WHERE we come from, fun is much more circumscribed,” friends from Frankfurt told me, wide-eyed, when I took them out to Coney Island a few years ago.

Their amazement was understandable. Among the cacophony of the shooting galleries and the bumper car and skee-ball arcades; the majestic turns of Deno’s Wonder Wheel (New York’s only combination Ferris wheel and roller coaster!) above us; the dizzying smell of every possible kind of fried food emanating from the blocks of fast-food stands, it is easy to believe that there is nothing that quite approaches Coney Island in Frankfurt, or anywhere else in the world.

My German friends also expressed their amazement that all this marvelous, beachfront property wasn’t lined with luxury housing. There is the rub. After so many years of decline and neglect, Coney Island at last has a serious developer, Joseph Sitt. Mr. Sitt, who says his company has spent $120 million buying up land in and around the area’s entertainment district, has dangled the idea of erecting a 40-story condominium there.

The City Planning Commission, to its credit, scotched this proposal. And last week The Daily News quoted a city official as saying that Mr. Sitt’s $1.5 billion plan to create some sort of enclosed, multimedia 21st-century amusement park, complete with time-sharing hotels, was “dead in the water.”

The question of just what Coney Island should be — a democratic bastion of raucous, honky-tonk entertainment, or something more genteel — has been disputed for nearly 200 years. Lately, though, it has become a struggle with a greater resonance, one that may foretell just what the future of New York as a whole will be.

Because Coney Island lies on the far reaches of the city, its destiny has turned on the availability of transportation and the changing vacation habits of Americans. Better access meant more money, but undermined efforts to keep the place exclusive. When a shell road first connected Coney to the rest of Long Island in 1829, developers dreamed of a resort that would rival Newport, R.I.

Renewed attempts to gentrify Coney Island led to the erection of Victorian curios like Coney’s Colossus, a 150-foot-high, tin-covered hotel built in the shape of an elephant, with a cigar shop in one of the legs and an observatory in the howdah. This soon became corrupted, a notorious haunt of prostitutes and adulterers. Newport it wasn’t.

“At night its eyes glowed yellow about the bathhouses and band shells and carousels,” Richard Snow, Coney’s most lyrical chronicler, wrote of the elephant. “Complex, facetious and a little sinister, it was an augury.”

It was indeed. By 1904, Steeplechase Park, Luna Park and Dreamland, the world’s first true amusement parks, opened along a 12-block stretch of Surf Avenue. These were enormous complexes. Luna alone took up 22 acres. The parks featured countless rides, animal acts, freak shows and huge re-creations of everything from recent floods and volcanic eruptions, to coal mines and tenement fires. Every inch was limned with light bulbs, so that by night the effect was mesmerizing.

“Fabulous and beyond conceiving, ineffably beautiful, is this fiery scintillation,” wrote an awed Maxim Gorky. The architecture alone was fantastic, plywood and plaster palaces unlike anything ever seen before. This was intentional, a straightforward, Industrial Age attempt to make fun a business.

“A spirit of frolic must be manufactured,” maintained Frederic Thompson, the dreamy impresario of Luna Park, “and it cannot dwell where straight lines, dignified columns and conventional forms dominate.”

Manufactured frolic: What a thoroughly American concept! But unlike other mass-manufactured goods, the parks were not intended for everyone, just the nation’s growing middle classes. Cheap as admission was, getting out to Coney on the Iron Steamboat Company or the New York and Sea Beach Railroad was still a major expenditure for much of the city’s working people. Pandering to what they expected to be an increasingly upscale audience, the parks — particularly the rather pretentious Dreamland — made great shows of trying to edify their clientele, including pious “trips” to heaven and hell.

Yet a rough, slightly malevolent undercurrent crept in. Many of the rides were dangerous contraptions that threw people together in bone-jarring collisions. Patrons of Steeplechase might be whacked with a cattle prod by a clown or given a mild electrical shock if they rested too long on a bench. Exhibits included freak shows, displays of aboriginal peoples, “cities” made up entirely of dwarves and midgets; even premature babies, struggling for life in the first incubators.

The walls of Luna Park were hung with leering wolf and pig heads. Enormous dance halls opened, accommodating thousands, and featuring two different bands a night. Coney Island’s very own Bowery sprung up amid the parks, complete with saloons, brothels and peep shows, and gangsters from Manhattan careered about the streets in their flashy new cars, taking potshots at one another.

Oddly, though, Coney’s peak popularity was not attained until the parks began to burn and crumble. Only after World War I, when the Boardwalk was built and the subway was extended out to Stillwell Avenue, did the area become a working-class destination. Summertime bungalows proliferated, but the biggest crowds — the grinning, waving mobs of bathers filling those Weegee photos — didn’t show up until after the Second World War.

And almost at the same moment Coney began its long decline, as all those people made money, moved out of the city, decided they no longer wanted to spend their vacations on a tiny patch of sand. The trip out became too long and arduous on the decaying subway system, the whole area too ridden with crime. Steeplechase, the last of the great parks, closed in 1964. The developer Fred Trump bought the land and held a party where guests were handed bricks and invited to hurl them through the fabled glass trellises that enclosed the park.

Nothing rose on the site for nearly 40 years, but now the developers are back. Families have been returning to visit the beach, or the Astroland amusement park, or the new Mets’ minor-league ballpark. At the same time, Coney has remained an urban space; diverse and edgy and even seedy in places, much more like the rest of the city was in the 1970s, rather than the ever shinier, duller New York of the 21st century.

Yet a perfect equilibrium implies stasis, and stasis is anathema to a city. Coney Island will continue to change, as it always has. The question is whether that change will be for the better.

New York has always been a wastrel with its cultural treasures. Again and again, we have let unique places vanish, victims of a passing market force or individual whim: the great jazz clubs and jitterbug palaces of Harlem, the Cotton Club and Small’s Paradise, the Savoy and the Renaissance Casino, now just a sad, empty hulk on West 138th Street; the old Latin Quarter; Ebbets Field, the Polo Grounds and the original Yankee Stadium; the downtown music clubs like Café Society, Max’s Kansas City, Danceteria and the newly departed CBGB.

Always, in the bustle and the careless optimism of this forward-looking city we have let the past slip away. Some of these changes were inevitable, and I’m not proposing that we save every corner club. But think of how much richer this city would be — economically and culturally — if any or all of these institutions still existed. Are we destined to become a city of luxury residences, stacked one upon the other?

The city cannot simply react to developers’ plans if it is to save Coney Island. The Bloomberg administration, which has recently shown a heartening interest in reviving the idea of city planning, needs to get ahead of the process and solicit ideas for what Coney should be. The dozens of small businesses that stuck it out through Coney’s worst years and did so much to preserve its honky-tonk flavor should be encouraged to stay. Strange as it may seem, Frederic Thompson had it right. We will have to manufacture frolic if we are to have it at all.