This paper applies the insights of Austrian economics to an important issue in local political economy. Basic economic theory holds that greater competition produces superior outcomes in private goods markets. The same should be true in the “markets” for the output of local government....

Using a new comprehensive data set of 314 U.S. metropolitan areas (or all metro areas for which comparable historical data were available), this article provides a newtest of the Leviathan hypothesis that there is an inverse relationship between fiscal exploitation and the amount of...