Why does Tiebout suggest that the list of assumptions in the local government model results in an “extreme” model?
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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 proposes what he calls an “extreme model” of local governments and public goods. This model is “extreme” because it is not really meant to be realistic. In physics problems, students are often told to assume that there is no friction. This is a similar situation. Tiebout’s extreme model has assumptions that could not possibly be true in real life. They are offered simply to help us think about the points that he is trying to make.
Let us look at some of these assumptions to see why this is so. The first assumption is that “consumer-voters” will readily move to whichever community has the mix of taxes and services that they like best. This assumes that there are no costs or inconveniences that will prevent people from moving. Another assumption is that consumer-voters know exactly how many services are provided, and at what price, in every community. In other words, people must have perfect knowledge. A third assumption is that people do not have to worry about their jobs. They are all assumed to be living on dividends (Tiebout might have talked about telecommuting if he were writing today) so where they live does not matter.
All of these are very fanciful assumptions. This means that the model based on them must be extreme and somewhat detached from reality.
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