Economics of Regionalism in Megalopolis

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By applying the economic theories to the legal scholarship, contemporary legal studies have undergone a radical change since the advent of such an approach especially in the United States legal academies. One of the most critical arenas that the economic analysis of law is concerned with is the issues subject to study in the local government law and urban studies. One of the biggest concerns in this field is the problem of the “size”. Concepts like zoning, incorporation, annexation, consolidation and regionalism are dominating issues in this branch of legal studies. The common element in all of these issues is undoubtedly the “size” which is effecting the local governments one way or another. On the other hand, the economists have dealt with the problem of size for a long time and they always tried to find a logical relationship between the efficiency of a firm and its size. The problem of size in Urban Studies and Local Government Law literature is merged into the dichotomy of localism and regionalism.In this paper, my primary purpose is to explain the size of local governments by applying economic methods of thinking. In this regard, at first, after briefly introducing localism, I will try to show its economic inefficiencies. By emphasizing the inefficiencies of local approaches in solving regional problems in megalopolises, it will be argued that save having a regional approach, many unavoidable flaws will emerge. In this regard, I will try to show that the sources of economic inefficiencies in local approach to regional problems are multifold. First and foremost, these inefficiencies arise from the diseconomies of scale including costs of communication among municipalities, duplication of efforts and cannibalization in locally fragmented megalopolis. The other sources of inefficiencies are the tragedy of the commons and anticommons in the region, positive and negative externalities producing free riding, gentrification, environmental problems and sprawl. Last but not least, the problem of high transaction costs and hold-out problem for the municipalities to come together to contrive a solution for the regional problems will be discussed. Eventually, taking the socio-political concerns like problem of representation and paradox of voting, the sense of community and the like into account, I will argue in favor of the coexistent model of localism and regionalism, as an idea to minimize the economic inefficiencies arising from the purely local approach to regional problems in megalopolises.