We present the results of a particle simulation studying the local flow of a viscous, self-gravitating disk in Keplerian motion. Our method is based on Wisdom and Tremain's (1988) local simulation of planetary rings, but includes self-gravity. We implement a new numerical prescription of interparticle viscosity that formally reduces to Navier-Stokes stresses. Inclusion of hydrodynamic Navier-Stokes-type viscous friction is essential for the system to develop a secular instability for high values of the stability parameter (Q > 1). In the framework of a linear perturbation theory wavelength and growth time of the most unstable mode are derived for a ''softened'' potential that is used in the simulation. The objectives of this paper are tw...