Central Stability or Unstable Decentralization? Why Enforcement is Unstable in Decentralized Governments

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

,

2000

). 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

,

2000

), local differentiation of public goods against internalization of inter-jurisdictional external effects (

Oates, 1972

) and mutual insurance against local responsibility (

Bucovetsky, 1997

;

Perrson and Tabellini, 1996a

). While most authors concentrate on geographical federalism

1

, 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,

prima-facie

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.