Paul Walker and Eric Crampton are both concerned about the proposal to merge Auckland’s city councils to create a ‘supercity’. They fear that the loss of competition for residents among councils will decrease the quality of service and increase the rates. My initial thoughts were:
- How much of a problem is this? In any given city over 90% of residents report having the nation’s best quality of life. Given that, is there really much that a council can do to entice people away from where they are?
- What’s the marginal impact of rates on people’s decision about where to live? I imagine that it is one of the least important factors in deciding what area of a city to live in.
- Can the difference in rates be large enough to overcome the transaction cost of moving house?
Upon reading some of the links they provided I’m more persuaded that there could be an issue. Particularly among poor people who have few assets, there is an incentive to move to a place with lower rates and better ameneties. It’s a shame, as Eric points out, that the Royal Commission didnt’ consider the issue. He provides some interesting examples of lessened competition decreasing service delivery, but it would be nice to have some systematic analysis of how well that applies to the case of Auckland. I doubt that quantifying it and weighing it against potential benefits is a trivial matter that can be sorted out in a blog post!