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 a 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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