In From Upstate New York to the Horn of Africa, by Spencer Heath MacCallum, Liberty magazine, May 2005, page 33; Spencer Heath MacCallum says societies should be organized like a hotel, where there is an owner who provides services in exchange for fees. Hotels can provide any services and charge any fees they want. If customers do not like the services or fees of one hotel, the customers can go to a different hotel instead.

Spencer Heath MacCallum also thinks that communities should have owners who can buy and sell communities just like buying and selling anything else. Well run communities would be worth more than poorly run communities. The owner of the community would have an incentive to make sure the community was well run so that the owner could sell the community for as much money as possible. There would be entrepreneurs who would buy badly run communities cheaply, fix the communities, and then sell the communities for a higher price. This is different from a system where communities have elected governments, where some voters and special interests have an incentive to prevent the community from being well run.

In most governments, the bosses know they will be replaced sooner or later, so they have no incentive to manage for the long term, because long term benefits will go to their successors. But if the community is owned, then the owner has an incentive to manage for the long term, because managing for the long term should increase the resale price of the community.

I am not sure if privately owned communities would work. Some people might value democracy more than efficient government. I do not see how an undemocratic government could provide the service of democracy. But the central government should not prohibit privately owned communities. The central government should allow competing governments to take any form whatsoever, so that through competition we can see which form of government works best. The only way to find out if privately owned communities will work is to try it. The central government should not prohibit willing volunteers from conducting the experiment.

Some industrial parks and shopping malls are successful examples of privately owned communities. But I do not know of any privately owned communities with concentrated ownership and significant numbers of human residents.

There are privately planned communities, but these are not the same as privately owned communities. A privately planned community occurs when a developer creates a community from less developed land. The developer builds streets, utilities, parks, etc. The developer organizes the community government. The developer sells houses. The developer has an incentive to plan the community well and to run the community government efficiently at first, because that will increase the value of the houses the developer is selling. But once the developer has sold out, the developer has no further incentive to manage the community for the long term.

Some people think that community associations or gated communities are privately owned communities. But community associations and gated communities usually are run by elected officials. Like in communities with conventional governments, these officials have no incentive to manage for the long term because the long term benefits will go to their successors.

The advantage of a privately owned community is that the owner has an incentive to manage for the long term, because managing for the long term will increase the resale price of the community. But there is no incentive unless the owner is free to sell the community.

If a community is owned but ownership is dispersed among many owners, each individual owner might not be interested in managing for the long term because most of the benefits would go to the other owners. A private community with dispersed ownership has less incentive to manage for the long term than a community with concentrated ownership. For example, I vaguely recall a trailer park in florida which was sold to a developer about 1995. The trailer park was owned by an association. Shares in the association were tied to lots in the trailer park, so any person who owned a share had the use of the lot tied to that share. But the association bylaws did not say whether or not a majority of shareholders could vote to sell the whole trailer park. So when the developer offered to buy the whole trailer park for a lot of money and a majority of shareholders voted to sell, the minority shareholders filed lawsuits to block the sale. In this case it was theoretically possible for the owners to sell the community, but there were many obstacles to selling. Dispersed ownership resulted in less incentive to manage for the long term than concentrated ownership.

more about private communities:

The Private Provision of Public Goods; by Donald J. Boudreaux; The Freeman; June 2010; volume 60, number 5; pages 17-18>p> The Voluntary City; edited by David T. Beito, Peter Gordon, and Alexander Tabarrok; copyright the Independent Institute; published by the University of Michigan Press; 2002