I can conceptualize how it has worked in rural communities or small towns (think frontier societies) but I’ve never fully wrapped my head around how it scales in large urban environments. I would think you just get the emergence of city states.
Discussion
It doesn't scale... so you wouldn't have large urban environments. If anything good comes out of covid era is that people's realize that urban density was the biggest issue. Large cities should start losing population and that population gets spread out more evenly creating more smaller cities. Technology should eliminate the reasons why big cities were more efficient. Push more govt power to the edges... technology should also eliminate the reasons why a big central govt was more efficient too.
Large urban environments are cancer anyway.
But anyway, I have seen neighborhoods being given autonomy and they become anarchistic, and it's pretty much a city within a city.
So yeah, you could make every neighborhood become autonomous, no problem. In fact that's the natural tendency of people.