Balkinization  

Tuesday, June 18, 2013

Competitive Federalism and Collective Action Federalism

Neil Siegel

For the symposium on Michael Greve's The Upside Down Constitution (Harvard University Press 2012).

Mazel Tov to my friend Michael Greve, who has written a comprehensive and insightful book on American constitutional federalism. In The Upside-Down Constitution, he argues that a structural constitutional principle binds together many of the federalism provisions in the U.S. Constitution. According to his theory of competitive federalism, the Constitution requires a system of governance in which states compete with one another for businesses and citizens. Greve does not maintain that the Framers or Founders of 1787 had a commitment to competition among states explicitly in mind. For example, he concedes that his champion, James Madison, missed the crucial importance of mobility to ensuring a competitive constitutional regime. But Greve does argue that a commitment to competition makes the best structural sense of the Constitution that the Framers drafted and the People ratified.

I have advocated a different structural theory of constitutional federalism, one that I have developed with Robert Cooter and refined on my own. The theory of collective action federalism understands the expanse and limits of congressional power in Article I, Section 8, as well as certain limits on state power in Article I, Section 10, and Article IV, in light of the collective action problems that the nation faced under the Articles of Confederation, when Congress lacked the powers to tax, regulate interstate commerce, raise and support a military, and act directly on individuals. The collective action principle distinguishes problems whose solution requires separate action by states from problems whose solution requires collective action by states.

The presence or absence of multi-state collective action problems is central to understanding the scope of federal power in the clauses of Article I, Section 8. These clauses mostly concern collective action problems created by interstate externalities and interstate markets. A prominent example is the Commerce Clause, which empowers Congress to regulate commerce “among the several States” but not commerce that is internal to a state.

Collective action federalism’s structural account of Article I, Section 8 draws substantial support from constitutional text, history, and much judicial precedent. For instance, the Framers understood collective action problems well; indeed, the pervasiveness of such problems facing the states during the Critical Period of the 1780s inspired the Constitutional Convention.

The collective action principle also makes functional sense. It flows directly from the relative advantages of the federal and state governments. Much of what the federal government does better than the states is solve collective action problems that the states cannot deal with as effectively on their own.

What is the relationship between Greve’s theory of competitive federalism and the theory of collective action federalism? There are obvious similarities in interpretive orientation. While Greve and I agree that each constitutional provision possesses its own distinctive meaning, we are both structuralists at heart on matters of constitutional federalism: we inquire into the underlying purposes of many of the Constitution’s federalism-related provisions considered as an architectural whole. We ask how the federalism components of the constitutional machine work or are supposed to work in practice. And in answering that question, we bring to bear tools and insights of modern economic analysis.


We also agree on some particulars. For instance, we both believe that there is a strong structural justification for a robust dormant commerce principle.

One might be tempted to see further similarities in our approaches. One might regard both of our efforts as really attempts to reason about what a federal republic ought to look like based on first principles of political economy. One this view, Cooter and I do not claim that the Framers reasoned precisely in our terms; rather, we claim that their accomplishment is consistent with sound economic theory. Likewise, the Framers did not have a theory of competitive federalism is mind, but Greve argues that their work product makes the most sense in terms of that theory.

Perhaps uncharitably, I tend to see Greve’s effort in such a light—not entirely, but to a significant extent. I read him mostly as reasoning his way from an extra-legal, Rawlsian “original position” to advocacy of a Constitution that is more friendly to business and wealthy Americans. The social science evidence allows us to be reasonably confident about the consequences of robust interjurisdictional competition: it restrains welfare state growth by causing states to limit the taxation that supports redistributive policies for fear that businesses and wealthy individuals will leave and more economically vulnerable people will enter. I did not encounter in Greve’s book (though I may have missed it) any evidence that any of the Founders anticipated such a dynamic and approved of it.

Grieve is, to my mind, more persuasive in seeing a commitment to competitive federalism in the Supreme Court’s jurisprudence of the Gilded Age. But the normative authority of such precedent is, in my view, very limited.

I do not understand the theory of collective action federalism as really just an exercise in constitutional design. I see substantially more legal support for collective action federalism than for competitive federalism.

Consider, for example, founding history. Of course the Framers and ratifiers lacked the tools and language of modern collective action theory. But they were living with substantial collective action problems under the Articles; they knew it; they described it; and they intended for the Constitution to do something about it.

For example, James Madison registered the existence of collective action problems in his Vices of the Political System of the United States, a memorandum he wrote while preparing for the Constitutional Convention. Recording various problems with the Articles, Madison underscored “want of concert in matters where common interest requires it,” a “defect . . . strongly illustrated in the state of our commercial affairs. How much has the national dignity, interest, and revenue suffered from this cause?” When activities spilled over from one state to another, Madison and other nationalist Framers recognized that the actions of individually rational states produced irrational results for the nation.

With Madison, the delegates at the Philadelphia Convention focused on collective action problems facing the states in considering the scope of congressional power that would become Article I, Section 8. The Convention instructed the midsummer Committee of Detail that Congress would have authority “to legislate in all Cases for the general Interests of the Union, and also in those Cases to which the States are separately incompetent, or in which the Harmony of the United States may be interrupted by the Exercise of individual Legislation.” This language of separate state incompetence apprehends the need to address collective action problems facing the states. It tracks statements made by James Wilson during the Pennsylvania ratifying convention. It also tracks Madison’s statement in THE FEDERALIST NO. 14 that the legislative jurisdiction of Congress “is limited to certain enumerated objects, which concern all the members of the republic, but which are not to be attained by the separate provisions of any. The subordinate governments . . . can extend their care to all those other subjects which can be separately provided for . . .” (my emphases).

Turning from history to doctrine, a collective action approach finds support in seminal decisions of the Marshall Court: McCulloch v. Maryland and Gibbons v. Ogden. Collective action federalism also offers a multi-generational synthesis of almost all of the Supreme Court’s Commerce Clause decisions since 1937, explaining why Wickard v. Filburn and Gonzales v. Raich belong on one side of the constitutional line and why United States v. Lopez and United States v. Morrison belong on the other. The Commerce Clause conclusion of five Justices in NFIB v. Sebelius is problematic from a collective action perspective, but it is reconcilable with a collective action approach to the extent one regards a ban on purchase mandates as an independent limit on Congress akin to commandeering. (For substantiation of these claims, see my analyses of the doctrine in the pieces linked above.)

I do not read Greve as rejecting the view that the collective action principle justifies many uses of the Commerce Clause; on the contrary, at times he seems to endorse it. But I suspect that he would define a collective action problem more narrowly than I do. (I define it to include material interstate externalities regardless of whether they cause races to the bottom.) I also suspect that he would have courts greet collective action justifications for federal power more skeptically than I would. More generally, Greve wants an aggressive—he would say “engaged”—federal judiciary.

For example, Greve dismisses the claim that different state laws and practices concerning child labor were causing a race to the bottom during the early 1900s. Collective action federalism views child labor as a textbook example of a problem warranting use of the Commerce and Taxing Clauses. Contrary to Greve, the fact that Southern states eventually reduced and nearly eliminated child labor on their own does not suggest that there never really was a race to the bottom, or that Congress should have waited. In the long run we are all dead, children included.

The differences between competitive federalism and collective action federalism may be greatest on the question of how to define the scope of multistate collective action problems. Where Greve sees anti-competitive cartels, I see permissible attempts to cooperate in just the way that the states failed to cooperate during the Critical Period. Competitive federalism views many of the results justified by collective action federalism as the establishment of state cartels that prevents healthy competition among the states. Collective action federalism views the Constitution as empowering Congress to combat destructive competition among states and to internalize other interstate externalities.

Collective action federalism is reconcilable with competitive federalism in the sense that collective action federalism permits the sort of politics that competitive federalism desires. If enough Americans want an anti-redistributive politics, then the Collective Action Constitution will not deny them. But collective action federalism rejects the suggestion that such a politics is the Constitution’s command. Collective action federalism seeks, among other things, to make sense of post-1937 constitutional law. Competitive federalism seeks to destroy it.

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