I've been reading Elinor Ostrom's Governing the Commons about how people who produce and consume commons self-regulate. Self-regulation is just that, It avoids the two extremes of private ownership and government ownership. The people set up their own institutions to create rules, monitor and even penalize violations. Following some theory, she provides examples of historical self-regulation around the world, where the institutions exists as institutions without any written history of creation. Then she provides an extended example in modern times of the creation and maintenance of self-regulatory institutions of underwater reservoir basins in and around Los Angeles. The people made use of the legal system, both courts and legislation for approval, but none of it was handed down from on high. This was possible she writes because, despite strong federal and state control, California is a home-rule state. So what is home rule?

Let's say home rule is federalism exercised intrastate.

Federalism, Dillon Rule and Home Rule (.PDF)

...The Founding Fathers of the United States had a clear vision of how they intended government to work using a system of federalism. By outlining this vision in the Constitution and the Federalist Papers, the Founding Fathers hoped their design would allow each level of government to function properly and provide stability to the country. Since the country’s founding however, the federal, state and local governments have competed for power and federalism has waned as the governing system.

The Dillon Rule originated in...the opinion of City of Clinton v. Cedar Rapids and the Missouri River Rail Road Company, [where] Justice Dillon spelled out the terms of his municipal philosophy: “A municipal corporation possesses and can exercise the following powers and no others: First, those granted in express words (from the state); second, those necessarily implied or necessarily incident to the powers expressly granted; third, those absolutely essential to the declared objects and purposes of the corporation-not simply convenient, but indispensable; and fourth, any fair doubt as to the existence of a power is resolved by the courts against the corporation.” Dillon did not regard local governments as equal or separate from state government, but rather as political subdivisions of the state.... Ultimately under the Dillon Rule, local governments are tenants of the state.

...Despite its widespread use, the Dillon Rule has critics who argue that federal, state and local governments each have their respective jurisdictions and the responsibilities attached. Rather than view local authority as a tenant of the state, these critics argue that each level of government has a separate realm of authority. Consequently, there are areas where state power should not infringe on that of local government.

This is precisely why certain local government advocates disapprove of state preemption.... When this occurs, local government officials believe the state is abusing its power. They contend that local government can better serve the people, and yet the states continue to use their authority to bar local policy from becoming law.

To negate the Dillon Rule, local governments have pushed for states to pass Home Rule legislation. In 1871, Judge Thomas Cooley challenged the Dillon Rule by holding that local governments possess some inherent rights. Whether through constitutional or legislative changes made by the state, Home Rule charters permit local governments to conservatively pass ordinances as they see fit, provided they abide by the state laws and constitutions.