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How might all this play back in city or town hall? In concluding, I now link the national game to the results in Sections II. In these contexts, what happens to our projects advanced by the national agenda setter representing the projects designed in City Hall and town hall? The projects, presumably contained as marginal ones in the rejected package (CDA) advanced by the national committee contained about $207 million in project costs. The jurisdictions would have presented WTPs aggregating $35.8 million and paid about $17.9 in Thompson insurance. If they are in the end position of now loaning a unused portion of their entitlement, they would be compensated for savings at the compensation loan rate and receive additional net compensation approximating $17.9 million plus a refund of about $100,000 per Congressional district.

Even if they were proposing, as was the case, projects that exceed their entitlement levels (S in Figure 1), they would also receive up to one-half their revealed net willingness to pay, because, in part, they were included in a national budget package of projects that met a cost-benefit test with positive NPVs. They are compensated in part for this loss. In this sense, the procedure is a further refinement of the compensated incentive compatible procedure we introduced in Section III and elaborated later in the section.

The above has provided first-step suggestions concerning how we can use incentive-compatible procedures in selected areas concerning the allocation of resources to distributive governmental programs. As a first step, it could be applied to about $25-30 billion annually in transportation programs (as well as perhaps another $25-30 billion in environmental and communications infrastructure investments), while tailoring the associated regulatory regime to make these investments more productive. A complementary paper addresses issues of regulatory flexibility and local public goods provisioning, using some of the ideas contained herein to attack the problem of rational ignorance (See also Clarke, 1980 and Bailey, 1997).

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ISSN 1548-6036

Copyright 1999-2000
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