COMPETITION BETWEEN LOCAL GOVERNMENTS AS A DISCOVERY PROCEDURE

Economists usually advocate competition between autonomous local governments on the ground that by moving from one jurisdiction to another the consumers of public goods are perhaps able to reveal their tastes better than in elections. In the view of most economists, the competitive process succeeds in revealing tastes only when it produces foreseeable outcomes that are known to be efficient on the basis of the currently available information. This paper explains that competition can also produce hitherto unknown and often quite surprising discoveries which can be called forth only by permitting competition always and irrespective of its expected particular benefits.