Tiebout and Hayek in Mexico

Last Friday afternoon we decided to go back to Xalapa from Puebla, where we had been on Thursday night, to do some work at one of the universities I have worked with over the last several years. The University is doing a series of projects in the general region (Puebla and Veracruz) on development. But the focus is not a traditional one. They are trying to develop a model which can assess readiness or commitment for additional economic activity.

The problem with many models that try to think about those issues is they tend to be either overly analytical or anecdotal. The analytical models use a lot of numbers based on traditional economic surveys mostly collected by government. The anecdotal models tend to be a bit too chatty for my tastes.

The project will use traditional data on economic activity in a region but then will devise an index of capacity or more appropriately resource utilization. It works with ten indicators – for example an assessment of social conflict in the area – that when taken as a group give an understanding of the ability of the residents to use resources to their best advantage. These can be internal benchmarks to measure changes over time but if the model is developed well they can also be used as comparative indicators among cities in a region.

As we drove to Xalapa we stopped in two towns that are similar in size and close to each other, Acatzingo and Tepeaca. One, Tepeaca, has a history of some wealth as a locus of extraction – a marble quarry. Yet the feeling you get from the two towns is very different. Tepeaca is not an especially pretty town. You get the idea, when you enter town, that it is one of those places that has not spent a lot of time creating itself.

One of the contrasts is the zocalo in each town. Tepeaca’s town square is much prettier – with more trees but the rest of the town is not as pretty. Acatzingo, on the other hand, has a lot of indicators of energy. You get a very different feeling walking around each town.

One of the risks of using macro data to think about places is what Hayek called the “knowledge of time and place.” Hayek argued that individual knowledge about local conditions could often trump macro knowledge. The distinctive feeling you get from Acatzingo is a pervasive civic pride. That should count for a lot when you think about how a city will begin to attract new activity.

The other model here is the Tiebout hypothesis – an idea from economic geographer, Charles Tiebout, who suggested that individual areas can make specific decisions about how to face development. Their market basket of amenities will differ according to local choices. That will have the effect of allowing people who are looking for places to locate of giving them different options.

The UAX project (Universidad Anáhuac de Xalapa) has the possibility to offer some new methods for understanding how communities develop. It also looks like a good model of how to involve a university in its region.