If the government is going to provide a public resource, decentralized administration is bad. Decentralization promotes redundancy, high coordination costs, and the inability to set up tight-knit teams of dedicated domain experts.
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According to Levy, infrastructure policy in the US is local because of our history of racial segregation. Centralizing public transport would require white and black people to share transportation; separate-but-equal is inefficient!
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Compared to other rich countries, the US has *weak* property rights. It's easy to eminent-domain people's houses. Instead, we have strong local governments that protect the houses of the politically connected. Another example of optimization pressure towards favoritism.
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The theory is, the US is less "clean" (Pareto-optimal, liberaltarian, technocratic, etc) than other rich democracies because it is more racially diverse. Racial animosity makes people willing to pay a cost to screw the other guy. Hence, graft/favoritism/discretion/corruption/etc.
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