Private Government

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New at Reason: Jesse Walker dissects Business Improvement Districts to determine whether this public/private phenomenon is fish or fowl.

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  1. “? Rather than diverting public money from the rest of the city, BIDs generate most or all of their own income.”

    In practice, the City often puts extra funds into these areas. For example, splitting the overtime cost of a police foot patrol with the BID. The theory being, you’ll get more return if you’re helping people who are helping themselves.

    Imagine the following scenario: the sidewalks are rubble in a neighborhood commercial area. Each business owner considers fixing the length of sidewalk in front of his store, but decides against it, since just having his 40 feet repaired, in the middle of district with lousy sidewalks, won’t make a difference. A business owner suggests to his neighbor that they both fix “their” sidewalks. The neighbor says, go ahead, fix “mine” and “yours,” but do it on your own dime. The responsible business owner doesn’t want to eat the extra cost, and is offended by the free rider stance of his neighbor. So none of the sidewalk gets fixed.

    BIDs provide a way out of this dilemma.

  2. Oh no, BIDs drive up property values. They must be stopped!

  3. joe,

    So those two agree to use the city’s guns to enforce the other’s participation in the scheme. Then, there’s a third shopkeeper, who would love to have new sidewalk, even if just his own amidst the rubble, but doesn’t have the money. The BID levy forces him into bankruptcy.

    Yet, since it is a local district, the poor guy could move to a shabbier area before the law comes down on him. I accept marginal businesses are ultimately consigned to marginal areas. And the officials wonder why the new sidewalks seem less vibrant…

  4. “The neighbor says, go ahead, fix “mine” and “yours,” but do it on your own dime.”

    It’s too bad Joe is so cynical about the possibility of cooperative behavior.

  5. fyodor,

    How about if the poor guy hears the other two and says,

    “My brother is a concrete guy. I can get all three of us new sidewalk for less than half what the city will charge, but we have to do it at night when the inspector is sleeping. And nobody tell the union.”

  6. hippies as working people?

  7. I apologize, mostly to Jesse, for the incomprehensible writeup I gave this article. I can’t even tell if that’s a sentence. Please focus on Jesse’s writing and not mine.

  8. “The BID levy forces him into bankruptcy.” Will someone please translate this argument into my native language, “Non-Shrieking Hysteric?”

    “It’s too bad Joe is so cynical about the possibility of cooperative behavior.” That happens when you’re in the real world. Cooperative behavior is great, but you can’t rely on it to solve all your problems. I, for one, don’t see a great deal to admire in throwing up your hands when Plan A fails.

  9. Joe, you make too many good arguments to fall back on that dumb “I’m in the real world and you’re not” doo-doo. Nothing solves “all your problems.” Not in the real world, anyway! 🙂 Of course, the two points that form the basis of my POV, that coercing people into doing something for their good is never much of a solution and that governmental solutions usually do more harm than good, are matters that we’ll likely never agree on

  10. fy,

    This is not a government solution. It’s a business solution. The extra money only gets spent in the district if the businesses there (a large majority of them, in most cases) agree to pay it, and agree that it should be spent on Projects A, B, and D.

    I appreciate your feelings that coercion never solves anything, but they are just that: feelings. I used the “real world” argument, because I have seen good things happen, in the real world, where your model would predict that they couldn’t.

    If you want to make the argument that no benefits – including lower crime, nicer appearances, more customers, more jobs – are worth the horror of extracting a BID fee from the minority of businesses that don’t support the BID, I can respect that. You have your values, I have mine. But your assertion that there won’t be any benefits is way too convenient and, I have to say, belied by what has happened in the real world.

  11. I didn’t say “no benefits.” Rather, “more harm than good.” There’s a big difference. Remember, Mussolini made the trains run on time! Whether there’s a threshold of net benefit over which extracting money (or any other abuse of rights) would be justified is one of those philosophical quagmires that have no definitive answer. Libertarianism is based largely on the belief that doing the right thing also produces the best results over the long haul, and I base my belief in that on reason and experience, not feelings.

  12. “more harm than good” Are we talking actual economic harm – lost jobs, lower wages, shuttered storefronts – or are we still on feelings?

  13. The whole shebang, Joe. Unintended conequences and all.

  14. joe,

    That business solution is dependent on the force of law (and ultimately, arms) for its application. It is more than simple enforcement of contract when all parties subject to it have not given consent.

    By strict cost-benefit analysis, one might find numerous state programs that offer net gain, if unfavorable variables are free to be ignored. BIDs may be a positive force, but still a government force.

    Sometimes the inherent inefficiency of collective action leaves somebody shrieking hysterically. I ask that we at least note those cries as we walk down our shiny new sidewalk.

  15. So they may be a positive force, but they are always inefficient? I’m sorry, I can’t your shrieking over the screaming contradiction.

    “BIDs may be a positive force, but still a government force.” So even if more people have jobs, even if the neighborhood is improved, even if the vacancy rate goes down…you’re still against it, because of the oppression of the free-rider-wannabes who are getting more business. I thought this was about prosperity.

  16. Yes, joe, it is my prejudice that anything government does, it does inefficiently. That doesn’t keep government from achieving positive results, but often makes a project cost more than it needs to, in both hard monetary and squishy social terms.

    My position, more directly, is that BIDs are essentially government entities. That view makes me skeptical of their operation, as they can operate behind a shield of private interests.

    If you thought it was about prosperity, I guess I thought it was about liberty. I am amused to see how those ideals can be seen in opposition.

  17. There are specific reasons why some government actions tend to be less efficient than some private sector actions – it’s not some mystical government hex, but a lack of sound market feedbacks. Properly structured, a decision to fund a certain BID project incorporates a market feedback mechanism, by giving the market actors – the businesses in the district – the power of the purse, and the power of project design.

  18. BIDs are essentially citizens buying extra government. Buying services like trash collection or street sweeping seem acceptable. Buying selective license enforcement or obscenity prosecutions is certainly less benign.

    To the extent that BIDs rely on government power for collections, and to execute their objectives, they must be public, not private. That there’s much less oversight (election) of the administrators unsettles me.

  19. Even buying services is not so benign if the “buying” is forced on people who haven’t agreed to it. Perhaps BID’s have the advantage of localism, as Jesse says, but as long as they have coercive powers over those who haven’t not contractually bound themselves to play along, I say they’re governments and should play by the same rules.

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