Market-preserving federalism constrains predation and fosters growth.
Weingast's argument that federalism constrains predation only under conditions: a common market, hard budget constraints on subunits, and credible limits on the centre. Without them it produces capture instead.
In practice
- A region that can borrow against an implicit central guarantee spends as though the budget were somebody else's, because it is.
- Without them it produces capture instead, which is why decentralisation without those three has a poor record.
- Subject
- Law & Politics
- Essay
- Competing accounts of how power works