Fried chicken (woot!) And comparative advantage (boo!)

I was a little worried that the fried chicken I got the other night wouldn't
sit right with me, but I couldn't taste any pig flu in it, and my
stomach hasn't been playing any Ethel Waters tunes, so I think I'm good
to go.

Man, though, I could really go for a burrito.

When the heck are the Bolivians going to catch on to the fact that they
should completely abandon any pretenses at a local culinary tradition
and just start eating Mexican food and waffles all the time?

I've been thinking about my post the other day on comparative advantage,
and I'm not sure that what I was saying is right (big surprise, I know).

Basically, what I said is that a desire for local competitiveness and
tax revenue should cause local governments to promote industries in
which the municipality enjoys a comparative advantage. Consequently,
local government intervention in local economies will tend towards
efficiency, as long as there are no serious barriers to competition with
firms in other municipalities.

I think that the assumptions I was making were that (a) municipalities
are primarily seekers of income, and (b) income primarily comes from
local sources. Both of these assumptions are wrong. Municipalities do
seek income, but they seek income to pursue political gains (victory in
elections being the most important goal).

Therefore, any economic interventions of municipal governments must
follow a much more complicated logic:

They will be interested in:
1. How much electoral benefit they will receive from a given
policy--how many votes they will win per dollar spent in a given policy,
compared to the benefits of other types of policies.
2. How much economic benefit the municipality will receive from a given
policy, transformed into the electoral benefits of that policy. In
other words, if a policy gains the mayor no political support, but
increases revenues, he needs to consider how much his revenues will
increase by, and how much political support that increase in revenues
will buy him when invested in other types of policies.
3. Which of the many policies--and what combination of policies (both
policies that increase revenue and increase political support) will
guarantee the mayor the minimum amount of support needed to gain him a
victory in the next election.

This combination won't necessarily be economically efficient, but it
does imply a political efficiency, defined as getting the most political
support for the dollar invested. In some ways, this type of efficient
may be more "just" than economic efficiency, because it means that the
largest number of individuals possible (under ideal conditions) are
benefiting from a given set of municipal policies, as opposed to an
economic efficiency, in which efficient government in an economic sense
would presumably permit citizens to gain the most money per dollar
invested, without any recognition of the distribution of income
resulting from that investment (could be that one guy makes a pile of
money and everybody else makes nothing, and that would still be defined
as an efficient outcome, but wouldn't be a just or desirable one).

Economists have pretty well established that, under many conditions, the
most economically efficient government is one that intervenes as little
as possible in the economy. That may promote economic efficiency, but
we don't always like the other kinds of outcomes that produces.