As Detroit declared bankruptcy, some liberals started shrieking about the Mad Max future that awaits America if government is scaled back. Meanwhile, some libertarians celebrated the upcoming utopia that unfettered individuals would build out of Motown's rubble. But if liberals are being absurd about the Motor City, libertarians are being Pollyannaish.

In July, MSNBC host Ari Melber declared that Detroit's "bombed out infrastructure" has made it "the most libertarian city in America." His colleague, Melissa Harris-Perry, asserted that Detroit is what results when "government becomes small enough to drown in a bathtub"-a famous formulation by the limited-government activist Grover Norquist.

Harris-Perry's bathtub must be the size of a Great Lake. Detroit isn't a poster child for libertarianism; it's a demonstration project on the vices of big government. Taxes are sky-high and government is Detroit's largest employer.

It's true that some libertarians are excited by Detroit residents resorting to "Lockean homesteading principles" to repurpose vacant properties, as one blogger put it. Likewise, Detroiter Karen De Coster, an anarcho-libertarian economist who writes a great eponymous blog, is convinced that Motown is undergoing an entrepreneur-led renaissance. "This insolvent city…lacks a police force to keep up with serious crime, business are, for a large part, left alone to conduct business as they wish," she observes.

But government in Detroit is nowhere close to withering. The danger is that future municipal governance will combine the worst of both worlds: too inept to provide basic services but strong enough to thwart private alternatives. Just because City Hall doesn't have enough police officers to control crime doesn't mean it can't find enough inspectors to harass residents. Earlier this year, the city launched Operation Compliance. The goal: to shut down or force compliance from 20 "illegal" businesses operating without proper permits every week. Expecting entrepreneurs to spearhead a renaissance under these conditions would be like expecting the Lions to win the Super Bowl.

Detroit boosters have long fantasized that the city's rock-bottom real estate prices-the median home price in 2002 was less than $10,000-will eventually lure back development. Cheap land might indeed work for some niche lifestyles, such as urban farmers and childless artists. A thriving city, however, needs more diversity. This requires decent public services. Effective services lower transaction costs for different life projects. A neighborhood where someone else keeps the streets safe allows moms to stay at home or become day care providers or offer consultancy services. More people will move to an expensive, high-tax city like New York, than a cheap, high- tax one like Detroit because of the massive differential in services.

Libertarians point to Detroit companies such as Threat Management Center (TMC) that are compensating for government failure. TMC responds within minutes to clients confronting criminal threats, compared with the hour it typically takes police. This might make the city more livable for existing residents, but it's hard to imagine potential migrants being attracted by the notion of paying out of pocket and taxes for the same services.

Liberal idealists have always believed that there's nothing wrong with Detroit that enough selfless do-gooders can't fix. Now libertarians are echoing similar kumbaya solutions, waxing eloquent about the emerging spontaneous order in the city.

Sure, individuals have installed benches at bus stops (subsequently razed because they weren't authorized), removed blight, and banded together to patrol the streets. But voluntarism alone can't be the basis for a recovery. Barring committed altruists, most people won't opt for a city requiring a huge personal commitment and considerable risk. Entrepreneurs and urban pioneers can't build a viable city atop widespread government failure. Detroit's renaissance depends on reforming its government-or actually making it small enough to drown in a bathtub.