Friday, August 26, 2022

Tiebout sorting and local governance

I'm a fan of Tiebout sorting and institutional diversity in general; I would like for people moving to an area to have a practical choice of what kind of town and neighborhood they live in, and (for example) for people who want high taxes and high services to be able to live in a town that provides that while people who want low taxes and fewer municipal services to be able to choose that, instead of having towns in an area that have more between-town homogeneity and contentious fights in each town, with few people getting what they actually want.  Furthermore, citizens who want to pay high taxes to invest in long-run improvements (better roads, better schools, etc.) should be able to secure those investments from people who might move in and vote for lower taxes, milking the assets (in which the previous residents invested) as they depreciate.  To the extent that it's practical, people should get the local governance they want by choosing the town, rather than by changing it.  

There are extents, of course, to which it's not practical, or otherwise not desirable.  You don't want towns generally to feel they don't have to serve anyone who finds it comparatively easy to move, and a town that is poorly run needs to be ultimately accountable to voters.  If the preferences of citizens of a metropolitan area shift, even if you want to continue to have a variety of options, the mix of options will need to change.  While it may make sense for the people with less of a practical exit option to carry more weight in shaping how the town changes, you don't want institutional arrangements that lead to no towns in an area serving a large group of people in that area just because those people can move.  While I raise this as a warning against too little direct and immediate democratic accountability, it's also a danger of too much direct and immediate democratic accountability; Mayor Curley of Boston seems to have intentionally driven voters who didn't vote for him out of the city and into the suburbs to cement his hold on power.  The institutional arrangement should ensure that citizens who are willing and able to move between towns are well-served, while also making it hard enough for them to change the towns that they give serious consideration to voting with their feet and don't remove options for everyone.

In light of these considerations, I'm envisioning a conglomerate metropolitan area, perhaps like London, which has 32 "boroughs" with some variety of institutional arrangements and a fair amount of devolved power, but some centralized power as well.  One thought that I have is that the boroughs would have councils with some seats elected by the locals with the least practical exit options (however determined) but additional seats appointed by the central body, which would be elected by voters without regard to exit options.  If the population of a borough drops, perhaps the make-up of the local council would be less locally determined; perhaps there would also be some funding tied to population.  The hope is that the boroughs would be fairly distinct from each other, and people moving to the area for the first time or relatively able to move from one borough to another would have a variety of attractive options, while making it difficult for them to choose a different borough and try to make it more like those that already exist.

Sunday, April 3, 2022

price controls and rationing

 There's been inflation, and there have been calls for price controls, and so I've been reading a bit about price controls in history.  Pretty much every time price controls with substantial bite[1] are implemented, you get shortages and black markets; additionally, I had failed to consider how expensive enforcement costs frequently are.  Usually the government gives up on price controls fairly quickly as it becomes clear that the problems created are worse than any mitigation; exceptions seem to be in cases where there is some other form of rationing taking place, typically in war time.

There may be a semantic argument whether rationing avoids shortages or repackages them, and they certainly don't avoid the black markets or enforcement costs, but they do create a little bit more reliability; sometimes consumers are unable to buy as much as the rationing system entitles them to, but it will be less common that they will be unable to buy anything than it will if there is not rationing and similar price controls are enforced.  This made me wonder whether, if price controls did gain political popularity now, we could mitigate some of their effects by implementing a rationing program as well.  After a bit more thought, though, it occured to me that this is a bit redundant; if you impose and enforce a rationing program, that should bring down market demand and reduce prices.  If the rationing is tight enough to bring prices to where you would "control" them, the control becomes superfluous; if it is not, then it isn't enough to restore the sort of reliability being sought with the controls in place, either.

As a political matter, perhaps the price controls would not be superfluous; the price controls may be the popular part, at least to the extent that people don't realize that it will amount to stochastic rationing.  The implementation cost, even if greater than many people appreciate, may also be less than that of a rationing system, and it would certainly tend not to fall directly on individual consumers to the same degree; carrying around ration coupons would be less convenient than heading to the store and seeing what they have in stock.  It would, however, keep prices "controlled" while substantially mitigating the biggest problem simple dictated price controls present — and you wouldn't even need the price controls themselves to do it.




[1] If the price is set at $5, and the market price would be $5.10, effects will naturally be minimal; if the price is set at $5 and the market price would be $20, but only for a couple of weeks, some of the effects won't have time to develop.  I'm mostly considering settings where the price is kept well away from the free price for a substantial period of time.