Market Urbanism

Liberalizing cities | From the bottom up

“Market Urbanism” refers to the synthesis of classical liberal economics and ethics (market), with an appreciation of the urban way of life and its benefits to society (urbanism). We advocate for the emergence of bottom up solutions to urban issues, as opposed to ones imposed from the top down.

Rothbard the Urbanist Part 1: Public Education’s Role in Sprawl and Exclusion

By

Rothbard

I’ve been meaning to address the public education system’s complex role in land use patterns, and found that Murray Rothbard does a better job in his 1973 manifesto, For a New Liberty than I ever could.  In summary, locally-funded public education is an engine of geographical segregation, which encourages flight from urban areas, and was a driving motivation for the popular acceptance of exclusionary zoning in newer suburbs.  As a result, wealth is consistently concentrated geographically, and housing affordability is at odds with these restrictions of supply intended to exclude poorer people from draining the property tax base.

Here’s a paragraph from the chapter on education:

The geographical nature of the public school system has also led to a coerced pattern of residential segregation, in income and consequently in race, throughout the country and particularly in the suburbs. As everyone knows, the United States since World War II has seen an expansion of population, not in the inner central cities, but in the surrounding suburban areas. As new and younger families have moved to the suburbs, by far the largest and growing burden of local budgets has been to pay for the public schools, which have to accommodate a young population with a relatively high proportion of children per capita. These schools invariably have been financed from growing property taxation, which largely falls on the suburban residences. This means that the wealthier the suburban family, and the more expensive its home, the greater will be its tax contribution for the local school. Hence, as [p. 133] the burden of school taxes increases steadily, the suburbanites try desperately to encourage an inflow of wealthy residents and expensive homes, and to discourage an inflow of poorer citizens. There is, in short, a breakeven point of the price of a house beyond which a new family in a new house will more than pay for its children’s education in its property taxes. Families in homes below that cost level will not pay enough in property taxes to finance their children’s education and hence will throw a greater tax burden on the existing population of the suburb. Realizing this, suburbs have generally adopted rigorous zoning laws which prohibit the erection of housing below a minimum cost level — and thereby freeze out any inflow of poorer citizens. Since the proportion of Negro poor is far greater than white poor, this effectively also bars Negroes from joining the move to the suburbs. And since in recent years there has been an increasing shift of jobs and industry from the central city to the suburbs as well, the result is an increasing pressure of unemployment on the Negroes — a pressure which is bound to intensify as the job shift accelerates. The abolition of the public schools, and therefore of the school burden-property tax linkage, would go a long way toward removing zoning restrictions and ending the suburb as an upper middle-class-white preserve.

Later chapters address other urbanism-related issues, and I’ll share those insights as I come across them.

For a New Libertyis available for free from the Mises Institute in full as an html page, a pdf, or audio book read by Jeffrey Riggenbach. (the audio version is how I am finding time to absorb it among the rigors of caring for the little guy)  Bryan Caplan also summarizes this chapter (and each chapter) as part of the Econlog Book Club.

Comments

  1. You’re right on with this one. Lack of high quality public schools may be the single most cited reason families do not live in urban areas.

    One other strange function of local school funding is that it sometimes sets up an incentive for localities to discourage younger families. Residential growth is already more expensive than commercial, but local jurisdictions are much more likely to welcome age-exclusive retirement communities given the chance. I know that some suburbs of Phoenix have been pretty actively excluding all non-retirees in order to reduce the school tax burden.

  2. You’re right on with this one. Lack of high quality public schools may be the single most cited reason families do not live in urban areas.

    One other strange function of local school funding is that it sometimes sets up an incentive for localities to discourage younger families. Residential growth is already more expensive than commercial, but local jurisdictions are much more likely to welcome age-exclusive retirement communities given the chance. I know that some suburbs of Phoenix have been pretty actively excluding all non-retirees in order to reduce the school tax burden.

  3. If public schools are such a good idea, then how about public supermarkets? Everyone would pay exorbitant taxes to be able to shop for “free” in their neighborhood supermarket — and would be allowed to purchase only what the fixed-salary politically-appointed supermarket manager chooses to stock.

    That said, I think that Professor Rothbard unfortunately only sees what he wants to see through his “Austrian” lens, and is therefore missing other reasons why “poor” people are not welcome in the suburbs — or anywhere else. Specifically, most home owners are interested in keeping out not poor people — but instead people with sociopathic behavior — which is more common among people who are less well-off.

    And in any event, I doubt there is any evidence that supports his implication that wealthy people lower school taxes for everyone else. If that were true, then every suburb would be begging for a Walmart — or similar business — that would pay truckloads of taxes.

    Furthermore, I believe that school districts try to extract whatever they can out of everyone. If rich people move to a suburb, then the school districts would only increase their budget.

    BTW, what’s wrong with segregation — as long as it is voluntary? I’m not saying that it’s good, but shouldn’t that be a personal preference? And it certainly seems to be a common personal preference — people like to live among, associate with, and marry people an awful lot like themselves…

  4. If public schools are such a good idea, then how about public supermarkets? Everyone would pay exorbitant taxes to be able to shop for “free” in their neighborhood supermarket — and would be allowed to purchase only what the fixed-salary politically-appointed supermarket manager chooses to stock.

    That said, I think that Professor Rothbard unfortunately only sees what he wants to see through his “Austrian” lens, and is therefore missing other reasons why “poor” people are not welcome in the suburbs — or anywhere else. Specifically, most home owners are interested in keeping out not poor people — but instead people with sociopathic behavior — which is more common among people who are less well-off.

    And in any event, I doubt there is any evidence that supports his implication that wealthy people lower school taxes for everyone else. If that were true, then every suburb would be begging for a Walmart — or similar business — that would pay truckloads of taxes.

    Furthermore, I believe that school districts try to extract whatever they can out of everyone. If rich people move to a suburb, then the school districts would only increase their budget.

    BTW, what’s wrong with segregation — as long as it is voluntary? I’m not saying that it’s good, but shouldn’t that be a personal preference? And it certainly seems to be a common personal preference — people like to live among, associate with, and marry people an awful lot like themselves…

  7. Bill,

    I actually think public supermarkets make more sense than public schools. At least everyone uses supermarkets. With schools everyone is forced to pay, regardless if they will ever use it…

    That said, I think that Professor Rothbard unfortunately only sees what he wants to see through his “Austrian” lens, and is therefore missing other reasons why “poor” people are not welcome in the suburbs — or anywhere else. Specifically, most home owners are interested in keeping out not poor people — but instead people with sociopathic behavior — which is more common among people who are less well-off.

    I’m sure Rothbard sees plenty of other reasons why the poor are not welcome in the suburbs, but this is an excerpt from his chapter on education. I’m sure keeping away from sociopaths is an objective for most rational people. However, even if sociopaths are more common among poor people, that does not justify coercive exclusion of a broad swath of people, most who are not sociopaths.

    BTW, what’s wrong with segregation — as long as it is voluntary? I’m not saying that it’s good, but shouldn’t that be a personal preference? And it certainly seems to be a common personal preference — people like to live among, associate with, and marry people an awful lot like themselves…

    I suppose there is nothing wrong with a person’s voluntary choice to segregate himself from people unlike himself. However, land use restrictions intended to exclude potential residents according to economic status are a form of coercion. One could say such interventions result in indirectly coerced segregation, as opposed to any form of voluntary segregation.

  8. Bill,

    I actually think public supermarkets make more sense than public schools. At least everyone uses supermarkets. With schools everyone is forced to pay, regardless if they will ever use it…

    That said, I think that Professor Rothbard unfortunately only sees what he wants to see through his “Austrian” lens, and is therefore missing other reasons why “poor” people are not welcome in the suburbs — or anywhere else. Specifically, most home owners are interested in keeping out not poor people — but instead people with sociopathic behavior — which is more common among people who are less well-off.

    I’m sure Rothbard sees plenty of other reasons why the poor are not welcome in the suburbs, but this is an excerpt from his chapter on education. I’m sure keeping away from sociopaths is an objective for most rational people. However, even if sociopaths are more common among poor people, that does not justify coercive exclusion of a broad swath of people, most who are not sociopaths.

    BTW, what’s wrong with segregation — as long as it is voluntary? I’m not saying that it’s good, but shouldn’t that be a personal preference? And it certainly seems to be a common personal preference — people like to live among, associate with, and marry people an awful lot like themselves…

    I suppose there is nothing wrong with a person’s voluntary choice to segregate himself from people unlike himself. However, land use restrictions intended to exclude potential residents according to economic status are a form of coercion. One could say such interventions result in indirectly coerced segregation, as opposed to any form of voluntary segregation.

  9. I suppose there is nothing wrong with a person’s voluntary choice to segregate himself from people unlike himself. However, land use restrictions intended to exclude potential residents according to economic status are a form of coercion. One could say such interventions result in indirectly coerced segregation, as opposed to any form of voluntary segregation.

    Now I’m curious: How do you feel about co-op boards having the right to exclude anyone for any reason, without having to explain why? Is that how you would see the future of all real estate?

  10. I suppose there is nothing wrong with a person’s voluntary choice to segregate himself from people unlike himself. However, land use restrictions intended to exclude potential residents according to economic status are a form of coercion. One could say such interventions result in indirectly coerced segregation, as opposed to any form of voluntary segregation.

    Now I’m curious: How do you feel about co-op boards having the right to exclude anyone for any reason, without having to explain why? Is that how you would see the future of all real estate?

  11. Now I’m curious: How do you feel about co-op boards having the right to exclude anyone for any reason, without having to explain why?

    Thanks for asking, Bill! I was wondering when readers would be interested in discussing some deeper philosophical concepts.

    How do I feel? I don’t like it when people exclude others for bigoted or elitist reasons. But, I think it is reasonable to exclude sociopaths – inevitable exclusion would probably deter people from acting sociopathic (if it’s a choice – I’m no psychology buff).

    But, do I think it is moral to stop bigots from making unsavory, yet voluntary choices that inflict no harm upon others? No. Forcing bigots to act against their will would be even worse than being a bigot itself. (unless their will is to directly harm others) Virtue cannot be forced upon people and still be virtuous.

    Is that how you would see the future of all real estate?

    I imagine exclusion would happen, just as co-ops and rent control slumlords do it now. But, elitist institutions often exclude others to their own detriment. I’m sure segregation of some sort would always exist, but remove the political forces that make segregation widespread and we would only be left with scattered incidences of voluntary segregation. Exclusive co-ops and developments will exist in isolation, but not in broad geographic areas as is common now.
    ——-
    What is your response to your own questions?

  12. Now I’m curious: How do you feel about co-op boards having the right to exclude anyone for any reason, without having to explain why?

    Thanks for asking, Bill! I was wondering when readers would be interested in discussing some deeper philosophical concepts.

    How do I feel? I don’t like it when people exclude others for bigoted or elitist reasons. But, I think it is reasonable to exclude sociopaths – inevitable exclusion would probably deter people from acting sociopathic (if it’s a choice – I’m no psychology buff).

    But, do I think it is moral to stop bigots from making unsavory, yet voluntary choices that inflict no harm upon others? No. Forcing bigots to act against their will would be even worse than being a bigot itself. (unless their will is to directly harm others) Virtue cannot be forced upon people and still be virtuous.

    Is that how you would see the future of all real estate?

    I imagine exclusion would happen, just as co-ops and rent control slumlords do it now. But, elitist institutions often exclude others to their own detriment. I’m sure segregation of some sort would always exist, but remove the political forces that make segregation widespread and we would only be left with scattered incidences of voluntary segregation. Exclusive co-ops and developments will exist in isolation, but not in broad geographic areas as is common now.
    ——-
    What is your response to your own questions?

  13. Now I’m curious: How do you feel about co-op boards having the right to exclude anyone for any reason, without having to explain why?

    Adam, you make a good distinction between “feel” and “think”. I feel ambivalent about exclusion; it probably depends on why people are being discriminated against.

    In particular, I am most repelled by discrimination based on irrationality; i.e., mass movements, conspiracy theories, agitating politicians and rabble-rousers, etc.

    The next level up would be statistical discrimination. That is, people who say, “People from Group X should not live here because there is a higher incidence of negative qualities in that group.” But I also understand why people need to think that way, so I do sympathize with it. But I also sympathize with those in Group X who do not have those negative qualities — yet are being prejudged.

    Then there is visceral discrimination. Here’s a good example of a repulsive remark: “I do not want black people in my building because I’m just not comfortable with them.” And yet, this is an entirely socially acceptable thing to say when it comes to finding a mate. Go to something like Match.com and you will find people openly and universally discriminating by race, religion, height, weight, gender, facial appearances, intelligence, etc., etc., etc. Why is this accepted and expected in romance, but taboo in real estate?

    In any event, I think that the people passing the laws are susceptible to the same biases that the rest of us have, except that they do not have to pay a penalty for their wrong decisions. Therefore, I would gladly accept real-estate discrimination by someone who will be backing it up with their own money — if the alternative is real-estate discrimination by politicians who have nothing personal at stake.

    Incidentally, I once lived in a neighborhood where “my type” was not welcome. In hindsight, I would have preferred to be warned by them at the start to stay out, as the alternative of living among those people turned out to be far worse.

    Is that how you would see the future of all real estate?

    Ideally, I would like to see a world without coercion — where everyone has the right to be stupid with their own money, and everyone has the right to bear the consequences of their own idiocy. And I would also like to see that world populated by people who practice skepticism, reciprocity, and civility.

    So, go ahead and refuse to sell your house to a black person if you don’t mind letting it sit on the market for a few more months while your bank account depletes itself. I think it’s your right to be a moron — and I feel that however immoral it might be, it’s nothing next to what the tax collector is going to do to whomever you will sell that house to.

  14. Now I’m curious: How do you feel about co-op boards having the right to exclude anyone for any reason, without having to explain why?

    Adam, you make a good distinction between “feel” and “think”. I feel ambivalent about exclusion; it probably depends on why people are being discriminated against.

    In particular, I am most repelled by discrimination based on irrationality; i.e., mass movements, conspiracy theories, agitating politicians and rabble-rousers, etc.

    The next level up would be statistical discrimination. That is, people who say, “People from Group X should not live here because there is a higher incidence of negative qualities in that group.” But I also understand why people need to think that way, so I do sympathize with it. But I also sympathize with those in Group X who do not have those negative qualities — yet are being prejudged.

    Then there is visceral discrimination. Here’s a good example of a repulsive remark: “I do not want black people in my building because I’m just not comfortable with them.” And yet, this is an entirely socially acceptable thing to say when it comes to finding a mate. Go to something like Match.com and you will find people openly and universally discriminating by race, religion, height, weight, gender, facial appearances, intelligence, etc., etc., etc. Why is this accepted and expected in romance, but taboo in real estate?

    In any event, I think that the people passing the laws are susceptible to the same biases that the rest of us have, except that they do not have to pay a penalty for their wrong decisions. Therefore, I would gladly accept real-estate discrimination by someone who will be backing it up with their own money — if the alternative is real-estate discrimination by politicians who have nothing personal at stake.

    Incidentally, I once lived in a neighborhood where “my type” was not welcome. In hindsight, I would have preferred to be warned by them at the start to stay out, as the alternative of living among those people turned out to be far worse.

    Is that how you would see the future of all real estate?

    Ideally, I would like to see a world without coercion — where everyone has the right to be stupid with their own money, and everyone has the right to bear the consequences of their own idiocy. And I would also like to see that world populated by people who practice skepticism, reciprocity, and civility.

    So, go ahead and refuse to sell your house to a black person if you don’t mind letting it sit on the market for a few more months while your bank account depletes itself. I think it’s your right to be a moron — and I feel that however immoral it might be, it’s nothing next to what the tax collector is going to do to whomever you will sell that house to.

  15. That’s right on Daniel…Suburbs – already maxed out of their resources and facing brutal budget cuts – simply will shut the door for continuing business as usual. Suburb and exurbs will begin shutting the door to anything but 55 and older development.

    Correlated to that phenomenon is the one I’m watching right now in my transit corridor’s gentrified enclaves. Young hipster couples gleefully participating in the 2007 baby boom appear to be bucking the trend to flee to the single-fam fields once their kids hit school age (some with the sudden fading of financial options but most simply because they LIKE their urban homes too much – realize they poured their life and blood into those bungalows for the past 7 years). I see that most of these families are entrenching themselves close to their work places (a resilient choice) and yet they face the meager educational options of the inner city. Some are beginning to send their young children to charter schools and the like. Very interesting to see what happens next and if the local school systems are innovative and flexible enough to shift their focus to diverse inner city resources run by a multitude of partners, including downtown libraries and children’s museums. We may be soon seeing a dramatic shift in the way we do K-8 in this country.

    The confluence of the baby boom and the downturn is very, very interesting indeed.

  16. That’s right on Daniel…Suburbs – already maxed out of their resources and facing brutal budget cuts – simply will shut the door for continuing business as usual. Suburb and exurbs will begin shutting the door to anything but 55 and older development.

    Correlated to that phenomenon is the one I’m watching right now in my transit corridor’s gentrified enclaves. Young hipster couples gleefully participating in the 2007 baby boom appear to be bucking the trend to flee to the single-fam fields once their kids hit school age (some with the sudden fading of financial options but most simply because they LIKE their urban homes too much – realize they poured their life and blood into those bungalows for the past 7 years). I see that most of these families are entrenching themselves close to their work places (a resilient choice) and yet they face the meager educational options of the inner city. Some are beginning to send their young children to charter schools and the like. Very interesting to see what happens next and if the local school systems are innovative and flexible enough to shift their focus to diverse inner city resources run by a multitude of partners, including downtown libraries and children’s museums. We may be soon seeing a dramatic shift in the way we do K-8 in this country.

    The confluence of the baby boom and the downturn is very, very interesting indeed.

  17. One more point about public schools…they create an incentive to encourage retirees (and other people without kids) to move in. These people pay taxes, but don’t impose a cost on the schools — so that keeps property taxes down.

    Can you think of any private business you use where you would want fewer other customers? For example, if you fly between an unusual city pair, you want other users so that the service will be provided. If you like Toyota, you hope that other people will too, so they will keep making cars.

    Only with government do you get these perverse diseconomies of scale — where demand for services declines, but everyone pays anyway.

  18. One more point about public schools…they create an incentive to encourage retirees (and other people without kids) to move in. These people pay taxes, but don’t impose a cost on the schools — so that keeps property taxes down.

    Can you think of any private business you use where you would want fewer other customers? For example, if you fly between an unusual city pair, you want other users so that the service will be provided. If you like Toyota, you hope that other people will too, so they will keep making cars.

    Only with government do you get these perverse diseconomies of scale — where demand for services declines, but everyone pays anyway.

  19. First time reading this and loving it . . . i think i was referred by orgtheory.net, but i’m not sure.

    Where o where do i start?

    Bill:
    1. why do you think sociopathic behavior happens more in lower economic classes?

    2. one could argue that the wealthy lower school taxes for everyone else in a city where their real estate taxes are higher than average and hence subsidizing others’ children’s education

    3. segregation is ‘only’ wrong when actions and policies are designed to keep out classes of people (such as the phoenix suburbs actions, co-ops to apparently)

    4. on discrimination: “Why is this accepted and expected in romance, but taboo in real estate?” perhaps because real estate and employment are regulatable (is that a word?) in that entities have to be registered and make contracts with each other through governmental stamp of approval (agreement of sale/business registration). Also because romance is so fleeting and for the most part non-contractual (cough, i’m engaged). (please do not take this for a fully-reasoned argument, i’m just trying to throw ideas around)

    Adam(?): “elitist institutions often exclude others to their own detriment”, what kind(s) of detriment to they experience as a result of this?

    All: what about having states ‘foot the bill’ of education instead of localities,
    this would even out or eliminate education’s impact on the flight to suburbs. In Pennsylvania they’re trying to raise the state’s proportion of the education budget, and it would seem that this would exert some downward pressure on the high-end of the distribution for education budgets thereby evening them out (unless you factor in Bill’s comment that localities will “get whatever they can . . . increase their budget”

  20. First time reading this and loving it . . . i think i was referred by orgtheory.net, but i’m not sure.

    Where o where do i start?

    Bill:
    1. why do you think sociopathic behavior happens more in lower economic classes?

    2. one could argue that the wealthy lower school taxes for everyone else in a city where their real estate taxes are higher than average and hence subsidizing others’ children’s education

    3. segregation is ‘only’ wrong when actions and policies are designed to keep out classes of people (such as the phoenix suburbs actions, co-ops to apparently)

    4. on discrimination: “Why is this accepted and expected in romance, but taboo in real estate?” perhaps because real estate and employment are regulatable (is that a word?) in that entities have to be registered and make contracts with each other through governmental stamp of approval (agreement of sale/business registration). Also because romance is so fleeting and for the most part non-contractual (cough, i’m engaged). (please do not take this for a fully-reasoned argument, i’m just trying to throw ideas around)

    Adam(?): “elitist institutions often exclude others to their own detriment”, what kind(s) of detriment to they experience as a result of this?

    All: what about having states ‘foot the bill’ of education instead of localities,
    this would even out or eliminate education’s impact on the flight to suburbs. In Pennsylvania they’re trying to raise the state’s proportion of the education budget, and it would seem that this would exert some downward pressure on the high-end of the distribution for education budgets thereby evening them out (unless you factor in Bill’s comment that localities will “get whatever they can . . . increase their budget”

  21. Welcome, Byron!

    Adam(?): “elitist institutions often exclude others to their own detriment”, what kind(s) of detriment to they experience as a result of this?

    Basically, if a business excludes certain potential customers, the profit from those customers would be lost. In the case of residential co-ops, if a co-op were to exclude, say people over 6′ tall, there would be a smaller pool of people who could potentially buy co-ops in that community. Thus, supply and demand tells us that the value of co-ops in that community would be less, to the detriment of the excluders.

    Here’s a great article that includes examples. http://www.econlib.org/library/Enc/Discrimination.html.

    I can think of examples where exclusion may increase the value for some. Like, if a smaller co-op were to exclude children or pets in order to maintain a certain atmosphere. This seems rational for some situations. But, excluding for bigoted reasons ends up as an unnecessary cost to the excluders, as unbigoted institutions will have a distinct advantage.

    One must be careful when examining exclusion when government interferes. Often, government enforced exclusion can create cartel-like mechanisms which hurt everyone except the cartel itself. The most obvious example of this cartel action is unnecessary government licensing of professions such as hair stylists, interior decorators, or street art vendors.

    The above linked article also featured a great example as it relates to streetcars:

    The Market Resists Discrimination

    The resistance of southern streetcar companies to ordinances requiring them to segregate black passengers vividly illustrates how the market motivates businesses to avoid unfair discrimination. Before the segregation laws were enacted, most streetcar companies voluntarily segregated tobacco users, not black people. Nonsmokers of either race were free to ride where they wished, but smokers were relegated to the rear of the car or to the outside platform. The revenue gains from pleased nonsmokers apparently outweighed any losses from disgruntled smokers.

    Streetcar companies refused, however, to discriminate against black people because separate cars would have reduced their profits. They resisted even after the passage of turn-of-the-century laws requiring the segregation of black people. One railroad manager complained that racial discrimination increased costs because it required the company to “haul around a good deal of empty space that is assigned to the colored people and not available to both races.” Racial discrimination also upset some paying customers. Black customers boycotted the streetcar lines and formed competing hack (horsedrawn carriage) companies, and many white customers refused to move to the white section.

    In Augusta, Savannah, Atlanta, Mobile, and Jacksonville, streetcar companies responded by refusing to enforce segregation laws for as long as fifteen years after their passage. The Memphis Street Railway “contested bitterly,” and the Houston Electric Railway petitioned the Houston City Council for repeal. A black attorney leading a court battle against the laws provided an ironic measure of the strength of the streetcar companies’ resistance by publicly denying that his group “was in cahoots with the railroad lines in Jacksonville.” As pressure from the government grew, however, the cost of defiance began to outweigh the market penalty on profits. One by one, the streetcar companies succumbed, and the United States stumbled further into the infamous morass of racial segregation.

    From Jennifer Roback, “The Political Economy of Segregation: The Case of Segregated Streetcars.” Journal of Economic History 56, no. 4 (December 1986): 893–917.

  22. Welcome, Byron!

    Adam(?): “elitist institutions often exclude others to their own detriment”, what kind(s) of detriment to they experience as a result of this?

    Basically, if a business excludes certain potential customers, the profit from those customers would be lost. In the case of residential co-ops, if a co-op were to exclude, say people over 6′ tall, there would be a smaller pool of people who could potentially buy co-ops in that community. Thus, supply and demand tells us that the value of co-ops in that community would be less, to the detriment of the excluders.

    Here’s a great article that includes examples. http://www.econlib.org/library/Enc/Discrimination.html.

    I can think of examples where exclusion may increase the value for some. Like, if a smaller co-op were to exclude children or pets in order to maintain a certain atmosphere. This seems rational for some situations. But, excluding for bigoted reasons ends up as an unnecessary cost to the excluders, as unbigoted institutions will have a distinct advantage.

    One must be careful when examining exclusion when government interferes. Often, government enforced exclusion can create cartel-like mechanisms which hurt everyone except the cartel itself. The most obvious example of this cartel action is unnecessary government licensing of professions such as hair stylists, interior decorators, or street art vendors.

    The above linked article also featured a great example as it relates to streetcars:

    The Market Resists Discrimination

    The resistance of southern streetcar companies to ordinances requiring them to segregate black passengers vividly illustrates how the market motivates businesses to avoid unfair discrimination. Before the segregation laws were enacted, most streetcar companies voluntarily segregated tobacco users, not black people. Nonsmokers of either race were free to ride where they wished, but smokers were relegated to the rear of the car or to the outside platform. The revenue gains from pleased nonsmokers apparently outweighed any losses from disgruntled smokers.

    Streetcar companies refused, however, to discriminate against black people because separate cars would have reduced their profits. They resisted even after the passage of turn-of-the-century laws requiring the segregation of black people. One railroad manager complained that racial discrimination increased costs because it required the company to “haul around a good deal of empty space that is assigned to the colored people and not available to both races.” Racial discrimination also upset some paying customers. Black customers boycotted the streetcar lines and formed competing hack (horsedrawn carriage) companies, and many white customers refused to move to the white section.

    In Augusta, Savannah, Atlanta, Mobile, and Jacksonville, streetcar companies responded by refusing to enforce segregation laws for as long as fifteen years after their passage. The Memphis Street Railway “contested bitterly,” and the Houston Electric Railway petitioned the Houston City Council for repeal. A black attorney leading a court battle against the laws provided an ironic measure of the strength of the streetcar companies’ resistance by publicly denying that his group “was in cahoots with the railroad lines in Jacksonville.” As pressure from the government grew, however, the cost of defiance began to outweigh the market penalty on profits. One by one, the streetcar companies succumbed, and the United States stumbled further into the infamous morass of racial segregation.

    From Jennifer Roback, “The Political Economy of Segregation: The Case of Segregated Streetcars.” Journal of Economic History 56, no. 4 (December 1986): 893–917.

  23. All: what about having states ‘foot the bill’ of education instead of localities, this would even out or eliminate education’s impact on the flight to suburbs. In Pennsylvania they’re trying to raise the state’s proportion of the education budget, and it would seem that this would exert some downward pressure on the high-end of the distribution for education budgets thereby evening them out (unless you factor in Bill’s comment that localities will “get whatever they can . . . increase their budget”

    Of course, education is not my forte, but I’ll give it a shot.

    Unfortunately, I don’t think funding itself is the problem any longer. Many inner-city school districts are very well funded on a per-student basis, but still have difficulty providing quality education.

    The flight has already happened, the stigma already exists, and there isn’t much political incentive to actually improve city education. Politicians will just pump more money into failing systems to look like they are solving the problems.

    I think trying to level the playing field will only be feasible on the state-level using some sort of program like vouchers that will allow city-dwellers to choose alternatives to failed public schools. A voucher system would probably cure the education system of the sprawl-inducing aspects as well as discrimination. However, as Rothbard notes in the book this article refers to, vouchers have problems of their own…

  24. All: what about having states ‘foot the bill’ of education instead of localities, this would even out or eliminate education’s impact on the flight to suburbs. In Pennsylvania they’re trying to raise the state’s proportion of the education budget, and it would seem that this would exert some downward pressure on the high-end of the distribution for education budgets thereby evening them out (unless you factor in Bill’s comment that localities will “get whatever they can . . . increase their budget”

    Of course, education is not my forte, but I’ll give it a shot.

    Unfortunately, I don’t think funding itself is the problem any longer. Many inner-city school districts are very well funded on a per-student basis, but still have difficulty providing quality education.

    The flight has already happened, the stigma already exists, and there isn’t much political incentive to actually improve city education. Politicians will just pump more money into failing systems to look like they are solving the problems.

    I think trying to level the playing field will only be feasible on the state-level using some sort of program like vouchers that will allow city-dwellers to choose alternatives to failed public schools. A voucher system would probably cure the education system of the sprawl-inducing aspects as well as discrimination. However, as Rothbard notes in the book this article refers to, vouchers have problems of their own…

  25. Great article and great discussion. I am in no way competent enough to “jump in” and make a very solid case one way or the other…but I was home schooled and so I have I always thought the voucher system is the fairer way to fund a school. It always seemed that any performance based model for financing schools would be superior.

    Bill, I have wondered why Public Schools still exist when alternatives have been thoroughly vetted. (If there were no government schools we would surly see a drastic rise in those choices) I once thought that perhaps it was because the community has a fiscal incentive to ensure their citizens ‘grow up smart’. Ergo, smarter people would equal higher taxes. So perhaps they believe other institutions couldn’t be “trusted” with such an important, albeit economic, responsibility. But that to me sounds more like an incentive to demand better performance in our schools.

    All I hear is how underfunded they are, not how poor they perform.

    I wonder if responsibility arises somewhat from the fact that our schools are not funded completely by local cities. The Department of Education at the federal and state levels have a lot to do with how much funding individual school districts receive as well as the curriculum used. If local governments were responsible for funding 100% would we see far more efficiency? Wouldn’t we see more attention paid to the quality of the education? It seems parents could actually make a difference in their child’s education that way.

    Another idea I have contemplated… Could cities or school districts simply get vouchers? In other words, a school district receive funds from the state/fed but is not told how to spend that money, except to pay for educating their citizens. When the federal government was trying to encourage the building of highways, they offered a 92% federal match. All the cities responded by ceasing to fund streetcars, buses, etc. and instead built highways at the cost of only $.08 on the dollar, all cities except for one that is – Portland. They convinced the highway administration to allow them to use the funds for alternative kinds of transportation. It is pretty fair to say that it has paid off for them.

    In the same way, would providing school districts with funding but with the ability to fund “alternatives” but still conduct business within the parameters of federally approved projects (just like Portland had to get approval for theirs) create an atmosphere of competition without disrupting the whole tax system?

    Don’t get me wrong, I am not an advocate for government schools. My experience as a city councilman taught me the valuable lesson of eating an elephant one bite at a time. I do believe we can solve our education “crisis” in America but it will take us being willing to make small gradual changes, and for us to become willing to try new ideas. Subsequently, like in the case of Portland, we must also allow some cities to make good decisions and others poorer ones, even if most cities make the poor choice at first. Making the system more free in the long run will always improve it.

  26. Great article and great discussion. I am in no way competent enough to “jump in” and make a very solid case one way or the other…but I was home schooled and so I have I always thought the voucher system is the fairer way to fund a school. It always seemed that any performance based model for financing schools would be superior.

    Bill, I have wondered why Public Schools still exist when alternatives have been thoroughly vetted. (If there were no government schools we would surly see a drastic rise in those choices) I once thought that perhaps it was because the community has a fiscal incentive to ensure their citizens ‘grow up smart’. Ergo, smarter people would equal higher taxes. So perhaps they believe other institutions couldn’t be “trusted” with such an important, albeit economic, responsibility. But that to me sounds more like an incentive to demand better performance in our schools.

    All I hear is how underfunded they are, not how poor they perform.

    I wonder if responsibility arises somewhat from the fact that our schools are not funded completely by local cities. The Department of Education at the federal and state levels have a lot to do with how much funding individual school districts receive as well as the curriculum used. If local governments were responsible for funding 100% would we see far more efficiency? Wouldn’t we see more attention paid to the quality of the education? It seems parents could actually make a difference in their child’s education that way.

    Another idea I have contemplated… Could cities or school districts simply get vouchers? In other words, a school district receive funds from the state/fed but is not told how to spend that money, except to pay for educating their citizens. When the federal government was trying to encourage the building of highways, they offered a 92% federal match. All the cities responded by ceasing to fund streetcars, buses, etc. and instead built highways at the cost of only $.08 on the dollar, all cities except for one that is – Portland. They convinced the highway administration to allow them to use the funds for alternative kinds of transportation. It is pretty fair to say that it has paid off for them.

    In the same way, would providing school districts with funding but with the ability to fund “alternatives” but still conduct business within the parameters of federally approved projects (just like Portland had to get approval for theirs) create an atmosphere of competition without disrupting the whole tax system?

    Don’t get me wrong, I am not an advocate for government schools. My experience as a city councilman taught me the valuable lesson of eating an elephant one bite at a time. I do believe we can solve our education “crisis” in America but it will take us being willing to make small gradual changes, and for us to become willing to try new ideas. Subsequently, like in the case of Portland, we must also allow some cities to make good decisions and others poorer ones, even if most cities make the poor choice at first. Making the system more free in the long run will always improve it.

  27. I don’t want sociopaths, but it is a sin to profile a group because it has slightly more sociopaths. Inherited wealth folks, of whom I am one, have more sociopaths than the middle class, too. I think “incomism” is a more serious problem than racism nowadays.

  30. It’s a wonderful article and great discussion. I am in no way competent enough to “jump in” and make a very solid case one way or the other. But I was home schooled and so I have I always thought the voucher system is the fairer way to fund a school. It always seemed that any performance based model for financing schools would be superior..

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