Klick, Jonathan --- "Introduction: law and economics of federalism" [2017] ELECD 229; in Klick, Jonathan (ed), "The Law and Economics of Federalism" (Edward Elgar Publishing, 2017) vii

Book Title: The Law and Economics of Federalism

Editor(s): Klick, Jonathan

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849803625

Section Title: Introduction: law and economics of federalism

Author(s): Klick, Jonathan

Number of pages: 4

Extract:

Introduction: law and economics of
federalism
Jonathan Klick

The economic theory of federalism has been well discussed through the
years. Wallace Oates (1972) largely started the systematic study of eco-
nomic federalism, from both normative and positive perspectives, and
the subsequent fiscal federalism literature is well developed.1 The basic
theoretical framework involves the recognition that there is preference
heterogeneity across jurisdictions (which can affect the optimal level of
public good provision) pushing in favor of smaller decision-making units,
balanced by the possibility that cross-jurisdictional externalities exist
as well as the potential gains from scale economies in production. The
optimal system, then, is one that sets the marginal loss from increasing the
jurisdictional level at which decisions regarding a public good are made
equal to the gain achieved by internalizing jurisdictional externalities and
exploiting economies of scale. The so-called decentralization or subsidi-
arity principle embodies this trade-off.
Subsequent economic discussions of federalism have included their
political economy aspects (see, for example, Inman and Rubinfeld 1997
and Weingast 2009), including analyses from a constitutional economics
perspective (Mueller 1996; Buchanan 2001). Legal scholars have used the
economic model of federalism, but have also critiqued it for failing to
recognize important practical limitations, such as a failure to distinguish
between regulatory and fiscal federalism (see, for example, Super 2005).
Beyond these criticisms, legal scholars have distinguished among coop-
erative and competitive federalism, as well as "uncooperative federalism"
(Bulman-Pozen and Gerken 2009). All of these models and perspectives
help ...