In his wide range of research on, and teaching of, the economic analysis of law, Hans-Bernd Schäfer has also come across questions of constitutional law, in particular with respect to the European Union (e.g.
Schmid-Lübbert and Schäfer, 2003
Schäfer and Van den Bergh, 1998
). Perhaps the most important topic in this field is subsidiarity and federalism, centralization and decentralization. As other jurisdictions with a federal structure, the European Union faces the problem of having to weigh democratic legitimization against economic efficiency (
Inman and Rubinfeld, 1998
), local differentiation of public goods against internalization of inter-jurisdictional external effects (
) and mutual insurance against local responsibility (
Perrson and Tabellini, 1996a
). While most authors concentrate on geographical federalism
, Frey and Eichenberger (1996) extended the geographical subsidiarity principle to the functional dimension: there seems to be little reason, why one low-level jurisdiction should decide on a multiplicity of subjects. Rather,
arguments would support the approach followed effectively in so many countries to split competences not only along the lines of federal subordination but also along functional distinctions.