The Theory of Local Public Goods

Abstract

The purpose of this paper is to develop the broad outlines of the general theory of local public goods. The theory of local public goods is differentiated from the conventional theory of public goods in one important respect: in the latter, the population of each community is assumed fixed, while the theory of local public goods is concerned with the determination of the allocation of the population among the different communities.

I am indebted to P. Mieszkowski, who, when we jointly taught the Public Finance Course at Yale in 1970–1, fust stirred my interest in the topics discussed in this paper. In a joint paper with Flatters and Henderson (1974), he has done much to clarify the issues originally discussed by Buchanan and Goetz (1972), Several of the results of sections II–III, although independently arrived at, are similar to the results obtained by Flatters, Henderson and Mieszkowski. I have also benefited greatly from discussions with Frank Westhoff, whose doctoral dissertation develops the model that is discussed briefly in section IV. An earlier version of this paper was presented at the IEA Conference at Turin, and, in revising the paper, I have been greatly assisted by the discussion of it at the conference, and, especially, by the perspicacious comments of my discussant, J. Milleron. The exposition of section II.1, in particular, has benefited from his detailed comments. Research support from the Ford Foundatioh and the National Science Foundation is gratefully acknowledged.