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In a lecture given at the London School of Economics this month, Professor Markus K. Brunnermeier (Princeton University) said:

Federal countries--like the United States, or like Switzerland, or like the Federal Republic of Germany--are very legalistic entities because you need lots of laws--lots of rules--to work out how the bits of the federation deal with each other.

What is it that creates the need for so many rules?

Are large quantities of laws common because of the organizational structure like Brunnermeier said? Is there something about the structure of the government that necessitates so much legislation?

or

Do federal governments just tend toward increased regulation more than other forms of government? The minimum wage is a price floor that may not be at the market equilibrium. Would the minimum wage have likely been implemented as universally as it has been had the United States been set up under a different form of government?

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Yes, Professor Brunnermeier is correct.

Let's start with a simple unitary state. The national government makes all laws. It needs however many laws it needs.

Now, supposing all other things are equal except instead of a simple unitary government you have a federal system with both a national government and states (sub-national) units. Their laws will overlap, and they will require extra laws to coordinate with each other.

Some laws are overhead that both will have. For example, both will probably have constitutions that outline the structure of the government and basic rights of citizens. Each state will duplicate other states: consider that if each state has a law saying it has a supreme court that is 50 laws. Additionally, many laws at the state level will simply restate a federal law, or will defer to the federal government.

States will also have to coordinate with each other. Most states have laws explaining how to handle adoptions of kids when the parent lives in another state, for instance. There are also laws which coordinate federal and state activities, such as laws instructing states how to expend federal revenues.

Taxes also play into this. A federalist system has more racing authorities, which means a larger number of taxes. Each tax has a specified allowable usage. For example, state fuel taxes are commonly set aside for highway maintenance. Each tax comes with a set of laws explaining its allowed usage and setting the tax rates.

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In the United States, there are more than fifty different rule-making organizations. The federal (national) government can make laws, plus each state can make its own laws. In some legal areas, the stricter law wins. In other circumstances, the federal law wins. And in some circumstances, the state law wins.

It is not at all uncommon in the United States for the federal government to pass laws to preempt the state laws. This can simplify things for businesses that operate in more than one state.

Beyond the federal and state governments, cities and counties can have their own laws as well. For example, some cities have higher minimum wages than the state or federal government. Or stricter sick leave policies.

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