Monday, 6 April 2009

Crampton on the "Auckland Supercity" (updated)

Over at Offsetting Behaviour Eric makes the important point that one of the biggest dangers with the Auckland Supercity is the loss of competition between cities and regions. Eric writes,
Voice is nice, but the threat of exit is a more powerful check on local governments' activities. Tiebout explained it all back in 1956 with his pure theory of local expenditures. In short, competition among jurisdictions for residents forces them to run their operations more efficiently; mobility across jurisdictions also allows matching between consumer preferences and government service bundles. So, if the rates in one of the local councils are getting steep relative to the services provided by the council, moving to the other side of town can help.
When reading some of the stuff on the Auckland Supercity idea I had much the same thought as Eric, competition works just as well in this situation as in any other and we should not overlook this point. It's not clear that having a Supercity will result in the efficiencies claimed since the Supercity would be a monopoly supplier of services to its region and like all monopolies it will lack competition and thus has no incentive to be efficient. Exit is difficult if there is nowhere to go.

Update: rauparaha comments at TVHE. Not PC tells us to Just say NO!

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