In order for us to understand why Tiebout’s model is “extreme,” let us look at what assumptions he makes in this model. There are five basic assumptions:
- “Consumer-voters” are able to move without any restrictions. They will move to any community that has the combination of public goods and taxes that they want.
- Consumer-voters have perfect information. They know everything there is to know about the level of services in each community and about the level of taxes.
- There are a large number of communities in which they may choose to live.
- No one has to worry about where their job is located. They are assumed to be living on dividend income. (If Tiebout were writing today, he might say that they could all telecommute and work from home over the internet.
- The public goods offered in each community do not spill over to other communities in any way (whether these be good ways or bad).
I would argue that at least Assumptions 1, 2, and 4 make the model “extreme.” When I say that it is “extreme,” I mean that it is very unlikely to happen in real life. Assumptions 1 and 4 both rely on the idea that people could and would move from place to place with complete freedom. This is simply not the case. Jobs are located in physical places and moving can make it less convenient to get to those jobs. People will have friends in their neighborhood. They will become attached to things like the view from their homes. They will not be willing to simply move at the drop of a hat like Tiebout assumes they will. Assumption 2 relies on the idea that people can find out everything there is to know about a community. This is surely not possible, particularly when combined with the idea in Assumption 3. It is not easy to learn exactly how many public services are available in a town. It is hard to know about things like police and fire response times. It is hard to know exactly how many magazines the local library stocks or exactly how many topics are covered well in its non-fiction section. It is hard to know how long it will take to get a building permit and how helpful the staff will be.
Because of all these factors, Tiebout’s model is extreme. It assumes a set of conditions that cannot exist in the real world. This is why it is “extreme.”