Tuesday, January 29, 2013

Hotels and Consensual Government

I am continuing through the book “Public Goods and Private Communities,” by Fred Foldvary.  In this 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 sovereign community:

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 community:

Only when the right of individual, personal secession is constitutionally acknowledged is the membership contractual.

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 collective goods:

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 potential rent.

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 grandfather:

‘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 contractually-based communities.

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 rent.

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 communities.

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, etc.).

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.

1 comment:

  1. I like the direction the argument takes, toward real privatization (as opposed to fire sales of resources). Other modest institutions suggest themselves, cruise lines, retirement villages,gated communities. Stuff rich people like. I've always regretted not traveling, but it seems as if the third world is coming to us. "We'll ride this out at the Ritz!"