Through some kind of numerology, the townspeople limit their population to 436 because that was when the town was their most prosperous. A census worker comes to survey the town.
Through some kind of insane troll logic the townspeople believe that anyone who stays even one night has moved to the town. If this puts them over the limit, they hold a celebration where one of the original townspeople (apparently usually a young woman) is hanged. They are all brainwashed to think this was an honor. They tell the new "immigrants" that bad things happen to those who try to leave.
Anyone who wants to leave has "the fever" and therefore must be cured. First they try ECT, then it's lobotomy time...
Apparently the "bad things" are true.... The movie has a downer ending.