Federalism and decentralization: Ownership rights and the superiority of federalism

Publius: The Journal of Federalism

Volumn 30, Issue 2, 2000, Pages 1-15

  Breton, Albert ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0034147933     PISSN: 00485950     EISSN: None     Source Type: Journal    
DOI: 10.1093/oxfordjournals.pubjof.a030076     Document Type: Article

References (50)

1. Charles M. Tiebout, "A Pure Theory of Local Expenditure," Journal of Political Economy 64 (October 1956): 416-424.
2. Throughout, without loss of generality, all governments, except federal and national governments, are called local governments; state, provincial, cantonal, regional, and municipal governments, for example, are subsumed under the term "local governments."
3. Paul Seabright, "Accountability and Decentralization in Government: An Incomplete Contracts Model," European Economic Review 40 (January 1996): 61-89.
4. Albert Breton, Alberto Cassone, and Angela Fraschini, "Decentralization and Subsidiarity: Toward a Theoretical Reconciliation," University of Pennsylvania Journal of International Economic Law 19 (Spring 1998): 21-51.
5. Susan Rose-Ackerman, "Risk Taking and Reelection: Does Federalism Promote Innovation?" Journal of Legal Studies 9 (June 1980): 593-616.
6. Alexis de Tocqueville, Democracy in America, trans., George Lawrence (Garden City, NY: Doubleday Anchor Books, 1969), p. 63. The original reads: "Les institutions communales sont à la liberté ce que les écoles primaires sont à la science; elles la mettent à la portée du peuple; elles lui en font goûter l'usage paisible et l'habituent à s'en servir." De la démocratie en Amérique (Paris: Librairie Philosophique J. Vrin, 1840/1990), Tome I, p. 50.
7. Alexis de Tocqueville, Democracy in America, trans., George Lawrence (Garden City, NY: Doubleday Anchor Books, 1969), p. 63. The original reads: "Les institutions communales sont à la liberté ce que les écoles primaires sont à la science; elles la mettent à la portée du peuple; elles lui en font goûter l'usage paisible et l'habituent à s'en servir." De la démocratie en Amérique (Paris: Librairie Philosophique J. Vrin, 1840/1990), Tome I, p. 50.
8. See John S. Mill, Autobiography (London: Penguin Books, 1989), p. 150 where the acknowledgement in respect of decentralization is explicit.
9. The complete sentence reads: "In an earlier part of this inquiry, I have dwelt in strong language-hardly any language is strong enough to express the strength of my conviction - on the importance of the portion of the operation of free [local] institutions, which may be called the public education of the citizens." From "Considerations on Representative Government," Mill On Liberty and Other Essays, ed., John Gray (Oxford: Oxford University Press, 1861/1991), p. 412.
10. I thank Richard Bird, a colleague at the University of Toronto, for bringing this fact to my attention.
11. I am grateful to Giorgio Brosio for reminding me of the importance given to local institutions by Tocqueville, for the reference to Mill's Autobiography, and for pointing out the recognition by Mill of Tocqueville's influence on Mill's thinking.
12. The expression "constitutional powers," used throughout, does not necessarily mean that the powers are explicitly entrenched in a written constitution. I use the term to identify all forms of authority that confer the right to design and implement policies in any particular domain.
13. That coordination can play that role, and that it is costly, was first modeled by Albert Breton and Anthony Scott, The Economic Constitution of Federal States (Toronto: University of Toronto Press, 1978).
14. Gary S. Becker and Kevin M. Murphy, "The Division of Labor, Coordination Costs, and Knowledge," Quarterly Journal of Economics 107 (November 1992): 1137-1160 have persuasively argued that in modern market economies, the division of labor is limited not so much by the extent of the market, as in Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (New York: Random House, Modern Library, 1937), Chapter 3, as by the costs of coordination.
15. Gary S. Becker and Kevin M. Murphy, "The Division of Labor, Coordination Costs, and Knowledge," Quarterly Journal of Economics 107 (November 1992): 1137-1160 have persuasively argued that in modern market economies, the division of labor is limited not so much by the extent of the market, as in Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (New York: Random House, Modern Library, 1937), Chapter 3, as by the costs of coordination.
16. The European Union (EU), as is often the case, poses a special problem in this connection because it is a governmental system that is neither fully confederal, fully federal, nor fully unitary. Article 3b of the Treaty of Maastricht, which defines the principle of subsidiarity, contains the following sub-sentence: "in areas which do not fall within [the community's] competence. . .", a statement which appears to say that those powers that had already been transferred to the Community in 1993 when the treaty came into effect are henceforth Communitv powers. This would imply that in respect of those powers, the EU is a federal system (see below). However, the EU's central government in Strasbourg has been given only a power of disallowance, the positive powers being vested with the Council of Ministers, which is a confederal institution. One could take the position that the EU is a governmental system in transition toward a federal or a confederal equilibrium or, instead, opine that it is really a new type of governmental system. However that may be, I will have not more to say on the EU in this paper.
17. Alexander Hamilton, John Jay, and James Madison, The Federalist (New York: Random House, The Modern Library, 1937), pp. 50-51.
18. Some evidence is presented in Daphne A. Kenyon, Interjuristictional Tax and Policy Competition: Good or Bad for the Federal System? (Washington, D.C.: U.S. Advisory Commission on Intergovernmental Relations, 1991); Daphne A. Kenyon and John Kincaid, eds., Competition among States and Local Governments: Efficiency and Equity in American Federalism (Washington, DC: Urban Institute Press, 1991); and Albert Breton, Competitive Governments: An Economic Theory of Politics and Public Finance (New York: Cambridge University Press, 1996).
19. Some evidence is presented in Daphne A. Kenyon, Interjuristictional Tax and Policy Competition: Good or Bad for the Federal System? (Washington, D.C.: U.S. Advisory Commission on Intergovernmental Relations, 1991); Daphne A. Kenyon and John Kincaid, eds., Competition among States and Local Governments: Efficiency and Equity in American Federalism (Washington, DC: Urban Institute Press, 1991); and Albert Breton, Competitive Governments: An Economic Theory of Politics and Public Finance (New York: Cambridge University Press, 1996).
20. Some evidence is presented in Daphne A. Kenyon, Interjuristictional Tax and Policy Competition: Good or Bad for the Federal System? (Washington, D.C.: U.S. Advisory Commission on Intergovernmental Relations, 1991); Daphne A. Kenyon and John Kincaid, eds., Competition among States and Local Governments: Efficiency and Equity in American Federalism (Washington, DC: Urban Institute Press, 1991); and Albert Breton, Competitive Governments: An Economic Theory of Politics and Public Finance (New York: Cambridge University Press, 1996).
21. Tiebout, "A Pure Theory of Local Expenditure." Pierre Salmon, "The Logic of Pressure Groups and the Structure of the Public Sector," Villa Colombella Papers on Federalism, eds. Albert Breton, Gianluigi Galeotti, Pierre Salmon, and Ronald Wintrobe, European Journal of Political Economy 3 (1987): 55-86; and Pierre Salmon, "Decentralization as an Incentive Scheme," Oxford Review of Economic Policy 3 (Summer 1987): 24-43.
22. Tiebout, "A Pure Theory of Local Expenditure." Pierre Salmon, "The Logic of Pressure Groups and the Structure of the Public Sector," Villa Colombella Papers on Federalism, eds. Albert Breton, Gianluigi Galeotti, Pierre Salmon, and Ronald Wintrobe, European Journal of Political Economy 3 (1987): 55-86; and Pierre Salmon, "Decentralization as an Incentive Scheme," Oxford Review of Economic Policy 3 (Summer 1987): 24-43.
23. Salmon's first paper on the subject was published in 1987, but it was presented at a Villa Colombella Group Seminar in 1984.
24. For example, Edward P. Lazear and Sherwin Rosen, "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy 89 (October 1981): 841-864.
25. Tocqueville, Democracy in America.
26. James Bryce, The American Commonwealth (New York: Macmillan, 1911).
27. Johannes Popitz, "Der Finanzausgleich," Handbuch der Finanzurssenchaft (Tübingen: 1927). Popitz's writings are in German and, as far as I have been able to ascertain, not translated. I, therefore, have had only indirect access to his thoughts through Emilio Gerelli, "Intergovernmental Financial Relations: The Case of the German Republic," Weltwirtschaftliches Archiv 97 (1966): 273-302, and Horst Hanusch, "Tendencies in Fiscal Federalism," Secular Trends of the Public Sector, ed., Horst C. Recktenwald (Paris: Cujas, 1978): 129-149.
28. Johannes Popitz, "Der Finanzausgleich," Handbuch der Finanzurssenchaft (Tübingen: 1927). Popitz's writings are in German and, as far as I have been able to ascertain, not translated. I, therefore, have had only indirect access to his thoughts through Emilio Gerelli, "Intergovernmental Financial Relations: The Case of the German Republic," Weltwirtschaftliches Archiv 97 (1966): 273-302, and Horst Hanusch, "Tendencies in Fiscal Federalism," Secular Trends of the Public Sector, ed., Horst C. Recktenwald (Paris: Cujas, 1978): 129-149.
29. Johannes Popitz, "Der Finanzausgleich," Handbuch der Finanzurssenchaft (Tübingen: 1927). Popitz's writings are in German and, as far as I have been able to ascertain, not translated. I, therefore, have had only indirect access to his thoughts through Emilio Gerelli, "Intergovernmental Financial Relations: The Case of the German Republic," Weltwirtschaftliches Archiv 97 (1966): 273-302, and Horst Hanusch, "Tendencies in Fiscal Federalism," Secular Trends of the Public Sector, ed., Horst C. Recktenwald (Paris: Cujas, 1978): 129-149.
30. Harold J. Laski, "The Obsolescence of Federalism," The New Republic 98 (May 1939).
31. Tocqueville, Democracy in America, p. 674. The original reads: "Je pense que dans les siêcles démocratiques qui vont s'ouvrir - la centralisation sera le gouvernement naturel," De la démocratie en Amérique Tome II, p. 245.
32. Tocqueville, Democracy in America, p. 674. The original reads: "Je pense que dans les siêcles démocratiques qui vont s'ouvrir - la centralisation sera le gouvernement naturel," De la démocratie en Amérique Tome II, p. 245.
33. Bryce, The American Commonwealth, Vol. 2, p. 906, goes on to say that "it may therefore be concluded that while there is no present likelihood of change from a Federal to a consolidated republic [in the United States], and while the existing legal rights and functions of the several States may remain undiminished for many years to come, the importance of the States will decline as the majesty and authority of the National government increase." In other words, for Bryce, the "transition" was already under way.
34. Gerelli, "Intergovernmental Financial Relations," 273.
35. For a more elaborate discussion of these views and of others (those of Albert Dicey, Henry Sidgwick, and Kenneth Wheare) - all, without a single exception, views of citizens of unitary states - as well as for a summary of the empirical literature on trends in the evolution of federal systems - trends that point to decentralization - see Albert Breton, Centralization, Decentralization and Intergovernmental Competition: The 1989 Kenneth R. MacGregor Lectures (Kingston, ON: Queen's University, Institute of Intergovernmental Relations, 1990).
36. The first meetings to discuss the formation of a Canadian federation were held in 1864. The American Civil War ended in 1865.
37. Macdonald and Cartier were the driving forces behind the efforts to create a federation. Macdonald became Canada's first prime minister in 1867.
38. Alfred Marshall, Principles of Economics 8th ed. (New York: Macmillan, 1952).
39. Paul A. David. "CLIO and the Economics of QWERTY," American Economic Review 75 (May 1985): 332.
40. Without path dependence, governmental systems and their defining ownership rights, which might have been identical at the start and might have evolved identically over time, may nonetheless come to be different as a result of a severe trauma such as a foreign invasion.
41. Marshall, Principles of Economics, Bk IV, Ch. X, p. 267.
42. See, for example, W. Brian Arthur, "Competing Technologies, Increasing Returns, and Lock-in by Historical Events," Economic Journal 99 (March 1989): 116-131.
43. Garry Wills, Lincoln at Gettysburg: The Words That Remade America (New York: Simon and Schuster, 1992), p. 145.
44. That helps explain why 25 percent of the Quebeckers who voted for secession in the October 1995 referendum believed that once secession had been achieved, they would continue to carry a Canadian passport, use Canadian currency, elect representatives to the Canadian Parliament, bring cases to the Canadian Supreme Court, and so on.
45. Outside Quebec, in the rest of Canada, there are some people - a good number of them academics -who hold to the view that, in Canada, all powers or most of them (some exceptions are defense and international diplomacy) should be owned by the provinces. These people do not state their position in the language of ownership, only because they lack the conceptual apparatus that would permit them to do so. Like most Quebec secessionists, they are confederalists and act as a "fifth column" for the Quebec secessionists. Indeed, they are seen as such by the latter.
46. See Decimus J. Juvenalis Satires, Translated by Jerome Mazzaro (Ann Arbor: University of Michigan Press, 1965). The original reads: "Quis custodiet ipsos custodes?" Satire VI, Verses 347 and 363. Though it has become conventional to apply Juvenal's question to politics, he himself posed the question after writing: "Lock your wives in." Book VI is indeed a satire against women and marriage.
47. See Decimus J. Juvenalis Satires, Translated by Jerome Mazzaro (Ann Arbor: University of Michigan Press, 1965). The original reads: "Quis custodiet ipsos custodes?" Satire VI, Verses 347 and 363. Though it has become conventional to apply Juvenal's question to politics, he himself posed the question after writing: "Lock your wives in." Book VI is indeed a satire against women and marriage.
48. I am grateful to an anonymous referee for stressing the importance of independent judiciaries.
49. Donald V. Smiley, "The Structural Problem of Canadian Federalism," Canadian Public Administration 14 (Winter 1971): 326-343 and Alan C. Cairns, From Interstate to Intrastate Federalism, Discussion Paper No. 5, (Kingston, ON: Queen's University, Institute of Intergovernmental Relations, 1979).
50. Donald V. Smiley, "The Structural Problem of Canadian Federalism," Canadian Public Administration 14 (Winter 1971): 326-343 and Alan C. Cairns, From Interstate to Intrastate Federalism, Discussion Paper No. 5, (Kingston, ON: Queen's University, Institute of Intergovernmental Relations, 1979).