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The Public Finances and Governance of a Free City

The Public Finances and Governance of a Free City. Fred E. Foldvary Santa Clara University, California www.foldvary.net/works/ free-cities.html. The Future of Free Cities. Roat á n, Honduras, 4 April 2011 Panel 2, 11:00 to 12:30 PM

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The Public Finances and Governance of a Free City

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  1. The Public Finances and Governance of a Free City Fred E. Foldvary Santa Clara University, California www.foldvary.net/works/ free-cities.html

  2. The Future of Free Cities • Roatán, Honduras, 4 April 2011 • Panel 2, 11:00 to 12:30 PM • Conference organized by Universidad Francisco Marroquín, Guatemala

  3. Elements of a free city • Economics: population density and public goods generate land rent. • Ethics: a universal ethic, the expression of natural moral law. • Governance: liberty is best secured by dividing governance into neighborhood cells, structuring the voting bottom up.

  4. The universal ethic 1. Evil is coercive harm to others. 2. Moral good: a welcomed benefit. 3. All other acts are morally neutral. Ref: Fred Foldvary, The Soul of Liberty

  5. Two levels of rules • The constitutional level of choice: when one joins a group or enters into a contract. • The voluntariness of a free city is at the constitutional level of choosing to join it. • Merely moving in is not a real agreement. • Free city needs an explicit contract among legal equals.

  6. Land rent • Cities have population, commerce, and public goods; these generate land rent. • Efficient private communities collect the locational rents to pay for their works. • Taxes on labor, goods, enterprise, make tenants pay twice, once with higher rentals, secondly with taxes. • The free city only charges the rental.

  7. Free city governance • Today’s mass democracies result in subsidies for special interests at the expense of consumers, taxpayers. • Avoid rent seeking: with small-group voting, bottom-up multi-level. • Demand revelation: residents state values, pay for changing outcomes.

  8. Free city avoids pollution • Charge for pollution and congestion. • The public finance of a free city: 1. Site rentals. 2. Demand revelation payments. 3. Compensation to avoid negative externality (pollution, congestion).

  9. Service substitution • Replace a government service with contractual service (partial secession). • Deduct the expenses the city government saves from tax liabilities. • Examples: schooling, garbage collection, street maintenance. • Secession should be totally voluntary.

  10. Summary • The principles of economics, ethics, and governance of a free city are in harmony. • The policies that are ethical also maximize prosperity and minimize corruption. • These complementary principles create a grand unified field theory of the free city.

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