I have benefited from helpful comments from Richard Bird, Michael Cragg, Aloysius Siow, and workshop participants and the University of Toronto; and from research assistance by Yaw Asamoah-Duodo. The errors are my own.

Introduction

Big-city governments are a fact of American life. Over 7.3 million people live in the 309 square miles in which New York City's government provides municipal services, and in 1989 74% of American employment in the fur good industry, 35% of the American employment of securities brokers and dealers, and 22% of the American employment of entertainers took place within these boundaries [Vilain, 1991]. Even the 25th largest city in 1992, Austin, TX, had 492,000 people in an area of 218 square miles. A polit ical history of twentieth century America without, for instance, John Purroy Mitchell, Fiorello LaGuardia, Frank Hague, Anton Cermak, the Richard Daleys and Carl Stokes would be seriously incomplete.

Yet economics lacks a theory of what job big-city governments perform and so it has no way of evaluating whether they are doing that job well or poorly. According to the prevailing theory of local public finance - that first enunciated by Tiebout [1956 ] - big-city governments are either anomalies or mistakes. Bradford and Oates [1975, pg. 55], for instance, compares the presence of an "incurable central city" to the presence of an incurable monopoly.

Tiebout's theory, roughly speaking, combines a normative conclusion that metropolitan areas ought to have a large variety in the types of local pubic goods being produced with a positive insistence that what ought to be is pretty close to what actually is. Large jurisdictions seem to preclude or at least reduce this variety, and so writers in the Tiebout tradition cannot explain why they exist.

What's wrong here? Jurisdictions and services are not the same things. Tiebout's is a theory about local public goods, not about local governments. Just as General Motors produces both Geos and Cadillacs and supermarkets sell both yogurt and hamburger, no physical constraint keeps a single government from providing different local public goods to different areas within this jurisdiction. I do not believe that New York City provides the same level of protection against tuberculosis in Little Neck as it does in Central Harlem, and I cannot even think of what it would mean to provide "the same level" of leaf collection services in both Chinatown and Tottenville. A fortiori, I cannot accept a physical constraint that enforces a uniformity I can nei ther observe nor imagine.