The Lake Tahoe Paradox

I can assure you, speaking as a midwestern transplant to California, that Lake Tahoe is every bit as majestic as you’ve heard. The impossible Mediterranean blue clarity and its blinding reflection, the redwooded Sierra Nevadas rimming the basin, and not least the scrappy, outdoorsy, work-a-day people who are  part of the Tahoe tapestry. Lake Tahoe’s people understand the treasure that is theirs to nurture—and for the world to experience. And we should reward them for stewarding one of the wonders of the world. 

Alas, American systems of rural community governance, contrary to popular belief, are not well structured for their tasks. They fail to reward either labor or entrepreneurship. Instead, rural America can be said to be, as Christopher Hedges put it, a sacrifice zone, where humanity and the natural world are sacrificed on the altar of the market to rapacious capitalism, to enterprises that would rather consume than conserve. Yet people endure, they still thrive, and they know that there is more that can be done. 

They’re right. They have every reason to persevere. Not out of some hollow rhetoric, but because they have tangible options. 

The challenges of economic development in rural communities aren’t limited to Lake Tahoe. I emphasize Lake Tahoe because it defies conventional wisdom that this marvelous community could be emblematic of American rural and civil decline. Lake Tahoe’s history has long been told, from the early days of celebrities and mafiosos to the present, when billionaire largesse plays a key but uncomfortable role in the community’s future. Those features may be unusual, but Lake Tahoe is shockingly typical in how it has bypassed civil society institutions in favor of big-business and big-government solutions that simply do not fit the community’s needs. To answer these challenges, I reengage with two civil society traditions, in America and Italy, that offer other  pathways. I then close with concrete examples of how Lake Tahoe and other rural communities can govern themselves when neither the market nor the state is capable.

Lake Tahoe as a Sacrifice Zone: Market and State Governance Failure

Lake Tahoe, like many rural communities, suffers from its distance from centers of decisionmaking and finance, a slim workforce, and a rugged terrain. Many communities are similar in these ways; it’s just hard to develop in rural places. And Lake Tahoe has always been harder than most. Rural community economic development (CED) shouldn’t wait for some benevolent company or well-intentioned politician to harness state or federal governments. The locals often know what’s best for the locals. 

California’s state government has had a difficult relationship with its rural communities, and, to the surprise of many, Lake Tahoe is no exception. This strained relationship comes from the calculus of state electeds; a great deal of California’s 40 million people are clustered around San Francisco, the Southern California coast, and the Fresno and Sacramento regions; Southern California alone is about 60% of the population. That means that when the legislature congregates in Sacramento, representatives with geographically specific concerns cluster together, with emergent policies tending to address the needs of the representatives’ metropolitan constituencies, all too often unaware of the appearance, much less the reality, that they are dismissive of the needs of their rural neighbors. 

The citizenry, conditioned over the decades to perceive the locus of control in the market-state binary, sees community governance not so much as a local matter, but instead as a state and national one. When basic goods and services provision breaks down, dissatisfaction is often directed at these, even though it means more time spent on grievance than solution. And as someone who also suffers from feelings of rural disaffection, I understand why the marginalized fall prey to these impulses; local community challenges may seem impossible to overcome on your own.

One enduring community governance function of rural America is the pride rural people take as the local stewards of wild and working lands, especially in California’s forest communities. Yet here, too, rural people often find themselves framed as part of a constellation of problems by metropolitan-based decisionmakers. When government officials and insurance companies are faced with increasing rural wildfire threats, investment in rural people and institutions is virtually nowhere, supplanted by nonstarter policy proposals like “planned retreat”—the removal of thousands of people from their home communities. 

Dependency on centralized, absentee governance over local affairs engenders the public-service paradox in other arenas of rural livelihoods, whereby those served have no voice in the provision of the services. Take for example the energy transition: Rural communities are ideal places for renewable energy development, yet renewable energy advocates are often perplexed at local opposition to such projects. It appears to them as backward and contrary to the local self-interest, never mind the expressed concerns of locals to such projects. My book, Governing the Wind Energy Commons, in part documents how rural communities are manipulated with outlandish promises of job creation and local tax generation by investor-owned firms (IOFs)—backed by the very officials local communities had elected. Never mind that the credibility of these major projects is rarely validated; this patriarchal CED view presumes the community’s best interest, yet it doesn’t ask their perspective or, often, their permission.

We can see echoes of that dynamic in the bailout of Pacific Gas and Electric. PG&E went bankrupt in 2019 after it was found liable for its failure to maintain safe powerlines, sparking the 2018 Camp Fire, burning down the town of Paradise and displacing over 50,000 people in the region. Proposed legislation seemed to accept the ratepayers were stuck with a too-big-to-fail behemoth, calling for the creation of a $21 billion insurance fund, with a 50/50 split provided by the utilities and a $2.50 surcharge on California ratepayers; reading between the lines makes it obvious the ratepayers are the on the hook for the full bill in one way or another.

A coalition of 114 California elected officials called for PG&E shareholders to take an overdue haircut and convert PG&E to a customer-owned co-op. Then San Jose Mayor Sam Licardo rightly noted that “We are on the hook for this. If we’re going to be on the hook, we better own it.” A better outcome was possible, yet market forces aligned with the state to maintain PG&E’s status quo; they were bailed out. The result is that a major power provider to the public continues with a guaranteed rate of return, profit-maximizing culture—favoring its shareholders but contributing to the American affordability crisis at the expense of everyday people. To make matters worse, despite receiving a lifeline from the public—and a government-protected rate of return—PG&E continues to operate in bad faith, pitting the wants of its shareholders against the needs of public safety. 

Zooming to the Tahoe region, one might think a community is better able to mobilize around their collective identity and shared interests. But, here too, external forces are at play, shifting governance over public and private life into the hands of a few.

The casual observer can see that Lake Tahoe’s governance structure is disempowering. First is the issue of property, with some 80% owned by the feds, and a much smaller share by the state; 10-15% is privately owned by the locals themselves; Sacramento and Washington, DC effectively control the land base and land use policies. The industrial base is characterized by absentee IOFs in tourism, recreation, health care, and gambling. These industries employ a workforce living on a razor’s edge of slim wages, often bouncing around, lease-to-lease, to overly inflated group rental homes, never able to set down roots. Compounding the challenges is Lake Tahoe’s attraction to global billionaires, leveraging their largesse by scooping up multiple residential lots, building walled compounds, and creating cracks in the region’s social cohesion. There are stories of local contractors walking off of job sites and accepting exit clause penalties because an out-of-town billionaire offered to buy out the contract and pay multiples on the contractor’s rate. The billionaire was “in a hurry,” and never mind how such actions rip apart the local social capital.

Come 2027, the 49,000 California residents of Lake Tahoe face the prospect of rolling blackouts. To add insult to injury, their power bill is likely to increase. And no, the power provider is not California’s notorious PG&E, but Liberty Utilities—an IOF. While Liberty has become a useful villain in the overall narrative, that fails to tell the whole story, wherein the fault lies both in the system of power provision and in how communities have been excluded from self-governing. The system isn’t broken. It was built this way.

Liberty is a heavily regulated monopoly utility. Yes, as an IOF, Liberty is beholden to its shareholders. But when electric utilities were originally built in the first half of the 1900s, the technologies, costs, and societal value of always-on electricity necessitated a Faustian bargain of sorts with the IOFs. The IOFs got a profitable monopoly over service to the territory and an allowed rate of return (ROR), and state public utilities commissions regulated them and required the utilities to serve all residents within their boundaries, with reasonably affordable consumer power rates. That is of course under normal circumstances.

Liberty and the Lake Tahoe region were never connected to the California grid, CAISO. The region’s proximity to the greater Reno region allowed for a grid interconnection with Nevada and access to Nevada’s power market. California’s government agencies—from the Governor and Legislature, to the Public Utilities Commission, California Energy Commission, and the grid operator CAISO—took for granted ready access to wholesale power supply from Nevada, and had not considered the likelihood of Nevada’s grid failing to provide for resource adequacy. While California utilities have an obligation to serve California residents, Nevada utilities have no legal obligation to serve California. 

NV Energy, the Nevada wholesale power provider to Liberty, alerted the California Public Utilities Commission in early 2026 that the current power purchase agreement (PPA) would expire as of May 2027. Liberty must now scrounge for power providers in their limited California markets and from the Nevada market. If they cannot secure a PPA, then they are left to the volatile spot market, where wholesale power supply is unpredictable and the price fluctuates wildly. The prospects for a stable PPA don’t look good. Liberty and its investors won’t really suffer, though; the losers are Liberty’s California customers. 

This is indeed how the system was built. Liberty’s state-granted ROR allows them to make a rate case to the California Public Utilities Commission (CPUC) on the billing charges to customers, based on resource adequacy, public safety, and obligations to serve, as well as how the costs are spread to various customer demographics, all the while balancing the rate of return to shareholders using a cost-of-capital framework. The simple argument is that Liberty has long-term obligations to their shareholders, financiers, and strategic priorities. Sure, the Liberty situation is unlike the other California IOFs, who are embedded in the California energy markets; Liberty has a severely constrained marketplace, so market rationality dictates that Liberty’s hands are tied. Even with the likelihood of spot-market pricing, rolling blackouts, and diminished service provision, the CPUC allows Liberty to pass the additional costs on to its customers so that its investors receive their ROR. What once looked like a useful regulation for utilities to secure low-cost, risk-mitigated capital has become a structural governance problem, a public-service paradox wherein the immediate recipients (customers) of a good (electricity) have limited voice due to the control of another agent—the absentee executives operating in the shareholders’ interests. 

In short, the provider’s incentives don’t align with the consumers’ interests. The results are easy to understand: The provider adheres to a check-the-box approach. The services provided are poorly stewarded. The provider is less than vigilant because achieving its own interests is already guaranteed through the state ROR. The options available to the consumers in Lake Tahoe are all cartoonishly out of reach:

What local authority does Lake Tahoe have? The region is governed by a fractured patchwork of jurisdictions. Two states share governance of the lake, as well as four counties feeding into 140 semi-autonomous jurisdictions with limited budgets, and seemingly little voice over power provision. It is no wonder people seek answers in the darker corners of our society, simply blaming out-groups for their complex structural challenges (here, too, California outperforms many states). Trust in the system is diminished, and people are alienated. What can one person do in such a scenario, when an entire region’s 49,000 residents feel disempowered? Big government and big business seem to have left them on the hook with a ho-hum “Welp, thems the rules. Sorry!” 

Now, multiply this by numerous communities facing their own tensions with the energy, water, infrastructure, and land demands of the hyperscalers, and you have the ingredients for some serious conflict, and an undermining of liberal democratic institutions.

However, there is a third way. Lake Tahoe can serve as a laboratory for community governance. 

Civil Society Renewal: Elinor Ostrom’s Call to Action

It’s been almost twenty years since Elinor Ostrom, in her Nobel acceptance speech, implored us to look beyond just markets and just states. Ostrom points the way in telling us to go beyond these binaries, and to explore the depth of human potential by engaging with institutional diversity. As Lake Tahoe shows us, the purely private or purely governmental provision of goods is not always superior. As she wrote in Governing the Commons: The Evolution of Institutions for Collective Action: 

Ostrom’s concerns were prescient in 2009, and they’re more relevant today than ever. Ostrom’s legacy endures as a guide to where we must venture next. 

Going beyond markets and states may be especially important in addressing society’s wicked challenges, problems where boundaries are often blurred, interdependent and interconnected, and where they involve collective action. We need concrete alternatives to the market-state binary. We need public entrepreneurs willing to put in the commitment to building civil society solutions. We need a blueprint. And we need assets, in the form of tangibly quantifiable community equity, in order to act.

The institutions of civil society’s economy are just what Ostrom was pointing to. Movements are emerging in a patchwork array of public entrepreneurship, creating new institutional arrangements, while simultaneously reengaging with a “hidden economy” of remarkably long-enduring but forgotten enterprise forms, particularly cooperatives. This hidden economy, seemingly absent in today’s discourse, is appealing thanks to its participatory democratic features and latent community capacity, waiting to be leveraged by citizen entrepreneurs. 

The wicked problem of Lake Tahoe’s Liberty electric utility is perhaps a catalyzing opportunity. With the right blueprint, we might To take what seems like an intractable challenge and leverage it, both to assess Ostrom’s “go beyond” thesis and to look for opportunities for overcoming these challenges in Lake Tahoe’s hidden economy. 

The “Hidden” Civil Economy Utilities of Lake Tahoe

I remember being in graduate school in Urbana, Illinois. We had an amazing grocery co-op, but for years it languished as a podunk grocer in the basement of a church, serving as a refuge from the excesses of industrial agriculture and an outlet to the nascent back-to-land farm movement. Grocery co-ops saw upstarts such as Whole Foods “greenwash” the movement for speculative profiteering, and Common Ground began taking market fundamentals more seriously in the 90s. By the late 2000’s, Common Ground Food Co-op’s new General Manager assembled a team, of which I was one, to engage in a member loan campaign. We raised millions in credit through crowdsourcing and traditional bank loans, moving the store from being a stale specialty grocer to a multimillion dollar a year CED growth machine providing market access to farmers and food entrepreneurs—and a voice for consumers. 

Common Ground Food Cooperative caught my attention as a third way, beyond markets and the state. Investors are used like any other business, but their control is subordinated, prioritizing the users (people) over capital (money), hence the one member, one vote board governance system. Through my exploration, I discovered the United States has a massive consumer-owned finance and credit system, that a vast majority of American food commodities run through cooperatives, that small business such as ACE Hardware own their franchise as purchasing co-ops, and indeed that 56% of the land mass is governed by energy democracy through the $42 billion electric co-op system (more on that shortly). These companies often out perform their investor-owned counterparts across traditional and social impact metrics. Civil economy institutions are indeed everywhere, we just don’t see them as plainly as the big, for-profit firms. This is foundational to my work, and to paraphrase James C. Scott, I know that we must not see like a state, or like big business, for that matter; big businesses can suffer from similar disincentives, giving rise to a similar institutional blindness. But Lake Tahoe has real choices, and so do we.

Liberty is but one regional utility. Lake Tahoe has three public utilities districts. Rounding out these publicly owned utilities (POUs), to the north is Plumas–Sierra Electric Cooperative (PSEC), and westward is Pioneer Community Energy, a community choice aggregator, that is, a public power procurement business operating in the consumer interest. 

These utilities exemplify the rich patchwork of civil economy institutions in our own backyards. PSEC represents the civil economy gold standard: a cooperative, an institution whose central design seeks resiliency and symbiosis through forming federations, which are co-ops of co-ops. The 830 local U.S. electric co-ops are organized into over 100 of these federations, with over $200 billion in banking capacity, utilities insurance, and IT and call center services, with many allowing for membership from other public utilities. The other POUs have networks of their own, from the California and

National Special Districts Associations to the American Public Power Association. What once appeared to be fragmented becomes now an opportunity for federation, and for resource pooling and access. What if Lake Tahoe’s POUs banded together and formed a unified regional federation, backed by regional consumers and their municipalities, to stand in where Liberty, by virtue of being an IOF, is unlikely to? Now Lake Tahoe has some real horsepower for community governance.

But let’s let our imaginations run wild. Earlier I noted the CED challenges specific to Lake Tahoe: its “shoulder season” economy, with much of ordinary life happening in between skiing and hiking seasons, its challenging wages, and its limited access to steady housing. Knowing what we do about the region’s POUs, could we leverage regional housing authorities, and their statewide association, to address low-income and workforce housing? Could the resorts be owned and controlled by the very staff dependent on their success for their livelihoods? And could the region’s small businesses—and other civil economy actors—connect to one of the country’s more than 1,000 purchasing co-ops to compete at scale against their corporate counterparts?

If only we would remove our blinders, a universe of options comes into focus. Not everything is the government, and not everything is capitalism; often it’s both—and something else entirely. There are potentials and prospects to use such civil economy institutions in the creative ways theorized by civil society theorists. So far they have been but little explored.

An Unexplored Pathway for Community Governance: Harnessing Civil Society Enterprise

Lake Tahoe, rural communities, and other marginalized places are not without agency, and, unlike the doomsayers, they need not accept their role as sacrifice zones. 

There is a real opportunity to engage with civil society’s economic institutions, to achieve community-level self-determination, self-governance, and public entrepreneurship. The civil economy goes beyond the feel-good and the immaterial, to concrete, to making meaning, and to finding a place in our community. The civil economy, co-ops in particular, are remarkably robust enterprises, ready to be linked and leveraged by everyday people to address their public entrepreneurial and community governance needs. What’s more, co-ops need not take sides in market–state or left–right debates. Instead, they may serve as tightly focused governing enterprises, specializing in a few subjects, whereas politicians and monopolies often seek to reach into everything. In this way, co-ops and the other family members of the civil economy have the potential to serve as polypartisan brokers and peacemakers.

The challenge before us, as scholars, as entrepreneurs, as leaders, as community members, and as families is to recommit to civil society as if we are opening our eyes to it for the first time. We must reveal this hidden economy, recognize the unique institutions, their designs, potential, and assets, and indeed govern them ourselves, democratically. We need policies that better protect consumers and workers, whether they be from our legislatures, or from the very people these institutions hope to serve. If they succeed, they can drive policy from below through the sheer force of collective action.

Renewing our commitment to civil society is what it means to go beyond markets and state.