Tiebout Was Wrong, But Why?
Yesterday, I delivered a plenary address to the Public Choice Society in Nashville on “Tiebout Was Wrong, but Why?” Here are the full slides.
Long story short: The still-popular Tiebout model predicts that – due to competition – local government policies will be highly economically efficient. Yet if you actually look at the world, you will see that local governments perform their core functions – education, housing regulation, and law enforcement – very poorly. Furthermore, the Tiebout model strongly predicts the virtual non-existence of local redistribution, but free public education is a massive counter-example.
To grasp what’s really going on, you must first accept that non-profit competition is far inferior to for-profit competition. The “competition” between local governments is like an academic test that doesn’t count for your grade. It’s better than nothing, but anemic compared to a standard exam where students’ futures are on the line. For details, check out the talk.
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idk. I mean, losing an election means losing your job. Sure, some of a CEO's compensation is in the form of stock options, but some of it is straight-up salary.
I think maybe we do see a lot of competition amongst cities to give residents hwhat they want. But here comes the black pill: Residents are dumm and they want dumb things. As consumers, they also want dumm things. This is bad news for libertarians. Especially dogmatic "the market will provide!" libertarians.
Sure, the market is more likely to provide things that statistical minorities want. You don't need 51% of the people in your town to like your favourite chocolate bar, in order to get your local convenience store to sell it. But you do need "enough" people to buy it.
And maybe not "enough" people want cities with no deficit spending, low taxes, no zoning regulations and variable-rate road tolling. Dr Caplan wants it. So do I. But that's not enough. (And I can't live in the US anyway and even if I did, I wouldn't wanna live in the Commonwealth of Virginia. But I'd visit!)
I think even if we had a free-market of for-profit municipalities, we would get municipalities that are very similar to the ones we already have. Unfortunately. Cause that's hwhat the market wants.
It costs money to move and it costs your friendships to move.