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.

Democratic federalism may assign policy responsibilities to local and central levels of governments according to how those assignments might make the strongest contribution to ensuring personal, political, and economic liberties. For example, assigning significant taxing powers to local governments controls the unwanted government taking of private property by government (Brennan and Buchanan 1980 and Weingast 1995). Assigning local governments responsibility for police functions ensures that local residents can monitor and discipline any abuses of police powers and provides possible protection against armed interventions by other local or even national interests (Rapaczynski 1986). Education too ~ particularly control over the curriculum — could be assigned locally to ensure political rights and freedom of speech. The central government can then be given responsibility for ensuring minimal economic subsistence, access to clean and safe shelters, literacy, and basic health services (Sen 1988). Finally, a representative legislature run by majority rule checks tyranny by a stable minority, while wide representation of local interests minimizes the risks to rights arising from a stable majority (Madison Federalist 10).

Political participation is also likely to benefit from the introduction of democratic federalism. To achieve this potential, however, local governments must be assigned significant policy responsibilities (Dahl and Tufte 1973), and the central government’s legislature must allow for significant representation of local interests (Cain, et. al. 1987).