I don't think Cohen is advocating the marketplace as an alternative model for politics so much as she's critiquing the fact that so many Americans already think of politics in marketplace terms. As she puts it, "The watchdog, public-spirited citizen consumers of the 1930s and 1940s increasingly were replaced by the self-interested government customers of the 1990s, who were encouraged to bring a consumer mentality to their relations with government, judging public services and tax assessments much like other purchased goods, by the personal benefits they derived from them."
For Cohen, the marketplace (or purchaser-consumer) model of government is bad because it leads people to worry only about themselves, assuming "that what's best for me is what's best for America," instead of worrying about "some larger public good beyond the individual's self-interest." Cohen is aware of how difficult it is to figure out what "the public good" is, but, as a good progressive, she also thinks that collective action to reform the system is essential to any healthy democracy. In a way, Cohen's label for the heroes of her book—the activists whom she calls "citizen consumers"—is a misnomer. She probably should just have called them "citizens."
Cohen may be right that there's been a dramatic shift in the way Americans think about government (though I have a hard time believing that back in the days of machine politics and strong parties people were obsessed with "the public good"). But the nature of the shift is very hard to get a handle on, because democratic politics is always a messy blend of self-interested and public-spirited behavior. (In fact, that's part of its genius.) You're never at one extreme or the other. You're only arguing about where to draw the line. So her lament (however nuanced) about the retreat from civic virtue seems overstated to me.
Having said that, I am sympathetic to Cohen's critique of localism. As you suggest, too often localism is a way for communities to cherry-pick benefits while making sure someone else has to bear the costs. And there are problems that are genuinely regional or statewide or national in scope, problems that are not amenable to purely local solutions. If you're a New Jersey citizen, moving to Clifton doesn't relieve you of responsibility for Newark. To take only the most obvious example, continuing to use property taxes to fund public schools is just bad policy (and New Jersey's courts should be applauded for those efforts they've made to put an end to it). Education is a public good, meaning that we all reap the benefits of an educated population. So we have a common interest in ensuring that spending levels for kids' education aren't radically different. Insofar as localism interferes with this, I think it's doing more harm than good.
The question of integration seems to me much more difficult. On a visceral level, I have no sympathy at all for suburbanites who wanted to keep their towns lily-white. When I was 9, my parents sold our suburban house to a black family in which the father was an engineer. Our neighbors were furious, and some of them (who had been good friends of ours) never spoke to my parents again. I understand what those neighbors were afraid of—that property values would drop, and they'd be left holding the wrong end of the stick—but frankly it was also clear that some of them were just racists and didn't want a black family—no matter how prosperous—across the street.
At the same time, the fact that people were afraid made their fear justified. Integration hurts property values because people think integration will hurt property values. If no one sold their houses in a panic after a black family moved in, property values would not plummet. (That, in fact, is what happened in my old neighborhood, which survived the arrival of the engineer's family.) But as soon as a few people do choose to sell—either because they're afraid of plummeting values and want to get out early, or because they're racists—everyone feels they have to sell, too, or else lose out. So I can see how homeowners thought the only way to stop this cycle was to keep it from starting in the first place.
In your terms, then, I guess I would say that homeowners were both vulnerable and unreasonable. I understand the rational economic motives behind hostility to integration. But I still can't help thinking of it, in the most simplistic sense, as profoundly un-American.
Of course, your point about the role of federal policy in encouraging people to keep all their financial eggs in one basket (the home)—and, therefore, making them more obsessed with property values than they might otherwise have been—is an excellent one. And for me, the real strength of Cohen's book is its ability to show the unintended consequences of federal and state policies. Given Cohen's politics, and her obvious skepticism about modern consumerism, one might have expected her to be more strident in her critique and more conspiratorial in mindset. But actually there are very few villains in this book, and no real conspiracies (except for the meat industry, which Cohen seems to think routinely hijacks consumers). I don't think Cohen makes her case that we'd all be better off if we'd become citizen consumers instead of purchaser consumers. But I'm pretty sure I won't look at suburban neighborhoods the same way again.
Really good talking with you. Let's do it again.