Choices and Responsiveness
Local governments permit fiscal diversity and choices about what government
services will be provided to the citizenry. Indeed, their most fundamental
strength is to permit people living in various localities within a country to
receive somewhat different government services while continuing to be
citizens of the larger nation. Localities that have a degree of fiscal autonomy
can adjust both what levels and types of government services are provided
and how they are financed, as they respond to the preferences of a
heterogeneous population. Residents of different localities are unlikely to
reach the same conclusions about what services government should provide,
so a degree of fiscal autonomy means greater diversity both in what services
are provided and in how they will be financed.That diversity provides something
like the product and price selection afforded by a private market, in
which many possible suppliers offer their products to the buying public.
Local fiscal administration provides the structure through which these governments
can respond to the service preferences of their residents in a fashion