Consuming Government

In his ambitious new book, William Fischel, a Professor of Economics at Dartmouth College, gives us a new political animal: “The Homevoter.” The homevoter is simply a homeowner who votes (p. ix). According to Fischel, she is the key to understanding the political economy of American local government. By implication, she is the key to understanding state and national government as well. Homeowners warrant special attention because “residents who own their own homes have a stake in the outcome of local politics that make them especially attentive to the public policies of local government” (p. ix). That is because local decisions – about how much to spend on schools or trash pick-up, for instance – directly affect home values in ways that most state or national decisions do not. The “homevoter hypothesis” is deceptively straightforward: decentralized, local governments provide a desirable balance of taxes and government services because the homevoter seeks to maintain or increase the value of her single largest asset – the family home (pp. 4-6). The homevoter explains why local governments “work better at providing local services than do larger-area governments” (p. x). This plausible sounding thesis has its roots deep in the decentralizing tradition of public finance theory. The idea that multiple local governments provide government services more efficiently than does a centralized government originated with Charles Tiebout’s seminal article, A Pure Theory of Local Expenditures. Tiebout’s solution to the problem of how to ensure the proper level of expenditures on public goods was to posit a market in public services. In his model, multiple local governments offer distinctive tax and spending packages, and “consumer-voters” choose to reside in jurisdictions that best fit their preferences, exiting those jurisdictions that do not. The notion that consumers of public goods “vote with their feet” by choosing where to live has become something of an economic maxim.