Wednesday, June 01, 2005

the tiebout hypothesis.

It is supposedly the 50th anniversary of what is referred to as the Tiebout hypothesis*. I was unaware of this hypothesis until today (a reflection upon tertiary education in this country?) but it is always good have learnt something that I probably should have already known about. (Even though, as usual with economics, it just seems like common sense).

The way I see it, governments are subject to a sort of competition (with each other) as suppliers of public goods. People will move elsewhere if they are not satisfied with the services they receive from their government for the taxes they pay, imposing a competitive pressure toward efficiency in the government sector. Specifically:

“Tiebout argued that individuals select the communities in which they live by carefully balancing the taxes they must pay against the level of public services they receive in return. Rather than waiting for annual elections or voting referenda to express their preferences (which are satisfied only if they are in a majority), people find more immediate solutions to restoring imbalances that may suddenly arise between taxes and services: they move. One result of the threat to move is that it imposes competition on governmental units and, theoretically, forces them to be more efficient in supplying goods and services out of taxes.” (more to be found here, link found via catallaxy).

This is probably most applicable at a local government level, although this immediately suggests to me that the restriction of migration removes most of this competitive pressure that is placed on national governments (even though we already know that restrictions on the movement of labour is uncompetitive). Further inefficiencies would result from any costs associated with relocation.

The other interesting thing about this is how this might be realised — catallaxy refers to a post about Christian fundamentalists mobilising to take over Alabama (or somewhere) when the;
“federal government forces sodomite marriages on our local communities.”

I didn’t realise that it was part of the Bush agenda to make married people sodomise each other. Whatever. I do think that it would be good if Christian fundamentalists went and hung out all together and stopped trying to impose their ideas on the rest of the world. Or maybe Tiebout thinks that we should try and move away from Christians.

* This was put to me by a learned colleague a bit prone to distraction. However, from what I see, the paper was not published until 1956. So maybe we will talk about it again next year. We were meant to be discussing the problems of (not) including behavioural components in the model which I am currently working on. Actually, you can see why we are both prone to distraction.


At 11:26 AM, Anonymous Ross said...

It makes me think of that Simpson's episode where Springfield introduced gay marriage to make some quick money.


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