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Article Summary

Lowery, David 2000. "A Transactions Costs Model of Metropolitan Governance: Allocation versus Redistribution in Urban America," Journal of Public Administration Research and Theory 10(1)(January):49-78.

In this article, Lowery structures a critique of the public-choice approach that has dominated the debate on metropolitan governance in the last years by organizing the arguments used by the proponents of consolidated government. In order to accomplish this he first examines the model of individual decision making implicit within the new case for consolidation and compares it to public choice. Second, he studies the consolidationists core institutional propositions on boundaries, and lastly, he evaluates the key hypotheses of the advocates for consolidation.


I. Individual decision making

Self-interest: According to Lowery, the public-choice model narrowly focuses on tax and services packages assuming that variations in preference guide Tiebout sorting within a fragmented governmental setting (52). However, preferences have been shown to be relatively homogenous. Also, location choice is guided by a search for lifestyle maintaining conditions, which leads to segregation (52).


Conflict resolution: The public-choice case for fragmentation relies on bargaining as the way to deal with conflict. The case for consolidation emphasizes the use of modest coercive capacities via majoritarian politics, but within an institutional framework that legitimizes this (p.56).


Perfect/Imperfect Information: According to Lowery, both schools have relaxed their positions on the assumption of perfect information, primarily because of empirical findings about the less than complete information that citizens of metropolitan areas have about taxes and service packages, but also because further theoretical developments have emphasized different determining factors in location choice in conditions of less than full information.


II. Assessment of the role of boundaries

Boundaries are important to both sides of the debate in three aspects: first, they are the definers of inclusion and exclusion. For proponents of consolidation they create, modify and facilitate the articulation of citizens self-interest and structure their conflict resolution. For public-choice proponents, boundaries are the reflection and consequent protection of separation.


The second function of boundaries is that they facilitate sorting. To public choice proponents, boundaries help by showing clearly distinguishable tax and service packages. To consolidationists, boundaries are founded on a wider array of criteria, including race and class.


The third function of boundaries is to define political property rights: the rules, venues for participation, who is enfranchised and who is not. In consolidated arrangements, funding for basic services is an allocative decision, while in fragmented ones it will require inter-jurisdiction subsidies, which makes the transaction redistributive. The case for fragmentation supports the notion that boundaries should be designed allocating property rights in a way that near-Pareto conditions are satisfied. Consolidation supporters argue that this is a scheme to minimize opportunities for redistribution. It should be considered that individual preference is structured, and can be shifted to achieve broader community goals, through an interactive democratic process.


Lowery concludes with a transaction cost model that pays attention to how boundaries define political property rights that then interact with the perception and articulation of interests to enhance or impede the adoption of metropolitan-wide urban policies (p. 73). It makes the distinction between allocative (in consolidated settings) and redistributive (in fragmented ones) choice. In consolidated settings, transaction costs are reduced by relying on democratic choice rather than intergovernmental arrangements. The model also addresses the interaction between the character and content of self-interest and boundaries. He offers three hypotheses in support of consolidation that provide a strong theoretical foundation for regional government structures:


       racial and income segregation will be greater in fragmented than in consolidated arrangements;

       in fragmented areas, the poor and minorities are isolated in jurisdictions with limited fiscal capacity and significant demand for expenditures, while wealthy whites go to enclaves with limited needs and a generous fiscal capacity;

       metropolitan-wide public policies designed to enhance equity in social opportunities and promote economic growth are supplied at higher rates in consolidated settings than in fragmented settings.