March 5, 2015

Design vs. Emergence in a Theory of Federalism

Toward Institutional Reconciliation
  • Richard Wagner

    Distinguished Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics
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Find the paper at SSRN.com. 

It is common to think of federalism as a governmental arrangement that entails competition among governments. Thinking this way, however, is problematic. A competitive system is generally associated with the notion of polycentricity, as illustrated by a market system of free and open competition. The structure of such a system emerges through a competitive process and changes continually as that process operates. By contrast, a federalist system of governments is typically designed as against being emergent, and with that design involving some assignment of powers, duties, and competencies among the member governments. A genuinely competitive federalism must thus be designed in such a fashion as to mirror the workings of a spontaneously generated order. While it is comparatively easy to think of competition among a horizontal array of governments, it is more difficult to do that when those governments are nested within a vertical array of governments. Furthermore, the problem of the anti-commons comes into play in dealing with federal systems because the inalienability of property rights within governmental entities works to stifle the continual adaptation in governmental structure that a genuine system of competitive federalism requires.