Mar 29, 2012 at 8:12 am
Via Paul K, here’s an interesting piece of analysis by Konczal and Covert on how job losses among public sector workers in states and cities have disproportionately occurred in places where state legislatures turned red in 2010.
K&C make important connections between state tax cuts and these employment outcomes, linking the losses to the sluggish national job market recovery. And it is very much the case that private and public sector job growth have been trending in opposite directions of late.
But I found myself wondering if this isn’t some sort of Tiebout solution? That’s a political economy model where people locate their families in places that match their political and personal preferences. Were someone like me to end up in one of these red places, he/she might well bemoan the lack of public services, but the citizens themselves would be perfectly happy with that arrangement. Other low tax types—say, parents devoted to home schooling who didn’t want to support public education—might locate to such places, as Tiebout predicted, while those who valued public services and didn’t mind paying for them would increasingly inhabit other places.
What’s wrong with that? I mean, at one level, it sounds pretty harmonious.
Well, for one, you’d have negative spillovers where the blues would end up supporting the reds, which apparently already occurs. But I’m thinking about more global externalities. This is a recipe for sub-optimal public good provision from the perspective of society as a whole. Children who grow up in areas with too few public goods will later make smaller contributions to society than would otherwise be the case—they’d be less productive inputs relative to places that invested in their kids—and that affects all of us. Interstate commerce would suffer from the lousy infrastructure in states seeking this “solution” and that would raise prices for all of us–this post about climate change, sea level, and roads in Louisiana provides an excellent real-life example.
Obviously, such outcomes are extremely common already, both here and in developing economies. Apartheid was a horribly inefficient economic relationship, but its purpose was to serve the racist preferences of white South Africans. The risk of this Tiebout solution is that while it may meet the preferences of those who oppose taxation and public services, it ultimately hurts the rest of us.
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