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How does Tiebout define public goods?

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sta112 | Teacher | (Level 1) Salutatorian

Posted September 10, 2013 at 12:10 AM via web

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How does Tiebout define public goods?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted September 10, 2013 at 12:31 AM (Answer #1)

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Charles Tiebout does not define public goods in any way that is particularly novel.  However, he adds wrinkles to the theory of public goods that are novel and important.  These wrinkles have to do with what he calls local public goods and with the idea that market solutions of a sort can determine how many of these public goods should be provided and at what price.

Public goods have two characteristics.  First, when one person uses them, it does not make it any less possible for others to do so.  Second, if a person does not pay for the good, they cannot be excluded from using that good.  Police protection is a typical public good.  If the police protect me, it does not reduce their ability to protect my neighbor.  If the police protect the town in general from criminals, they cannot exclude some people from that protection.

Economic theory had said that only political solutions could be found that would determine how many public goods a government should provide and at what price.  Tiebout argued that this was not so.  He said that many public goods are local public goods.  These are goods that can be consumed only within a given locality.  In other words, police protection in Town A cannot be enjoyed unless you live in that town.  The same goes for the schools and parks in that town. 

Tiebout said that the optimal amount of local public goods can be determined by a market process.  All towns in an area provide different sets of public goods at different tax rates.  People essentially choose to “buy” a given set of public goods by moving to the town that offers them.  In that way, there is essentially a market process for deciding which goods to offer at what price.

I assume that you are asking about Tiebout’s classic article from 1956 that is entitled “A Pure Theory of Local Expenditures.”  In this article, Tiebout talks about public goods.

In this article, Tiebout does not really propose an alternative definition of public goods.  Instead, he proposes that public goods can be allocated based on supply and demand just as private goods can be.  He says that different local governments can offer different combinations of tax levels and levels of public goods.  Consumers can show their preferences by moving to localities with the “right” mixes.

At the beginning of the article, Tiebout rehearses the classic definition of public goods.  These are goods which all people enjoy in common.  In other words, these are goods (like clean air or national defense) that everyone can enjoy simultaneously.  When I “consume” clean air, it does not lessen your ability to have clean air as well.  In this sense, clean air is a public good.

Tiebout does briefly offer a second definition, but says that it does not really improve upon the first.  He defines public goods as things that should be produced, but for which there is no good way to charge consumers.  However, he does not appear to think that this definition is really superior to the other one.

What Tiebout does say is that it is possible for “consumer-voters” to let government know which amounts of public goods they want.  This is not really a change in the definition of a public good.  Instead, it is a change in the theory of how we can know how many public goods should be produced and at what price (tax) level.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted September 24, 2013 at 7:12 PM (Answer #1)

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I assume that you are asking about Tiebout’s classic article from 1956 that is entitled “A Pure Theory of Local Expenditures.”  In this article, Tiebout talks about public goods.

In this article, Tiebout does not really propose an alternative definition of public goods.  Instead, he proposes that public goods can be allocated based on supply and demand just as private goods can be.  He says that different local governments can offer different combinations of tax levels and levels of public goods.  Consumers can show their preferences by moving to localities with the “right” mixes.

At the beginning of the article, Tiebout rehearses the classic definition of public goods.  These are goods which all people enjoy in common.  In other words, these are goods (like clean air or national defense) that everyone can enjoy simultaneously.  When I “consume” clean air, it does not lessen your ability to have clean air as well.  In this sense, clean air is a public good.

Tiebout does briefly offer a second definition, but says that it does not really improve upon the first.  He defines public goods as things that should be produced, but for which there is no good way to charge consumers.  However, he does not appear to think that this definition is really superior to the other one.

What Tiebout does say is that it is possible for “consumer-voters” to let government know which amounts of public goods they want.  This is not really a change in the definition of a public good.  Instead, it is a change in the theory of how we can know how many public goods should be produced and at what price (tax) level.

Sources:

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