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CHAPTER 1. KEY CONCEPTS
Given their potential in terms of human and natural resources, some federations should be
more productive—more prosperous and peaceful—than they are.
Federalism is not for every society. For some, it offers few advantages, and its complexity
many disadvantages. What this book will reveal is that an expected benefit is only a neces-
sary condition for federalism’s success: the suitability of federalism depends as much or more
on how feasible it is to construct a network of institutions with features, defined here, to
make the union as productive as possible. It is natural to think that the best candidates for
federalism are ethnically diverse or especially large countries. Implicit in the statement that
federalism is not for every society is the claim that federalism is adopted for a reason, or most
likely, a combination of reasons. The particular design of the federation—the distribution
of authority between levels of government—will vary according to the goals a society had in
mind when adopting the federation structure. In this book, we ask what effect constitutions,
and the institutions they establish, have on the success of a federation, in its ability to meet
the union’s goals. Our objective is to develop a method of thinking about the problem of
federalism—the reason that it might fail to perform—as well as an improved approach to
considering the effect of institutional safeguards on the behavior of its governments, and
therefore the federation’s robustness.
The book begins with the following premise: the distribution of authority between the
national and the state governments may be engineered to provide benefits to the citizens
in the form of meta public goods: national security, economic efficiency, and quality repre-
sentation. From this basic framework, the book makes two theoretical contributions to the
study of federalism’s design. First, while the division of authority may be set to optimize
the federation’s performance, the optimal division may not be sustainable. Distributions
suggested by a constitution mean nothing if the governments have no incentive to abide by
them, and intergovernmental retaliation, the baseline enforcement mechanism in any union
(including international organizations), tends to be inefficient. The union’s performance
Convention