Archive for May, 2014

The efficiency performance of democratic federalism turns on constitutional assignment and representation. As a guideline to assignment, local governments will be most efficient for those services, taxes, and regulations which benefit local populations and which have no significant positive or negative spillovers onto non-residents. For goods with significant economies of scale in production or consumption, for taxes which alter the spatial allocation of economic resources, and for services and for regulations with economic spillovers, allocation by the central government is preferred (Oates 1972).
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Democratic federalism offers a possible middle ground upon which to balance the advantages of a decentralized federal constitution for protecting rights and promoting participation and the advantages of a centralized federal constitution for efficiently providing public goods and local spillovers. The number of local governments is set so that local congestible public services are efficiently provided. Constitutional assignment can be to either local or central levels of government. Finally, representation in democratic federalism can be structured to give local interests a clear voice in central government policy-making through representation to a locally elected national legislature. Under democratic federalism, decisions by the central government legislature are made by majority-rule.
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Centralized federalism combines local governments with a central government run by an elected president or executive council. All policy responsibilities are assigned initially to the central government. If the elected president or council wishes, those responsibilities may be reassigned to local governments.

Centralized federalism is likely to offer only fragile protection for individual rights. When the majority electing the executive is a stable majority, either because of stable economic interests or ethnic allegiances, the place and prospects of immobile minority groups is solely defined by the ruling majority. The fate of Blacks in the U.S. South before the Voting blights Act of 1965 and that of Jews in Nazi Germany illustrate the potential risks to basic liberties with strong, majority-controlled central governments.
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The potential for decentralized federalism to efficiently allocate public resources is also uncertain. Five conditions must hold for the decentralized public economy to be economically efficient: 1) Publicly provided goods, services, and regulatory activities must be provided at minimum average cost; 2) There must be a perfectly elastic supply of political jurisdictions, each capable of replicating all attractive economic features of its competitors; 3) Households and businesses must be fully informed about the fiscal and regulatory policies of each jurisdiction; 4) Mobility of households and businesses among jurisdictions must be costless; and 5) There can be no inteijurisdictional externalities or spillovers. When condition 1 is violated, the community’s activities become “public goods.” Without condition 2, fiscal competition can lead to the misallocation of labor and capital (Boadway and Flatters 1982). If families and businesses do not know the full implications of government policies (violating condition 3) or if there are significant relocation costs (violating condition 4), then the current community can “exploit” residents and firms through higher taxes or lower services. Finally, when there are inter-community production or consumption spillovers (violating condition 5) local services may be under-provided (positive spillovers) or over-provided (negative spillovers). The solution in each case is to look to a central government to manage the resulting misallocations.

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As a protector of individual rights, the performance of decentralized federalism is uncertain. If individuals are mobile across local governments, if new local governments can be easily established, and if local governments have full responsibilities for rights enforcement and policies, then individual rights to personal freedoms, political rights, and property rights are likely to be well protected. Nonetheless, a strong central government will be required to ensure an individual’s right to move freely, to allow new communities to incorporate, and to guarantee that each community can set and enforce its own policies. If free mobility, community formation, and community independence cannot be guaranteed by the central government, then local governments may become a source of oppression through “tyranny by a majority.” U.S. Southern states before the Civil War is one telling example. Decentralized federalism may also fail to ensure positive liberties. If protecting positive liberties requires the taxation of the more able to subsidize the less able — say to provide a subsistence income, basic shelter, or minimal education and health care — then a decentralized network of fiscally competitive local governments is not likely to succeed; this protection is likely to come only from a central government. But under decentralized federalism central government policy requires the unanimous consent of all local communities. Positive liberties are denied, now through “tyranny by a minority.”

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All constitutions must define who is allowed to participate in governments’ decisions (citizenship), what governments can and cannot do (personal and economic rights), how governments’ decisions are to be made (political rights and voting rules), and how governments’ decisions are to be enforced (judicial rules). Federal constitutions must also be defined along three additional dimensions: the number of lower tier, or local, governments in the federal union, the assignment of policy responsibilities to local and national governments, and the representation of local jurisdictions in the national government. Three alternative federalist constitutions can be specified.
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Economic efficiency seeks to ensure that there is no reallocation of society’s economic resources which can make someone better off while leaving everyone else no worse off. Competitive markets are the preferred institution for ensuring economic efficiency, but markets do not always achieve this end. Markets fail for a variety of reasons: public goods, spillovers, increasing returns to scale, and asymmetric information. In each instance, economic efficiency requires cooperative behavior to provide a shared asset, and each economic agent must reveal his or her true preferences for the shared good. fully
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Encouraging Political Participation: Political participation involves actions through

which ordinary citizens influence or attempt to influence political outcomes. The potential benefits to citizens from political participation are threefold: instrumental or utilitarian, developmental or educative, and intrinsic or consumptive. For utilitarians such as Bentham and James Mill political participation serves a specific function: To ensure that government maximizes aggregated citizen utility or welfare. While acknowledging the contribution of participation to efficient government, Rousseau and John Stuart Mill stress the role political participation can play in protecting citizen liberties. Through participation no one individual or group is master over any other. Finally, for Aristotle, Rousseau, J. S. Mill, de Tocqueville, and contemporary commentators such as John Dewey, political participation serves important communitarian values (Frug 1980). By participating in the political process an individual learns that his private interests are intimately linked to the interests of others, leading to a willingness to compromise, to put private interests aside, and to call upon values of justice and common good when making public and private choices. Electronic Payday Loans Online

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The Objectives of a Federal Constitution

Constitutions establish the rules for collective decision-making: who is allowed to participate, what is to be decided, and how those decisions are to be reached and enforced. The unique contribution of a federal constitution is to allow for multiple layers of governments, each with a domain of policy responsibilities. In setting the number and layers of governments and in drawing their exclusive and mutual responsibilities, three objectives for government are commonly mentioned: the guarantee of personal, political, and economic rights; the encouragement of political participation; and the promotion of the efficient allocation of economic resources. Electronic Payday Loans Online
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Subsidiarity is a principle of governance designed to give meaning to the divisions of power and responsibility between the central government and constituent states in a federal system. The principle seeks to allocate responsibilities for policy formation and implementation to the lowest level of government at which the objectives of that policy can be successfully achieved. Today’s proponents of subsidiarity within the European Union trace its intellectual roots to 20th Century Catholic philosophy: Just as it is wrong to take away from individuals what they can accomplish by their own ability and effort and entrust it to a community, so it is an injury and at the same time both a serious evil and a disturbance of right order to assign a larger and higher society what can be performed successfully by smaller and lower communities. . . . (T)he more faithfully this principle of subsidiarity function is followed and a graded hierarchical order exists among the various associations, the greater also will be both social authority and social efficiency, and the happier and more prosperous too will be the condition of commonwealth (Pius XI as quoted in Bermann 1994, fn. 18). payday loans lenders
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