The Distance between Buchanan's 'An Economic Theory of Clubs' and Tiebout's 'A Pure Theory of Local Public Expenditures'. New Insights Based on an Unpublished Manuscript

Abstract

This article introduces Buchanan's comment on Tiebout's "A Pure Theory of Local Public Expenditures". It helps us to understand the nature of the relationship between Buchanan and Tiebout. Usually, it is claimed that Buchanan modeled Tiebout's insights, that there exists a Buchanan-Tiebout hypothesis, and that Buchanan in 1965 complemented what Tiebout had written in 1956. We show that Buchanan could not have written "An Economic Theory of Clubs" as a complement of "A Pure Theory of Local Public Expenditures". He disagreed with Tiebout's ideas on mobility because he saw mobility as a cause of inefficiencies and not a cause of homogeneity in groups. This is what we show by putting Buchanan's comment on Tiebout into historical perspective. It appears that Buchanan interpreted Tiebout (1956) from the perspective of his works on fiscal federalism from the early 1950s. We show that there is a continuity between Buchanan (1950) and his works in the early 1970s; and Buchanan's way of reading Tiebout is part of it. Hence, when he wrote "An Economic Theory of Clubs", Buchanan was convinced that Tiebout was wrong and that he was offering an alternative framework for public economics.

Keywords: Buchanan, Tiebout, Clubs, Fiscal federalism, Fiscal justice, spatial competition, free riding

JEL Classification: B31, H41, H73, H77