Rethinking federalism

The appropriate federal structure of government is now a policy issue of major debate. This paper identifies three approaches and compares their strengths and weaknesses. Economic federalism recommends the use of competitive communities for the provision of congestible local goods and a strong central government for the provision of pure public goods and spillovers. Cooperative federalism recommends intercommunity agreements; democratic federalism prefers a majority-rule representative legislature. Efficiency will sometimes conflict with other constitutional objectives-political participation and the protection of rights-and compromises will often be required.