FLORENCE, ITALY -- For me, the ambiguity of this beautiful and wicked old city was unforgettably expressed by Orson Welles, playing drug-smuggler Harry Lime in Graham Greene's ''The Third Man.''

When an old friend confronts Lime with his antisocial behavior, Lime offers a ready excuse -- Florence. Five centuries of treachery, war and fratricide, he says, gave the world the Renaissance glories of Dante, Michelangelo and Leonardo, while 500 years of peace and brotherly love in Switzerland produced . . . the cuckoo clock.

Lime's excuse is, to be sure, cynical and mischievous, worthy of the worst of the Borgias. But whatever your excuse for being in Florence (mine was to witness a conference on ''development'' between Italian local officials and their U.S. counterparts), you can't escape the baffling alchemy in which beauty has been catalyzed by vice.

The Italians are in their usual lavishly pro-American mood. Any Tuscan city that lacks an American twin city is seeking one. Genoa is looking to the 1992 Columbus celebration and has already struck up a heavy romance with Baltimore. Genoa is eager to become a tourist stop and even thinking of building itself a waterfront aquarium.

But one soon learns that by U.S. standards Italian local government, once nearly all, is now nearly nothing -- so far as real power is concerned. Italian cities, regions and provinces have little or no taxing authority and essentially administer the earmarked budgets sent to them from Rome.

There came a symbolic moment in the conference (sponsored by the Region of Tuscany, the U.S. League of Cities and The Bridge Association). The mayor of a nearby hill town arose to ask how U.S. cities get their hands on land for public purposes. Merle Kearns, a county commissioner from Springfield, Ohio, explained the process of condemnation. The looks of awe and envy on Italian faces would not have been exaggerated if she had been talking about how to split an atom or send a rocket to the moon.

One has the back-to-the-future sense that local Italian authorities are only now getting into the issues (air and water pollution abatement) that Americans debated and settled, in principle at least, 15 or 20 years ago. In Florence, acid rain is a mortal threat to the statuary. People may be expendable, but when Michelangelo is at risk, that is a genuine municipal emergency.

Yet the matter can't be left there. Americans may have developed better tools for local government. But why then are so many American cities dead, joyless places, frantic and noisy by day and deserted by night -- places from which the mobile flee at sunset?

Florence certainly is very different. It may be a wicked old place, a bit down at the heels. And government may be largely a ceremonial ballet by powerless figureheads.

Yet I have never seen a city -- not even Paris at its most self-satisfied -- whose residents seem to be so happy with who they are and where they are. Long after nightfall, even on a weekday night, the labyrinthine old streets (where one almost expects to meet Dante's shade) echo with darting, snorting motorini (motor bikes). People in their hundreds course up and down, walking and talking, always talking.

Italian local officials may profess to envy the powers of a commissioner of Dade County, Fla., all they wish. But in Florence, the real danger is that somebody will get the itch to fix what isn't really broken. Brunelleschi's great cathedral dome, the Duomo, one of the architectural wonders of the world for six centuries, still soars serenely in the night. And one is told -- this cannot be verified -- that the sewer system is mostly Roman, and still working. No wonder a sense of urgency is missing.

With all the kamikaze driving down streets never meant for cars, with all the fine miasma of dust and gas fumes, the city of the Medici seems to be living a robust life, far from the critical list of ailing or dying cities. When the last internal combustion engine is lost in the rubble of the last instant-food joint, Florentines may still be living contentedly on the trust of their treasures