recreational facilities such as libraries, musical and literary entertainment,
swimming pools, gardens and gold courses, with courteous services by the
community officers and employees.’
Courteous services…by the department of water and
power. That is a novel concept.
Unlike sovereign governance,
proprietary administration is subject to a market discipline. As Heath put it, ‘the slightest neglect of
the public interest or lapse in the form of corruption or oppression would
itself penalize them by decline in rents and values.’
Spencer Heath MacCallum carries further the work of his
‘The hotel has its public and
private areas, corridors for streets, and a lobby for its town square. In the lobby is the municipal park with its
sculpture, fountains, and plantings… its public transportation system, as it
happens, operates vertically instead of horizontally.’
The entire organization of a hotel is based on contract,
some explicit, some tacit. Employee
agreements, guest agreements, and articles of incorporation: these would
constitute the constitution of the hotel and define the law. Such is the root of contract law: not to be
found in a search of law regarding contract, but in the medieval ‘law’ which
contracting parties bring into existence by their agreement.
It is clear that the agreements and contractual structures
governing guests and employees of a hotel do not address every issue taken on
under the term “government” as understood today. For this reason, Foldvary develops several
case studies, broadening the concept with actual examples of
The second half of Foldvary’s book constitutes these case
studies, casting the net farther and wider than the example of the hotel. For
these, I will quote extensively from his summary of each study:
Walt Disney World was selected as
an example of a proprietary community.
Although typical of resorts and hotels, its autonomous legal status
makes it a prime case study for the commercial provision of collective goods.
Arden Village was chosen as a prime
example of a community financing its collective goods from site rents on
privately owned land. It also
demonstrates a high degree of voluntary activity.
Fort Ellsworth is an example of a
condominium, a common type of contractual community which provides a limited
range of goods, and implements the economic principles of funding them from
The Reston Association is an
example of a large civic association, resembling a sovereign town,
demonstrating that such large-scale operations can be run as contractual
Finally, the St. Louis ‘private
places’ show how neighborhoods within a metropolitan area have associations which
own the streets and utilities, providing protection and a sense of community.
Together the case studies
demonstrate the feasibility of contractual governance and the provision of
civic goods under different conditions, each being an example of a more general
type of community.
I may write further on this general topic from the case
studies. However, my purpose is not to
cover the book in its entirety, but to present his work as a model for
contractually organized communities.
For me, the key takeaways include the idea that the relationships are
voluntary and that the structure can be disciplined by market forces via profit
and loss. I can imagine associations of
many small groups coming together for certain needs (broader defense, for
example), and remaining independent for others (streets, community parks,
I find Foldvary’s work to offer real food for thought,
worthy of consideration in the dialogue of voluntary governance with the
individual in control of his agreements and relationships. Whether or not I write further regarding the
book, I will at some point offer another post on this topic, summarizing my
views on the possibilities.
And for those who say there is no example today of a society
governed purely by voluntary means, I will now offer the hotel as my counter.