The Completely Decentralized City: The Case for Benefits Based Public Finance

Abstract

An alternative to centralized top‐down city governance is a multi‐level bottom‐up structure based on small neighborhood contractual communities. This paper analyzes the voting rules and public finances of decentralized, contractual urban governance and the likely outcome of such a constitutional structure, substantially reduced transfer seeking or rent seeking. Tax and service substitution, with lower‐level funding and services substituting for higher‐level public finance, is the general process by which the governance would devolve. Land rent is the most feasible source of such decentralized public finance, and local communities could also engage in local currency and credit services. Some empirical examples demonstrate the implementation of some of these governance structures.