Public Choice

, 149:187 | Cite as

Why local governments do not maximize profits: on the value added by the representative institutions of town and city governance

Article

Abstract

This paper provides an explanation for the lack of profit-maximizing local governments and for the historically widespread use of more or less representative forms of town and city governance. The analytical part of the paper suggests that profit-maximizing governments suffer from a “proprietor’s dilemma,” which can be reduced by including a representative council with veto power over new taxes. Limited but costly mobility plays a role in the analysis, as does the fact that residents often make investments in a town that are difficult to relocate once made.

Keywords

State and local governance King and council model Tax constitution Productive theories of the state Constitutional political economy Colonial American history 

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Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.George Mason UniversityFairfaxUSA
  2. 2.West Virginia UniversityMorgatownUSA

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