Tiebout models of community structure

The provocative work of the late Charles Tiebout has inspired a lot of rethinking on the process of public goods provision in the urban context. The thrust of his argument [21] was that once spatial choice is introduced in the form of alternative communities, optimal public goods provision could be approached through households bidding for sites in competing communities. Community governments would attempt to provide the goods and services demanded by their constituents, and the amount and "mix" of these goods would vary among communities, reflecting the variety of preferences and incomes present in the total population. According to Tiebout, "The greater the number of communities and the greater the variety among them, the closer the consumer will come to fully realizing his preference position." (p. 418) The strength of Tiebout's view lies in its intuitive proximity to reality and not in its formal logic. His lucid depiction of actors in the suburban setting should not be criticized for its lack of rigor, nor for its less than complete discussion of how disequilibrium location patterns adjust. His use of a model was simply a forceful way to demonstrate the possibility of efficient public goods provision when consumers are mobile and local governments are adaptive. The model is one of suggestion rather than deduction. It leaves a clear impression of reasons why we should expect "near efficiency" and observable regularities within communities despite its lack of formal clarity. Having said this, it is still useful to examine the logic of Tiebout's paradigm and to identify the problems encountered in formalizing his ideas. This paper surveys these problems, and elaborates on two simple models that embody much of the Tiebout view. Our point of departure is a restatement of the essentials of the Tiebout model.