Efficiency or Rent-Seeking?
By Arnold Kling
[New Jersey Governor John] Corzine, who presided over mergers and acquisitions as chairman of Goldman Sachs, is telling hundreds of New Jersey’s smallest towns and boroughs that they are too small to exist. Multiple layers of government are financially wasteful, he says, and the littlest towns and boroughs need to merge with their bigger neighbors to achieve economies of scale.
Corzine’s incentive — more like a hammer — is a threatened cutoff of state aid. Under the governor’s proposed budget, the state’s 323 towns with populations of fewer than 10,000 people would face drastic cuts if they do not consolidate. Towns with populations between 5,000 and 10,000 people would see their aid sliced in half. Those with more than 10,000 would have their aid frozen at 2007 levels. And those such as Moonachie, with fewer than 5,000 people, would get zero state funding. Zilch.
The tone of the story is one of amusement at these quaint little jurisdictions. No attempt is made to ascertain the basis for Corzine’s claim that they are inefficient.
To me, a small jurisdiction has the potential for real democracy. See my recent post on Charter communitiies.
I have no first-hand information, but I would bet that a lot of the push for Corzine’s comes from public-sector labor unions. My guess is that they have a harder time overpowering voters in smaller jurisdictions. If my suspicions are correct, then this is not a drive for efficiency. It is rent-seeking hardball.
Pointer from Tyler Cowen.