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Neither Public nor Private: Rethinking the Dichotomy
Cato recently kicked off an essay series they’re calling “What Can’t Private Governance Do?”. The series questions how far we can take private governance in replacing public institutions. The most recent essay by Mark Lutter questions where to draw the line between private and public in territorial governance. And, more importantly, whether drawing that line even makes sense. Mr. Lutter concludes that it does, but I’ll politely disagree. We should instead abandon the public vs private dichotomy. It doesn’t accurately describe reality. It’s not useful for understanding policy problems. And it distracts us from the more interesting lines of inquiry we could otherwise be pursuing. A Tale of Two Cities Imagine two different cities, one proprietary and the other public. The former is run as a private, for-profit firm. It has an executive team, board of directors, and shareholders. The latter is a traditional municipal corporation. It’s run partially by elected officials and partially by appointees. It’s what we would call non-profit. No one “owns” the government as a legal entity. Now imagine that both cities raise revenue through land values. Greater demand to live in either city translates into a higher price for land. And the more that either city does to make their jurisdictions attractive, the more revenue that either stands to collect. In this scenario, price signals in the form of land valuations give both cities an incentive to make positive sum investments. Those same price signals also provide both cities with the ability to understand what those positive sum investments might be. Each city is responding to price information and making positive sum investments. So what difference does it make to call one public and the other proprietary? In all fairness, there’s still one place we could draw a line. We could make the choice of […]
