Federalism and individual liberty

See the remark of Elazar (1987, p. 91): “The central interest of true federalism in all its species is liberty”.

See the remark of Chemerinsky (2001, p. 929): “The point is that none of the traditional justifications for federalism explain why it is likely to enhance liberty nor is it ever explained why federalism is needed to secure liberty”.

See Shapiro (1995, p. 91f.): “[O]ne of the stronger arguments for a decentralized political structure is that, to the extent that the electorate is small, and elected representatives are thus more immediately accountable to individuals and their concerns, government is brought closer to the people, and democratic ideals are more fully realized”.

“Exit” has been sufficiently used, of course, in the theory of competitive federalism originating in the classic Tiebout (1956) article and more generally in the economics of federalism (for a collection see Ribstein and Kobayashi 2007). However, this literature pays no attention to the question how the possibility of exiting a jurisdiction affects individual liberty.

An anonymous referee has pointed out that decentralization does not encourage very much institutional diversity. He referred to the cases of the US, Canada, and Australia which are regarded to be three of the four most decentralized federal systems, but their state governments have relatively little diversity. I have no space here to discuss the empirical literature on decentralization and heterogeneity (see Mueller 2003, Chap. 10.5 for a competent review), and I would only like to make two remarks. First, decentralization must be distinguished from noncentralization. Second, since I am primarily interested in developing a theoretical argument, I, of course, do not claim its validity for all cases, but only for those for which it is empirically applicable.

Already Madison noted: “In order to lay a due foundation for that separate and distinct exercise of the different powers of government, which to a certain extend is admitted on all hands to be essential to the preservation of liberty[…]” (The Federalist Papers 1961, No. 51, Madison, p. 321).

Hirschman (1970, p. 83) stresses the fact that although prima facie exit and voice are alternative mechanisms, their relationship is more complex. “Now it appears that the effectiveness of the voice mechanism is strengthened by the possibility of exit. The willingness to develop and use the voice mechanism is reduced by exit, but the ability to use it with effect is increased by it”.

At this point it should be mentioned that no assumptions are made about the second derivative of the function, i.e., how the curve looks exactly. I have used a linear interpretation only because of its simplicity. The important fact in this and the other figures is only that the relationship is a positive or a negative one.

What is important in this context is “that enjoyment and pleasure are not always by any means the result of returning to a healthy or normal state, or of making up deficiencies; rather many kinds of pleasure and enjoyment arise when we exercise our faculties” (Rawls 1971, p. 426).

“Regardless of the level of government, exit entails cost, not only economically but, perhaps even more importantly, psychologically. Normally, an individual feels an attachment to or part of the community in which he is born and raised. It is where his friends are. He identifies with it. It is ‘his’ community. He is a member of it and feels loyalty to it. It is where his ‘roots’ are. It is ‘home’. Thus, exit, like revolution, will not occur ‘upon every little mismanagement of public affairs’ or disagreement over public policy”. (Osterfeld 1989, p. 171).

The results of my analysis are hence different to those of Osterfeld (1989). He advocates radical federalism as a means of enhancing responsiveness of government without taking into consideration the indirect effect; he thus reduces the complexity of the problem. Only if both effects, the direct and indirect, are seen, can we reach a complete treatment of the problem of the appropriate extent of federalism.

Dye (1990, p. 16) refers to the fact that between 1980 and 1985, 40% of Americans changed their residence, and nearly 10 percent moved to a different state. And Walzer stresses the fact that in the United States the individuals are continually in motion. He speaks of the four mobilities: (1) geographic, (2) social, (3) marital, and (4) political. In respect to political mobility Walzer remarks: “Loyalty to leaders, movements, parties, clubs and urban machines seems to decline rapidly as place and social standing and family membership become less central in the shaping of personal identity. Liberal citizens stand outside all political organizations and then choose the one that best serves their ideals or interests. They are, ideally, independent voters, that is, people who move around; they choose for themselves rather than voting as their parents did, and they choose freshly each time rather than repeating themselves” (Walzer 1990, p. 12).