How does Tiebout suggest that, unlike a federal or central government, local governments can achieve an optimal solution in which consumer preferences match the public goods provided?

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I assume that you are asking about Charles Tiebout’s classic article from 1956 that is entitled “A Pure Theory of Local Expenditures.”   You have asked other questions about that article and the content of this question makes sense in that context.  If you are asking about this article, the answer is that federal or central governments cannot easily compete with one another for “consumer-voters” whereas local governments can.

In this article, Tiebout argues that it is possible for consumer preferences to match levels of services through process of supply and demand.  In this way, public goods (services) can be matched with people’s preferences just as private goods can be.  In order for this to happen, there has to be competition among governments to attract consumer-voters.

If there is an urban area with a lot of different small suburbs, people can choose among the suburbs rather easily.  Some can choose one suburb because it offers many services while others choose suburbs that offer lower taxes.  This is possible because it is easy for people to move from one community to the other.

This is not really possible when we are talking about the level of services offered by a central government.  It is much harder, for example, for people to move from the US to Canada because they want a different level of services.  Therefore, while there can be real competition between small towns, there cannot be real competition between countries.  Because of this lack of competition, it is not possible for central governments to match levels of services with consumer wants through a supply and demand mechanism.  By contrast, it is more possible for local governments to do so when there are many small communities with different levels of services. 

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