Charles Tiebout (b. 1924–d. 1968) was an American economist, best known for his model of consumer-voters choosing where to live based on the combination of taxes and services in candidate jurisdictions. The model was proposed as a counterexample to the free rider problem in public goods—that is, that consumers will not voluntarily reveal their preferences for non-excludable goods. For goods that are local in nature—Tiebout used the example of a beach of fixed length—consumer-voters have no choice but to reveal their preferences by “voting with their feet,” living in the jurisdiction providing the good and paying the tax price for doing so. The original model relied upon some (extreme) simplifying assumptions, including perfect information, costless relocation (including no impact on household income), and a large number of communities to choose among. The subsequent literature has explored efficiency, equity, and empirical validity. A significant policy question is whether to encourage the large number of jurisdictions that the model requires—what some might disapprovingly call metropolitan fragmentation. Considerable effort has gone into developing a version of the model that corresponds with the reality of American local government organization, in which goods are funded via property taxes and zoning is used to limit access. The model remains a standard in local public finance.
Biography and Major Works
Tiebout’s dissertation was in regional input-output analysis, completed at the University of Minnesota. His seminal work in local public finance was titled “A Pure Theory of Local Expenditures” (1956), a play on Samuelson’s “The Pure Theory of Public Expenditures” (1954). At UCLA, he worked with political scientist Vincent Ostrom on a project related to local government formation, leading to Ostrom, et al. 1961. After that he left for the University of Washington, where he was founding co-director of the interdisciplinary Center for Urban and Regional Studies. Tiebout 1956 was little noticed, and his work at the center returned to the regional economics of his dissertation. He died at the young age of forty-three, a year before Oates 1969 would focus attention on the paper he would become famous for. Some of Tiebout’s biography is recovered in Fischel 2001 and Fischel 2006, and significantly elaborated in Singleton 2015. Tiebout’s name is properly pronounced TEE-boe, though most economists pronounce it tee-BOO. Fischel surmises that this is due to Tiebout’s early death and the lag time between Tiebout 1956 and Oates 1969.
Fischel, William A. “Municipal Corporations, Homeowners and the Benefit View of the Property Tax.” In Property Taxation and Local Government Finance: Essays in Honor of C. Lowell Harriss. Edited by Wallace E. Oates, 34–77. Cambridge, MA: Lincoln Institute of Land Policy, 2001.
Summary of Fischel’s The Homevoter Hypothesis for a conference on property taxation. Marks the rediscovery of Tiebout’s biography by public finance economists.
Fischel, William A. “Footloose at Fifty: An Introduction to the Anniversary Tiebout Essays.” In The Tiebout Model at Fifty: Essays in Public Economics in Honor of Wallace Oates. Edited by William A. Fischel, 1–20. Cambridge, MA: Lincoln Institute of Land Policy, 2006.
Summary of fifty years of research into the Tiebout model and overview of edited volume. Further biographical detail on Tiebout.
Oates, Wallace E. “The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis.” Journal of Political Economy 77.6 (1969): 957–971.
Watershed paper that brought Tiebout 1956 to the forefront of the public finance literature and gave birth to the capitalization literature.
Ostrom, Vincent, Charles M. Tiebout, and Robert Warren. “The Organization of Government in Metropolitan Areas: A Theoretical Inquiry.” American Political Science Review 55.4 (1961): 831–842.
Written at a time when theory heavily favored metropolitan governance; argues that “polycentric” governance allows self-determination and can be more efficient than centralization. Different public goods require different scales of organization, and desired results can be met by contracts with private providers or other governments.
Samuelson, Paul A. “The Pure Theory of Public Expenditure.” Review of Economics and Statistics 36.4 (1954): 387–389.
Seminal paper in public finance; establishes that the free rider problem will lead to the underprovision of public goods, and that there is no voluntary solution to the problem. Tiebout 1956 is a reaction to this work.
Singleton, John D. “Sorting Charles Tiebout.” History of Political Economy 47, Suppl._1 (2015): 199–226.
Detailed intellectual biography of Tiebout, including his academic perambulations and the collaborations they led to.
Tiebout, Charles M. “A Pure Theory of Local Expenditures.” Journal of Political Economy 64.5 (1956): 416–424.
One of the most highly cited papers in the public finance literature. Establishes a model in which local public goods can be provided via a market in local governments, with the usual efficiency results of markets.
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