Nudging Federalism towards Productive Experimentation

Abstract

Formal constitutional amendment can be difficult to achieve and, without the confidence of experience, may introduce changes that too quickly and too rigidly alter the balance of authority between federal and state governments. Therefore, in federal systems it is preferable to experiment with alterations prior to formal adoption. In this article I address how federal systems encourage two types of policy experimentation that are either unlikely to be tried or unlikely to be accepted. To encourage costly state experimentation, the federal government can alter financial incentives, nudge states towards a new policy by shifting public attention, set a pre-emptive floor and offer party-based rewards. To smooth union acceptance of selfish experimentation, a set of safeguards encourages deliberation and experience with the policy that leads to public acceptance or rejection.

Keywords:

• Constitutional evolution
• safeguards
• systems theory

Notes

In formal terms, the discount parameter grows; the member governments value future benefits more as they grow more confident that the other member governments will also make the sacrifices necessary to sustain a productive union.

See New State Ice Co. v. Liebmann (285 U.S. 262, 1932).

Kollman et al. (2000) demonstrate that state experimentation is most efficient for moderate levels of policy complexity.

While the positive effect for other states would be minimal, in U.S. Term Limits v. Thornton (514 U.S. 779, 1995), where the Supreme Court struck Arkansas' attempt to impose term limitations on its federal legislators, one unmentioned consideration is that by limiting the terms of their federal representatives, the citizens of Arkansas put themselves at a disadvantage, given the importance of the seniority norm in committee assignments.

I offer one caveat: failed experiments may generate policy spillovers that affect the utility of other governments, particularly in federations with an expectation of intergovernmental bailout.

I will return to this point in the following section.

Because authority shifts can have broad implications, the success of larger shifts in authority depends upon framing. The way that an experimental policy is linked to other policies often determines its acceptability as much as its net benefit.

The programme itself has mixed results. While the number of welfare recipients has been reduced drastically—the US Census Bureau reports a 75% reduction over ten years—the percentage of the population living in poverty is essentially unchanged. This inconsistency suggests that the federal government incentivized the wrong outcome, leading to state restrictions on eligibility without leading to a solution to the problem of chronic poverty.

However, concern over it is most sustained in Canada; for a recent analysis see Bird (2009).

Nicholson-Crotty (2009) shows that policy salience speeds state policy adoption.

545 U.S. 469 (2005).

One provision requires state law enforcement, during a legal stop or detention, to determine the immigration status of any person suspected of illegal status. Critics oppose the measure for encouraging racial profiling.

Naturally, when accountability is suspect, politicians can use their freedom for more nefarious ends as well.

One week following the President's signing of the bill, attorneys general of 14 states have challenged the bill in federal courts, in two separate suits. The main one, filed by 13 attorneys general—all but one Republicans—contends that the federal government has no power to compel citizens to purchase health insurance. (The other, challenging the bill on the same grounds, would nullify the act in Virginia—a symbolic protest without a chance of success passing constitutional muster.) As this article goes to press the suit is still pending.

In 2008 the EPA denied California's right to mandate emissions. The EPA reversed its decision in 2009 when a new administrator was appointed to head the EPA.

This theory is developed in more detail in Bednar (2009, chs 6 and 7).

This problem is general to almost all problems that require collective action with individual self-sacrifice (see Bednar, 2006).

See Bednar (2009, ch. 7) and Page (2010) for detailed discussions of independence and robustness.

Crutchfield (2009) uses this phrase to describe the underlying vulnerability of many complex systems; he motivates his thesis with reference to the collapse of the financial markets in the fall of 2008. See also Fergusson (2010), arguing that the general tendency of empires to suffer rapid decline can be understood better if one conceives of them as a complex system, because proximate causes are often only symptoms of a deeper underlying decay.