You’re reading Startup Cities, a newsletter about startups that build neighborhoods and cities.

Today’s issue features an interview. These interviews focus on innovations enabled by Startup Cities as well as innovations that enable startups to build cities.

I have a few goals for these interviews:

To take innovators seriously, even if an idea sounds weird.
To ask the questions that an intelligent skeptic would have about an idea.
To go deep. No grand “TechCrunch visions”. How does the thing actually work?

Let me know what you think in comments.

Scott Beyer is founder of Market Urbanism Report, a fellow of the Independent Institute’s Catalyst project and a regular columnist to HousingOnline.com and Governing Magazine. He’s also the author of the book Market Urbanism: A Vision for Free-Market Cities.

Themes:

If market urbanism is so great, why don’t cities do it?
Contrarian ideas about Henry George, Jane Jacobs, Robert Moses
Owning vs. renting, climate change, was Detroit destroyed by capitalism?
Awards for the Best and Worst Run City in America
Free parking, curb pricing, street carts, wooden skyscrapers, and flying cars
Sprawl, crypto, America’s terrible trains, developer greed, micromobility, gentrification
Vertical integration vs. vertical disintegration, blight, and Scott’s Globe-Trotting Adventure
The Market Urbanist Zoning Code, an ethical way to bribe your neighbors
The perils of backyard goat management
Privately owned cities
Monetization strategies for cities, the diversity of business models, and billion dollars bills on the sidewalk
If Scott were CEO of a Startup City

As always, feel free to skip around!

Meet Scott

Who are you and what are you building?

SB: I'm an urban affairs journalist. I'm a policy fellow for the Independent Institute, specifically of an umbrella brand they have called Catalyst. I also write regular columns for HousingOnline.com and Governing Magazine, all specializing in urban issues.

I'm also founder of Market Urbanism Report. The goal of Market Urbanism Report is too advance the idea of free market cities and explore how classical classical liberal ideas about economics can apply to things like housing and transportation and the administration of city governments.

You took a pretty epic trip across America cities by the end of that trip, did it leave you feeling optimistic or pessimistic about American cities?

S: I'm gonna say more pessimistic. I think the nature of governance — and not necessarily even just in the US — but elsewhere I think the nature of democratic governance has all kinds of moral hazards and all kinds of public choice flaws. These are always going to lead to suboptimal results.

While I do think there are some reforms that can be applied to different US cities I'm really moving more into the direction that you are with Startup Cities where I think that it will be easier to find greenfield properties in or outside of the US that have a more nimble set of laws, a more predictable business climate. and less control under bureaucracy.

I think that’s more going to be the future of urbanization. Some of the endemic problems that I talked about in my book like are sprawl, segregation, fiscal insolvency and high home costs. I don't know if those will be solved under our current system.

If Market Urbanism is So Great, Why Don’t Cities Do It?

I loved your book. I don’t necessarily agree with every detail, but it’s brilliantly written and I can’t think of any more definitive statement on market urbanism out there.

Let’s start with an objection: If market urbanism is so great, why don't American cities do it? And why do so few urbanists and architects seem to believe it?

SB: There's this belief that just collectivizing and centralizing society and government bureaucracies is somehow going to solve problems. People seem to think that the very act of centralizing something makes it more efficient.

Market Urbanism proposes a decentralized system where millions of individuals get to make their own decisions and follow their their own self interests. And the idea is that by millions of people doing that, it actually leads to better outcomes that help more people. But people don't really accept that message. It’s sort of like a complex of thinking that bigger is better when in reality the more decentralized something is, the better it is.

If market urbanism so great, then why are developing world cities — where rules are quite laxly enforced by their central power — so chaotic?

SB: I'd say the other end of this spectrum are rules being too lax. If you're so decentralized that you can't stop drug cartels from shaking down businesses then that’s not good either.

I would argue that in some ways developing world cities provide a better urban standard relative to where they started in some respects. I think if you're a small entrepreneur who just wants to have a food cart, it would be easier for you to do that and make a living in, say, a Mexican City than it would be in an American one. If you're a rural migrant who needs to move into a city and find a place to live it can be easier to do that in a favela of Brazil than it is in San Francisco.

There's complications to all this. It's hard to really conclude that one is good and the other is bad. But given the fact that they started from a lower living standard, it can't necessarily be expected that they're going to be as wealthy as people growing up in America.

Contrarian Ideas About Cities That Will Get You Uninvited From Dinner Parties

I'm now going to make a bunch of arguments. I'll take a position and you can respond however you want.

SB: OK.

Zoning is the biggest problem facing American cities today.

SB: I agree.

Henry George: crank or genius?

SB: I would probably put him closer to genius. I'm not sure I would go either way. But, yes, I do support a land value tax as maybe not the ideal system for urban governance, but better than the existing tax structure that we have.

Property taxes should be reduced to zero and replaced with fees, for-profit services, and revenue from other sources.

SB: I agree.

Property taxes should actually be much, much higher so that people pay the fair value of all the positive externalities they enjoy as property owners in a city.

SB: See that's where I would prefer a land value tax system over a property tax system.

What you said is kind of right. Maybe it's completely right. But with a land value tax system the crucial distinction is it encourages you to improve the land whereas a property tax system discourages that because the more you've improved the land the more you'll be taxed. So it's a disincentive.

How do we correctly and ethically estimate the unimproved value of land to calculate the LVT (land value tax)?

SB: Well I actually think the market does this pretty well. That’s one push back I would do to the LVT crowd.

If you want to determine the intrinsic value of land based on the infrastructure and various goods and services that have been sunk into the area I'd say simply just listing it and seeing what the market, what the clearing prices for a buyer would be a pretty good mechanism for determining the value of land.

Robert Moses: villain or visionary?

SB: Hmm. Villain. I mean that came to my mind immediately.

But it could be more complex than that. I think that cities do benefit to some degree from having really wide roads that all that accommodate a lot of freight traffic and allow people to have goods delivered to them within one day or even shorter. So overall a villain in the sense that we probably could have done this a different way than wiping out whole neighborhoods.

If New York City's transportation system had been laid out on market principles, nobody would have been able to just wipe out neighborhoods and build huge roads. But there still would have been a demand for having access into the city and roads into the city.

So how would market actors have pursued that? Well, they might have built tunnels. They might have built elevated systems over the existing roads. But in other words, they wouldn't have, they wouldn't have had the power of Robert Moses to do what he did. And it probably would have been less hurtful to society if we had allowed market actors to do what he wanted to do.

Jane Jacobs: woman beyond her time or just a proto-NIMBY?

SB: *laughter* Okay, so the good aspects of Jane Jacobs are that I think she did bring the Hayekian critique down to city planning better than anyone. She was able to analyze the city block and look at the social organism of the block and how hundreds of people doing different things actually leads to optimal economic output and social life within a city.

Where I would probably disagree with her is that I think she also brought aesthetics and design into that conversation too much. She had her own normative opinions on how she thought cities should look.

The urbanist movement probably focuses more on that aspect of Jane Jacobs than on her economic insights. That’s unfortunate because I don't think her aesthetic blueprints are particularly good.

Own vs. Rent, Climate Change, Detroit Destroyed by Capitalism

It's almost always better to own a house than to rent in the United States and this would be true even in your ideal Market Urbanist city.

SB: I have mixed feelings about that. It depends on from whose perspective. From the perspective of the homeowner, I think it's probably better to own than to rent.

That's a complicated question. I'm gonna say it's better for the actual individual to be a homeowner. But from the city's perspective, I’m very compelled by this idea: if you were to have a startup city then from the city's perspective it might be better if they actually own the land and the real estate and leased it out.

U.S. Cities would have been better off if they had used long-term leases on the model of say a Singapore or Hong Kong rather than freehold ownership for development.

SB: Well, it's not one or the other. I'd like to see more experimentation.

It would probably be better if some cities did that so that we could see how it worked, particularly in the American system. It has brought plus and minuses to Hong Kong and Singapore.

On one hand, it seems like Singapore has had an incentive to really densely develop their lands and the cash flows they get from leasing out enable them to keep taxes really low. On the flip side, there is still some protectionism that that sneaks into the system when you have that land lease system.

The government, like in Hong Kong's case, seems to have an incentive to not develop land because it elevates the assets of certain politically-connected developers. I think it depends more on the details of how the leasing system works.

If we had 10 cities that had done this in the United States, we might get a better sense of which ones did it well and which ones didn't.

Singapore Skyline. Photo by Swapnil Bapat on Unsplash

Environmental concerns and climate change are more important than building a lot more houses for Americans.

SB: Oh, I think building housing for Americans is way more important. I think a lot of the environmental concerns are overstated.

Detroit's demise was caused by capitalism.

SB: Detroit's demise was caused by 50 different things and some of them have to do with capitalistic forces. I would argue that a lot more of them have to do with government forces and maybe what you can even call crony capitalist forces which are governmental.

It's not any one thing. It's everything. It's municipal corruption. It's overextended infrastructure, urban renewal policies that demolished functioning neighborhoods and instead built highways

Then obviously foreign competition to produce automobiles in cheaper areas of the world did it too. I think you could even say the weather being so cold had some had some impact on it.

You could talk about racial tensions. African Americans moving from the South up into the city and suddenly that caused a lot of tension between the white community and the black community. So it's like everything that has been dysfunctional about America over the last century or two could be encapsulated in Detroit in some way or another. And maybe Detroit is just the most extreme example.

Although American cities face some challenges, it's still true that the average American city is competently managed.

SC: Yeah, I don't agree.

The Best and Worst Run American City Awards

Okay, the best run city in America is…

SB: I think the best run cities in America are generally suburbs where the land imprint is smaller. The government is more local.

The public officials are more responsive to the people, there is less incentive or room even to sprawl out and the people may be wealthier and better capable of administering a corporation than the people running typical cities. So I'd say pick any number of suburbs that are wealthy and solvent and that's going to be your best run city.

The worst run city in America is…

SC: I'm gonna say New York because it has so many ingrained advantages.

Since it's dense it generates a lot of revenue. But its density exists not because of the current people managing it, but because it grew at a time when land use was more liberalized. The existing leaders of the city inherited the assets and yet they have still found a way to run up debt.

You know a large percentage of of New York City's operating budget at this point is just debt payoff. I think it's something like 11% of their of their city operating budget just goes to debt payments. That should not be the case.

New York should be like Singapore where there's efficiency to government and you don't even have to have these higher taxes. But it's so mismanaged in the way that they capture the value of their assets that I have to give the award to New York.

Parking, Curb Pricing, Street Carts, Wooden Skyscrapers, and Flying Cars

There is too little parking in most American cities.

SB: No, I think there's too much.

In fact there's a lot of space that is used for parking that could be used for more productive things. The reason there's a perception that there's too little parking is because people don't want to pay for it. They think it ought to be free. And if they were willing to pay even a little, they would find in most American cities, there is quite a lot of space available for paid parking.

It should be legal to put a food stand on wheels on any sidewalk in an American city.

SB: Agreed, with the caveat that I think the best way cities could manage its sidewalks and particularly its curbs is to have is to have market rate pricing and a leasing system. So it would not be as simple as a food art vendor just opening up on the sidewalk. They would have to rent that space at a market price from the city.

In any building taller than a typical single family house, the first floor should always be dedicated to commercial use.

SB: No, I don't think a building should be expected to do anything other than what the what the owner wants to do with it.

Commercial tenants, meaning a small business not office space, shouldn’t be located any higher than the 5th floor.

SB: No. Same answer as before.

People should be able to operate businesses out of single family homes.

SB: Yes.

Urban planning is a failed profession.

SB: *laughter* Yeah. The answer is yes.

But let me sort through why. Yes, because the idea that a city even needs to be planned, particularly by a government, is very questionable to me.

There may be examples of where it could be effective. We were talking about the land lease system earlier. If the government owns the land and wants to get the maximum value out of it and it’s functioning like a corporation then that would require some urban planning just in the way that a corporation does its planning.

But in the U.S. context where cities are government-run and a lot of the public spaces are government-run then I think urban planning is a failed profession. It’s violating the basics of public choice theory. You have a bunch of urban planners who don't necessarily have a profit motive in mind, they're just responding to a varied set of political interests that are conflicting and that don't really make sense.

When they're running a city on those bad incentives, then the city itself is going to fail, and that's why I think urban planning itself is a failed idea.

We could make it harder for fire engines to reach buildings by reducing setbacks, narrowing streets, and introducing car free roads and the risks would totally be worth it.

SB: Yeah, well, that's the whole thing about public health policy in general is that you're trying to calculate risk and reward based on a freedom versus safety dynamic.

It's really hard to draw conclusions because everybody's going to have a different version of what trade-offs they want to accept. I'd rather live in a city that has streets designed for the pedestrian than streets designed for faster access by fire trucks.

That’s just my personal opinion, based on my trade offs of having a pedestrian oriented city versus having one that fire trucks can just move around quickly. Other people might have different opinions.

Cities should fill their streets with surveillance cameras so that we can be safe.

SB: Well, in my opinion, certainly not. Again, that's a freedom for safety trade off. I'd prefer freedom over safety in that case.

So the act of being observed by a city surveillance camera impinges on your freedom?

SB: I think so, yeah.

Do you consider cities like say Taipei or Tokyo or other hyper-surveilled cities unfree spaces?

SB: My gut is to say probably yes, but I haven't I haven't been through them extensively enough to to be able to say for sure.

It's safe to make really tall buildings out of wood.

SB: It appears to be the case. I'm not a structural engineer, but the International Code Council has approved wood frame towers up to a certain height.

That tends to be a very conservative organization that proceeds carefully about what they're willing to approve. I don't know what the exact figure is at this point. But if they’re willing to approve wood frame towers up to something like 18 stories then I would yield to their expertise.

It's important that new buildings include some percentage of affordable housing by law.

SB: I don't agree.

Cities would be better today if flying cars were allowed to take over the transit market in the mid 20th century.

SB: Yes. The benefits would be better mobility, more cars taken off the road, and potentially cheaper mobility.

If the flying cars were autonomous that might could potentially be cheaper than hailing an Uber that has a physical driver. But we'll wait to see. Which one becomes autonomous first will dictate which one is cheaper probably.

Sprawl, Crypto, Trains, Developer Greed, Micromobility, Gentrification

Sprawl is a market outcome because as people get wealthier they want to live in a single family home with a nice car out front.

SB: I agree that sprawl is a market outcome.

But I think the level of sprawl that we have in the U.S. far exceeds what the market would have produced because we have engineered it to be even greater than it would have been through government subsidized roads, large lot zoning, and really mismanaged cities. I mean a lot of the reason people sprawl is because of mismanagement in the cities.

Cities should issue their own cryptocurrencies and then force residents to pay fees and taxes in that currency.

SB: Should is a strong word. I wouldn't want New York to start doing that. Cities can do that.

I've been reading about these different crypto cities. I just read about one in the Texas Hill Country and they want to start like a new micro city that has its own currency.

They can do that and it's worth trying. But I wouldn’t say “should.”

Is that Montanoso, Texas? Just curious. Or do you mean Creator Cabins?

SB: I think it's Montanoso.

Oh awesome. I'm going to interview the founder pretty soon. Anyway, next argument!

Trains just don't work in a country as big as America.

SB: Do you mean passenger or freight?

Passenger.

SB: There's some degree of truth to that, but I think they can work.

There's not anything fundamental about America that would prevent them from working. A lot of our population is clustered along the East Coast and the West Coast and increasingly in the Sun Belt.

With a clustered population trains would at least be able to serve those areas. A lot of the reason we don't have particularly good passenger trains is because a political decision (and to some degree a market decision) was made to accommodate the right of way for freight instead.

Developer greed is responsible for the housing shortage.

SB: No.

Micromobility. Photo by Jan Antonin Kolar on Unsplash

Micromobility like scooters are more dangerous for passengers and more wasteful than cars.

SB: No, it's the opposite. I think most micromobility is much safer than cars because it's going to be less deadly if people are hit by bicycles and scooters than if they're hit by two ton automobiles.

Gentrification is actually a good thing.

SB: Well, that comes down to tradeoffs again. It also comes down to which party you're talking about.

If you're talking about an existing homeowner in a gentrified area who, say, is not white and they're able to sell their home for a windfall because of the improvements in their neighborhoods then gentrification has been good for them. If you're talking about a renter it's less good potentially.

Vertical Integration, Vertical Disintegration, Blight, and Scott’s Globe-Trotting Adventure

Cities should be more vertically integrated.

SB: That's a complicated answer. Again “should” is a strong word.

In the sense that that they “should” no more be vertically integrated than they “should” issue their own currency.

But cities can do that. I would rather see it experimented with in some of these new startup, greenfield type cities that can start from scratch. All these innovations, whether whether we're talking about land leasing or crypto or vertical integration or urban planning, I'd rather just see it experimented with on a micro scale in a new city than to have like a Detroit or New York trying to attempt these things.

Cities should be more disintegrated. They should sell off assets and pursue radical outsourcing of services along the lines of Sandy Springs, Georgia.

SB: Yes, that would generally be closer to my ideal. So the whole vertical integration thing — it would be it would be a good thing to try maybe for an urban corporation that's running a small city.

But, as a general rule, I think in the current political context for American cities that disintegration would be better. Sell off assets, outsource services, and generally kind of weaken the power structures within existing cities so that more people have an opportunity to profit rather than keeping that power within existing structures.

Blight is a market outcome caused by highly subdivided land ownership.

SB: Oh yeah, definitely not. I think a lot of the blight that you see in Rust Belt cities is often governments owning a lot of land. Like for example, in Detroit and Philly, the land bank owns a lot of land and there's no doubt in my mind that a lot of the land plots stay suboptimal and underdeveloped just because they're under the ownership of the bureaucracy.

Even when you're talking about the private market, if a big corporation comes in and snaps up a bunch of land I think they will feel less urgency to improve that land than if you're just kind of a Joe Six Pack landowner who needs the cash flows and wants to improve their land.

I think that latter type of person is much more likely to improve it and maximize it than a big corporation. So the more decentralized land ownership is I think the more improved that land becomes.

The future of market urbanism is most likely outside the United States.

SB: I don't know if you know this, but I'm going on a big potentially 1 or 2 year cross world tour where I'm gonna be staying in a lot of different global cities.

That's awesome!

SB: Yeah, it is awesome. It's gonna be a lot of fun. I'm kind of in search of the answer to that question. It seems like it would be.

For one thing, the Global South is growing a lot faster and urbanizing a lot faster than than Europe and the US. Just based on my knowledge so far it seems like the urban orders in those countries are much more emergent and flexible.

You can have fast growth quickly, even if it means favelas. So I'm tempted to say that this market urbanism ideology — which at its root is calling for decentralized spontaneous-order type cities and market outcomes — would more likely occur in a place like that places like that than it would in the U.S., which is hyper-regulated.

The Market Urbanist Zoning Code: An Ethical Way to Bribe Your Neighbors

Can you explain your market urbanist zoning code?

SB: Market Urbanist zoning is designed to prevent the flaws of land use that traditional zoning was meant to do, but that traditional zoning has never done well.

At bottom Market Urbanist tries to prevent externalities. But it says that pretty much any use, any density, any design can go on a plot of land as long as it doesn't create externalities.

If it does create externalities, it either will not be allowed or the building could be adjusted in a way that the externalities are prevented. Or the building owner can engage in Coasean Bargaining with the surrounding parties to come to an agreement on what the payout will be for the externality created.

Traditional zoning has all these fixed things that you're not allowed to do: you can't build in a certain density, you can't build at a certain design, it has to be set back etcetera. Market Urbanist zoning is more fundamentally “by right” than your average zoning code. It's just trying to avoid externalities. Traditional zoning is trying to prevent externalities as well, but it doesn't do it as effectively as market urbanism zoning would.

Why should a reader believe that the median American city would be good at enforcing a code like this?

The justification for traditional Euclidean zoning is "oh there's negative externalities everywhere. And we have to zone to prevent those from ruining property values and making people's lives miserable."

Plans have these sort of dumb but relatively straightforward and consistent rules in the zoning plan. But the Market Urbanist zoning code seems to trade the dumb, heavy-handed zoning rules for discretion.

But discretion is risky. The city has to determine whether an externality is real or not and whether it's so bad that you have to prevent it. Given your criticism of city management, why should we believe that they’d make good judgments about these externalities?

SB: If I were suggesting a Market Urbanist zoning for a specific city I would tell the city to keep some “big dumb rules” around. For example a noise code. No property owner anywhere can exceed a certain decibel level. Or codes against runoff or against odors. That's a basic nuisance code. All cities have nuisance codes.

Keep that in place. That gives you a framework for determining what an externality even is. With that, then the city just needs to look at whether the building doesn't violate these nuisance codes. If it doesn’t then it's good. If it does then you proceed with bargaining and and the various manipulations that might have to happen to the building.

But there there's still a legal structure in place called the nuisance code and that's your baseline framework for determining things.

The Perils of Backyard Goat Management

How can market urbanist zoning code avoid a new version of the holdout problem?

Let's say I'm a homeowner in a residential neighborhood and I want to put a goat in my backyard. You used the example of the pig pen in your book. This is the goat pen. And this is not considered illegal — this is my right!

But it does potentially generate some externalities and I have one jerky neighbor that tells the city that he has a longstanding goat phobia and so I need to pay him $10,000 a month to compensate for psychic distress.

How do we avoid these ridiculous hold out situations when bargaining?

SB: Like I said, the the nuisance code is the baseline structure for understanding what should and should not be regulated. So a lone individual cannot just arbitrarily determine a nuisance that's not written out in the code in any way and then sue on those basis is or try to create extractions. That would not be possible.

OK, then let's consider a less absurd situation.

Goats smell bad. My neighbors say the goats smell terrible and they want $10,000 a month. The smell is almost certainly something that would be considered a genuine nuisance. But, intuitively, my price seems exorbitant.

I don't really have a basis for saying it's exorbitant. What's the basis that $10,000 is too much but paying him $100 a month is a reasonable compensation? In technical language, where are the bounds for the Coasean bargain?

What about a guy that lives seven houses away and says "I have very keen sense of smell and I really smell those goats and that guy needs to give me 100 bucks a month too!"

SB: Well I think it would depend on how the actual baseline code is written. That's really where the devil meets the details.

You can imagine other other examples of this. For example, I think shadows are good because they reduce their urban heat island effects. But if the city kind gets captured by NIMBYs who write really restrictive shadow protocols into their code then it becomes a form of NIMBY capture.

I think it begins with having a baseline nuisance code that is rooted in common sense and that is not just being captured by NIMBYs. Like common sense notions of runoff. You can call anything runoff. You can say a lawn that doesn't have enough shrubbery as causing runoff. But that would be an excessive interpretation.

What you're describing is a problem with a lot of different regulations and the potential for any regulatory code to get captured. I don't think the Market Urbanist zoning would be exempt from those problems.

I just think that if it's working from a baseline structure that has been rooted in common sense and that can't be changed or manipulated in arbitrary ways, then I think it would work better than most other regulatory codes.

One of the other hazards of discretion in policy is that discretion requires a human to make that discrete decision.

So why would Market Urbanist Zoning versus traditional Euclidean zoning not create greater incentives for me to bribe the city? One version of your Coasean bargain is, well, I don't want to pay all these annoying neighbors that want to block my goat.

I can just slip this one guy — the inspector — 100 bucks and then he's going to say the goats are very clean and don't smell bad and aren't that noisy and are well behaved and off we go.

SB: Right.

For one thing I don't think the inspector is ultimately going to be the one making the rules. There can be bribery in any case.

I was reading literature from the Startup Societies Foundation about what kind of bureaucracy could be formed in a startup city and why it would be more based on merit and in certain meritorious principles than the average city would be.

But at the end of the day that could be violated too with bribery. If you look at a corporation, there might be standards written in place that give people promotions and give them authority based on certain merits or criteria, but it can always be violated because you have humans involved.

The criticisms you're making of Market Urbanist Zoning could apply to even the most rock solid corporations that have the best charters to determine that sort of stuff. It's all subject to human failing totally.

Privately Owned Cities

Let's consider what you call the “private city model” in your book. Why would a private city pursue anything that looks like Market Urbanism?

Today, many privately built and managed communities tend to enforce a certain style. They often have a master plan and they advertise it and they may be open to a variety of uses, but only within the kind of infrastructure and patterning that they've already built.

So does that mean that there isn't actually an incentive to let freewheeling building happen in a privately managed city?

SB: Yeah. You basically just described an HOA [homeowners associations].

HOAs are sometimes more rigorous than even your average municipal zoning. I think that speaks to the difference between a private city model versus say, a market urbanist private city model.

The thing about a private city is that private cities aren't inherently spontaneous orders. They're not inherently capitalistic. Somebody could start a private city and decide to have it run on communism I'm actually totally fine with having the private city model be used for all kinds of different things.

I'm fine with HOAs even though I know that that they don't embody market urbanism. I view Market Urbanism as: if you're going to have private cities that are structured in 100 different ways depending on the situation — market urbanism is one interpretation of what a private city could be.

This model would be operated without zoning or with some sort of Market Urbanist zoning. It would try as hard as possible to be decentralized and fee-based and outsource as many services as possible. Not all private cities are Market Urbanist and not all Market Urbanism is in private cities. It's just one blueprint and interpretation of how a private city could work.

Monetization Strategies for Cities, Diversity of Business Models, and Billion Dollars Bills On the Sidewalk

There's one reading where your book is essentially a monetization plan for entrepreneurs.

You talk about all these assets that cities have that they don't monetize: curb rights. rights of way, congestion pricing, parking and all this stuff. There seems to be all this money that's laying on the sidewalk – in a sort of literal sense in this case!

If all this is true then we must conclude that there’s this amazing market opportunity out there: to build a market urbanist private city. Such a city would be privately managed but embrace the spontaneous order of Market Urbanism.

If you’re right, then these strategies would make the city perform better, be more dynamic, grow faster, attract more people and all of that. Are real estate developers and startup people just not paying attention to this insane opportunity?

SB: It seems like what I’m saying is a contradiction in some respects. I’m saying things need to be decentralized but then in different contexts I will say things like a city should do congestion pricing, curb management, and become rich doing that sort of thing. I'm kind of describing a contradiction then.

I didn't mean to suggest that it was a contradiction. More that the strategies you describe are potentially worth a lot of money.

If you as a company had curb rights over Manhattan, that's worth billions of dollars. Why aren't there more companies that say: I’m going to build a market urbanist private city or I'm gonna get curb rights from an existing city.

Why isn't capitalism eating this stuff?

SB: Well I'm saying it can be seen as a contradiction. Where it falls in line is just that: I want experimentation. That's what Market Urbanism truly is.

It’s having a lot of different cities experiment. You can have one Market Urbanist city could be a Singapore model where they do centrally manage all the land and all the assets and then they just get a bunch of money from doing that and they don't have to charge very high taxes.

But then I could see a completely different Market Urbanism model that's completely decentralized where like just a private developer comes in and starts building a street grid and charging for it. Maybe a different private developer builds a different street grid a mile away that has a more pedestrian type grid. And the other one has more of a traffic flow grid. So that would just be like radical decentralization.

Nobody is really monetizing the whole thing. It's all just patchwork. I could see one or the other. There's no one blueprint. But it's all getting to the idea that that things should be solvent. We should aim to make cities solvent and as economically dynamic as possible and as freedom-oriented as possible.

So in other words there's a diversity of potential business models. There's not like the ideal model here.

SB: Absolutely. Even if you look at the private corporate world, Berkshire Hathaway is a completely different corporate structure than Apple. They're more decentralized.

Show me 100 different companies and they're going to have 100 different structures, but you can all call it capitalism. That's kind of what I would view the city building process being under market urbanism.

You're CEO of a startup real estate company. You just raised $15 million. Nothing is built, you have no customers, you can do anything you want.

What are the first things that you do? What's your strategy, where do you build? What's your business model?

SB: Well, the interesting thing is what you just described is precisely the position I would like to be in. I don't know how soon it will happen or if it ever will happen, because what you just described as a very ambitious and difficult undertaking.

The question is quite literally what have been thinking about and where I'd like to be in say 10 or 20 years. I don't have straightforward answers at this point. It will kind of be an evolving conversation.

You could do the land leasing system where the land is owned collectively by a board of investors who want to maximize the land and so they lease based on what's going to create the most profit. Maybe they centrally plan the infrastructure and run it on market-based principles where you're charging for specific space.

On the other hand, you could do the complete opposite and this would probably be more my perspective, which is that you just start selling the land to the highest bidder.

You have a big list of developers. I'm building a list like this. Basically, there's a bunch of developers all over the country who are extremely pissed off because they try to build in their respective markets and they can't get anything approved. So if you've got a Rolodex of 1000 developers like that all around the country, I think my temptation would be to say: “I'll build a little bit of infrastructure for you, but come in and just purchase the land and you can do whatever you want with it." I'm not going to zone it in any way and I'm not gonna put any sort of regulations around you. The existing residents of the city do not have any say over what you can build: this is just your blank slate.”

I think that would be more along the lines of how I would want to run the city, rather than owning all the land itself and having to kind of maintain or manage that asset it would it would be much easier just to sell the land off and let the developer do whatever they want with it.

So disgruntled developers are the future.

SB: Yeah, yeah. I think I’ll have a much better idea at the end of my trip, after I visit a lot of these startup cities popping up. I think one idea that seems compelling is the idea of turning an entire city into a REIT [Real Estate Investment Trust].

In that case it would make more sense to do a land lease: the vertically-integrated type community. If you're selling off all the lands — well REITs can do that as well — but it would seem like a more consistent investment for somebody if they're buying shares into something that says “we own the whole city and we're trying to maximize the profit of the city and we're not going to sell it all off.”

Thanks, Scott!

Check out Scott’s book Market Urbanism.

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Startup Cities

Interview: Market Urbanism with Scott Beyer