Why would it be crazy? Local autonomy is a very important concept. That's why many regions want more of it. (Eg. Catalonia in Spain, Scotland in the UK, and HK in China.)

There's also the tradition of cities being "free" as in they were not feudal land.

Of course self-determination doesn't mean complete total independence. Sometimes cities/regions/states lack the ability to control their currency supply (see the problem with in the Eurozone due to the differing interests of Germany and Greece), but inclusive institutions should maximize the ability of the member to work within the institutional framework to have its problem addressed. And that's why democracy is such an institution, and in theory other institutions built on democracy have this ability too. Of course it needs many things for it to work well. (For example empathy of the other members.)