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Megan McArdle

Megan McArdle - Megan McArdle is a senior editor for The Atlantic who writes about business and economics. She has worked at three start-ups, a consulting firm, an investment bank, a disaster recovery firm at Ground Zero, and The Economist. More

Megan was born and raised on the Upper West Side of Manhattan, and yes, she does enjoy her lattes, as well as the occasional extra-dry skim-milk cappuccino. Her checkered work history includes three start-ups, four years as a technology project manager for a boutique consulting firm, a summer as an associate at an investment bank, and a year spent as sort of an executive copy girl for one of the disaster-recovery firms at Ground Zero … all before the age of 30.

While working at Ground Zero, Megan started Live From the WTC, a blog focused on economics, business, and cooking. She may or may not have been the first major economics blogger, depending on whether we are allowed to throw outlying variables such as Brad Delong out of the set. From there it was but a few steps down the slippery slope to freelance journalism. She has worked in various capacities for The Economist, where she wrote about economics and oversaw the founding of Free Exchange, the magazine's economics blog. She has also maintained her own blog, Asymmetrical Information, which moved to The Atlantic, along with its owner, in August 2007.

Megan holds a bachelor's degree in English literature from the University of Pennsylvania and an M.B.A. from the University of Chicago. After a lifetime as a New Yorker, she now resides in northwest Washington, D.C., where she is still trying to figure out what one does with an apartment larger than 400 square feet.

Is local governance a good idea?

By Megan McArdle
Mar 31 2008, 8:00 AM ET Comment

[Tristan Reed]

In the United States, libertarians and small-government conservatives often subscribe to the idea that local government is, in general, better than federal government at providing services, barring a few exceptional policy areas, such as national defense. Local governments, at least in theory, are also thought to be more accountable to their constituents. Why should Washington bureaucrats allocate funding within school districts, when the school boards with local knowledge know better where that funding should go, the argument goes.

There is a sentiment similar in big multilateral organizations such as the World Bank, which when it advises countries often recommends decentralization plans that. it argues, will make governments less corrupt and more accountable to their people. Indeed, Sierra Leone, the country that in July will be my home, is currently undertaking a massive decentralization with backing from the Bank.

A working paper by UCLA’s Daniel Treisman may give decentralization advocates in the U.S. and at the multilaterals reason to be less sanguine about their cause. Treisman summarizes the reasons why decentralization may not be so great, and then does some neat cross-country regressions to see test them empirically. His results are discouraging.

Decentralization can be bad for a number of reasons. Decentralization can create so many checks and balances between government entities that nothing can get done. It may be harder to reform a broken system when you create more stakeholders, and thus an inefficient government, once decentralized, may become even worse. Second, adding more tiers of government, which often happens in decentralization schemes since one can rarely create more local government without keeping some power at the top, can cause duplication of policies and waste of resources. Think of the overlap between state and federal health care programs. Another worry is that local government officials can be less competent. They might also be more susceptible to bribery than those in high office.

Treisman finds little support for the “local knowledge,” hypothesis laid out in the school board trope. In general, he finds, greater local decision-making and budget authority are associated with nasties such as poorer youth literacy and sanitation. He also finds that the number of tiers of government is positively associated with the level of perceived corruption. More tiers of government are also associated with fewer inoculations, a good measure of a country’s health performance.

Now, all this is not to say that decentralization and localization of government is bad all the time. Though it may not be very beneficial on the aggregate, what doesn’t work in the majority of countries may still work fine in some. What the paper does suggest is that local government is not the cure-all for government inefficiency, though some think it to be. It also suggests that federal government may not be so bad relative to the alternatives. In a static system in which the size of government is held constant, it may be worthwhile to concentrate it in fewer levels, and nearer to the top.

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