“In many economics textbooks, the presence of externalities is invoked as a justification for government intervention in the marketplace. Yet the private sector often finds its own solutions to externality problems. This is the secret of the shopping mall’s success. Because a property developer owns the entire shopping complex, its profits depend on the entire mall, not on any particular shop. By choosing the right mix of tenants and charging rents that reflect each store’s contribution to the mall’s overall revenues – including the business it brings to other stores – the developer can ‘internalize’ the externality and maximize its profits.”How scalable is all this? And what are the possible boundaries between "public" and "private"? I place these in quotes because the simple example of the mall shows that various privately owned facilities and spaces are open to the shopping public. The private planner who owns and operates the mall has every incentive to get the public spaces (including accessibilities and infrastructure) right, in ways that facilitate use of the whole site.
A new book by Grazia Brunetta and Stefano Moroni (Contractual Communities in the Self-Organising City: Freedom, Creativity, Subsidiarity) goes over much of the relevant material when it comes to private city planning. First, they manage to link the private communities phenomenon to the work of Ebenezer Howard, a connection that was new and useful to me. Second, they take a stab at the public-private division of labor question: "... it would be better if public administration guaranteed only the basic abstract rules and the main networks of infrastructures; and that contractual communities should be free to compete in delivering the detailed rules and neighborhood-level services. In other words, the advantages that Tiebout had foreseen in the competition among a number of public units delivering services would be enhanced in these units were private ..." (p. 57).
The passage refers to Charles Tiebout and voting-with-feet Tiebout-sorting, which probably works best when the competitors are private. Note that Charles Tiebout discussed "consumer-voters". But we are all consumers while not all of us are voters. Recognizing this, highlights the importance of the cited Brunetta-Moroni sentence.