Shanske on Tiebout, Politics, and Local Public Goods

Darien Shanske has posted an article to SSRN called, "The Tiebout Model and the Role of Political Choice in the Production of Local Public Goods." Here is the abstract:
This paper addresses the central normative justification for the current local government landscape. This justification is economic and consists of the argument that competition among a multitude of local government entities is efficient. This vision of jurisdictional competition is generally known as the Tiebout model of local government. Much of the debate about the Tiebout model has centered on whether it correctly describes reality (e.g., are there enough jurisdictions for meaningful competition?) and on whether it would be desirable if it did do so (e.g., jurisdictional competition by necessity creates "losing" jurisdictions - is this an acceptable way to organize our local politics?). As an initial matter, I observe in this paper that constitutional law at the federal level has played a central role in enabling Tiebout-type jurisdictional competition. The Supreme Court's most recent contribution to the Tiebout model was its decision on intra-district desegregation plans last term in Parents Involved. This decision makes it much more difficult for local governments to directly mitigate long-terms patterns of residential segregation, but for the same reason helps the Tiebout model by allowing individuals to buy into the type of neighborhood they want without fear of later meddling by local governments. Justice Kennedy's controlling concurrence in Parents Involved claims that school districts may still try to combat residential segregation through "strategic site selection of new schools." He does not explain how school districts are to do this. This paper suggests some mechanisms that might be used. This paper makes a series of contributions to the discussion of the Tiebout model. First I argue that, despite arguments by proponents of the Tiebout model to the contrary, a full-blown Tiebout model does not release governments at various levels, nor citizens, from making political choices about a just (versus merely efficient) distribution of resources. This is primarily because the legal background rules set the terms of the competition and can select for different equally efficient sets of jurisdictions (at least from a pragmatic perspective). From this result it follows that these legal background rules ought to be interrogated as making political choices. A particular type of rule is described in this paper as a "bundling rule." A bundling rule operates, for instance, by making a certain method of financing schools readily available only to new subdivisions, thus bundling new schools with new development. By opting to make such a method available, state governments are in effect choosing to encourage certain (rather dubious) patterns of development. There has not been adequate discussion of the power of bundling rules to shape the governmental and development landscape. Considering the impact of these state and local rules, diffuse and obscure as they may be, is especially important because, among other reasons, so much federal law as regards these issues has not only been settled, but settled in a way that embraces the Tiebout model.

An earlier version of this article was the basis for Darien's job talk. Here is the link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1243818