Tiebout models deal with local public goods and show that when consumers can 'vote with their feet' then there is a market type solution. What about transfers between Tiebout Economies? Will they create a perverse 'Transfer paradox' such that the donor is benefited and the recipient impoverished? Graciella Chichilnisky did path-breaking work on the 'Transfer paradox' but was kept out of mainstream publication for quite some time as she recorded in a rueful essay from the early Nineties. Her important work on the concept of 'limited arbitrage' as being the other side of the coin of restricted social diversity- i.e. there shouldn't be too little or too much social diversity so gains from trade exist- seems to have a natural application to Tiebout models with a Transfer paradox. The question is whether this fits something like Kyoto Carbon trading- i.e. does the apparent altruism of the developed countries have the perverse effect of impoverishing the objects of its charity such that they become, let us say, Tiebout producers of 'bad' local public 'goods'- and restricting social diversity is, in a sense, a local public good- like crazy Religious or stupid Economic ideas while the developed countries have Science based Environmentalism which, if nothing else, can improve local conditions and inculcate decent human values as opposed to the desire to chop cartoonists heads off?
Chichilnisky has written about the greater volatility in knowledge markets. If Third World 'knowledge-as-local-Public-good' production follows a Tiebout model and if there are Transfer paradoxes and, further, if such resource or other shocks have a ratchet effect, then we could predict that Third Worldism will just get stupider and stupider, tripping over its own preference falsification availability cascades any time anything sensible is suggested, until it ends up crucifying, our man of sorrows, Dr. Manmohan Singh- the International Trade expert whom our dirigiste Indianism has chosen as its not savior but scapegoat.
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