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Published by EH.NET (November 2002)

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David T. Beito, Peter Gordon, and Alexander Tabarrok, editors, The Voluntary City: Choice, Community and Civil Society. Ann Arbor: University of Michigan Press, 2002. xiii + 462 pp. $65 (cloth), ISBN: 0-472-11240-6; $24.95 (paperback), ISBN: 0-472-08837-8.

Reviewed for EH.NET by Richard Lester, Department of History, University of Missouri-Columbia.

The Voluntary City, edited by David T. Beito (University of Alabama), Peter Gordon (University of Southern California), and Alexander Tabarrok (The Independent Institute), is a collection of fifteen articles examining historical and contemporary examples of private delivery of public services. The articles generally challenge the view that government has to provide certain “public goods” because of the market’s failure to provide them efficiently.

Summing up the book’s major themes, the introductory and concluding essays contend that the market and the voluntary associations of “civil society” are better able to provide a much wider variety of “public goods” than has usually been acknowledged. The “free rider” and “externality” problems can be solved through creative market-oriented arrangements and private voluntarism. Consequently, the market often can provide “public goods” at least as efficiently as government. Moreover, the private sector may have significant advantages in providing “public goods,” particularly greater flexibility in responding to consumer demand.

The remaining essays explore a varied array of historical examples of the private provision of “public goods” on the local level. The first section focuses on the role played by private market-oriented arrangements in urban planning and the construction of urban infrastructure. Stephen Davies argues that real estate market practices and restrictive covenants were highly effective in regulating urban growth in Britain between 1740 and 1850, in the absence of public urban planning. David Beito examines late nineteenth century St. Louis’s private streets, which were owned and maintained by associations of adjoining homeowners. He argues that private streets were created in response to property owners’ dissatisfaction with municipal corruption and inadequate city services. Daniel Klein examines turnpike construction by private companies in the early nineteenth century, focusing on how these companies overcame “free rider” problems. Robert C. Arne explores the history of Chicago’s Central Manufacturing District as an example of “entrepreneurial city planning.”

The second part of the book examines private provision of quasi-governmental services. Bruce Benson examines the medieval law merchant, a private contractual system of law, which once governed international trade. Stephen Davies examines eighteenth and early nineteenth century British voluntary associations for the prosecution of felons, which often privately funded local watches and patrols. David Beito examines American fraternal societies while David Green examines similar British and Australian friendly societies. Both kinds of societies provided their members with insurance and important social services in the absence of a government social safety net. James Tooley examines private education in nineteenth century Great Britain and the United States, arguing rather unpersuasively that private schools provided a near-universal system of high quality education even before the creation of public school systems.

The third section, which focuses largely on contemporary examples, examines private communities such as condominiums, mobile home parks, and subdivisions governed by homeowners’ associations. Fred E. Foldvary, Donald J. Boudreaux and Randall G. Holcombe, Robert H. Nelson and Spencer Heath MacCallum all examine the private systems of government in these communities.

The Voluntary City works best as a series of case studies examining some fascinating historical examples of private provision of “public goods” such as urban infrastructure, city planning and law enforcement. Economic historians will find many essays to be of interest, particularly those by Beito, Davies and Klein. The book will be of particular interest to historians interested in private urban planning devices, which are covered more thoroughly and systematically than many of its other topics. At its best, the book also challenges historians to develop better explanations of why public city services triumphed over private market-based alternatives by calling into question the assumption that this triumph was logical and inevitable.

Overall, however, the quality of the articles is uneven. Some essays seem rather abbreviated and fail to examine the historical context of private provision of “public goods” adequately. With only a few exceptions, the essays generally fail to examine the role of the nonprofit sector, one of the most interesting issues raised in the editors’ introduction. Contributors’ frequent attempts to draw far-reaching policy implications from narrowly focused historical case studies are often strained and unconvincing. A few of the essays, such as the essay on the medieval law merchant, have only a peripheral relationship to the theme of the “voluntary city.” Many essays implicitly associate private provision of public services with free market policies. Historically, however, the link between the two is quite debatable. Early nineteenth century American cities relied heavily on private provision of public services at the same time that they heavily regulated prices and other economic activities. On the other hand, as city governments became more laissez-faire in their other economic policies, they also assumed increasing responsibility for providing “public goods.”

The articles often paint a highly selective picture of private sector efforts to provide “public goods,” highlighting their successes while omitting discussions of their limitations or failures. Examples of voluntarism that undercut the private sector’s reputation for efficiency, such as the early nineteenth century volunteer fire companies, which appear to have been highly ineffective at putting out fires, are simply not discussed at all. Even the very good essays on fraternal and friendly societies do little to address obvious questions about whether societies financed solely by assessments on their generally working class members really had the financial resources to provide adequate aid to these members in times of financial hardship.

The contributors also fail to explain adequately why so many privately provided “public goods” were ultimately replaced by government services, a historical development that the economic theory of “public goods” explains very well. The alternative explanations offered by the articles, that government generally seeks to expand its own power and that government intervention “crowds out” private sector initiatives, seem oversimplified and superficial. Most of the articles provide little supporting evidence for either explanation. Moreover, numerous counterexamples disprove the claim that government intervention automatically “crowds out” private sector initiatives. To cite only one, whatever its impact on fraternal societies, Social Security clearly did not “crowd out” the development of private employee pensions in the postwar United States.

Ultimately, I found the book’s critique of the “public goods” theory to be fundamentally unpersuasive. Few would deny that private market-based mechanisms can occasionally overcome “free rider” and “externality” problems. The real question is whether they can do so repeatedly and do so as efficiently as government intervention can, considering all the multiple “free rider” and “externality” problems typically associated with “public goods.” The scattered and impressionistic historical evidence in the volume failed to convince me that they could. It is doubtful whether private contractual arrangements can take into account every possible “negative externality,” no matter how remote. Moreover, the essays are silent on the transaction costs of such contractual arrangements. None of the essays really undertake the systematic historical comparisons between privately and publicly provided services that might prove or disprove the book’s major contentions. Finally, important questions about the fairness and equity of private provision of “public goods” are simply evaded. Many might question the desirability of making the quality of vitally important services like education and police protection contingent on the individual’s ability to pay for them, a logical consequence of privatization.

Nevertheless, The Voluntary City fulfills its primary purpose, which is more to raise questions than to provide answers. The editors themselves note that the essays in the volume cannot “definitively answer” the question of whether the “spontaneously created institutions of civil society [were] better than the government institutions that replaced them” (p. 3). They only contend that the historical evidence shows that the question is worth asking. Viewed in this light, The Voluntary City raises worthwhile questions, which will give historians much to think about. While they are unlikely to answer the questions in the same way as The Voluntary City, they will certainly benefit from consulting its frequently thought-provoking essays.

Richard Lester is a Visiting Assistant Professor at the University of Missouri-Columbia. He has written a number of conference papers on the administration of New Deal unemployment relief programs in Los Angeles County. He is currently working on turning his dissertation, “Building the New Deal State on the Local Level: Unemployment Relief in Los Angeles County during the 1930s,” into a book.