Federalism and Collective Action

Robert Cooter & Neil Siegel, Collective Action Federalism: A General Theory of Article I, Section 8, 63 Stanford L. Rev. 115 (2010).

Robert Cooter and Neil Siegel’s Collective Action Federalism is probably the most important academic article on constitutional federalism in several years. Cooter is one of the world’s leading law and economics scholars. Unfortunately, his work has not gotten the attention it deserves from constitutional theorists. Siegel is a leading constitutional law scholar in his own right.

In Collective Action Federalism, Cooter and Siegel argue that the congressional powers  enumerated in Article I, Section 8 of the Constitution should be interpreted in light of the goal of giving Congress the authority it needs to address collective action problems among the states. A collective action problem arises when members of a group want  a good, but have little or no incentive to contribute to its production, because they can instead try to free ride on  the efforts of others. This is likely to occur in cases where the good in question is a  “public good” for the group in question, one for which there is no way to prevent group members from consuming it even if they have not contributed to its provision.

Cooter and Siegel point out that the framers of the Constitution justified many of the powers enumerated in Article I as solutions to collective action problems among the states (though of course they did not use that terminology). For example, the power to raise and support armies was intended to provide the public good of national defense, which states often failed to contribute to under the Articles of Confederation. Similarly, the power to regulate interstate commerce was intended to be used to prevent states from adopting protectionist trade barriers against each other or impeding the movement of goods across their borders. Interstate free trade is a public good.

The authors argue that Article I, Section 8 should be treated as a “unified whole” rather than as a discrete set of unconnected individual powers. And they propose collective action theory as a unifying framework for interpreting that whole. Where there is an interstate collective action problem, they would give Congress the power to address it. Where no such problem exists, state power should be allowed to prevail.

Cooter and Siegel’s approach would lead to broad interpretations of congressional power in some areas, and relatively narrow ones in others. Currently, the Supreme Court interprets the power to regulate interstate Commerce in a way that gives Congress nearly unlimited power to regulate “economic activity,” while restricting its authority over “noneconomic” matters. Cooter and Siegel correctly point out that some forms of economic activity do not raise any interstate collective action problems, while some types of noneconomic activity do. With respect to the General Welfare Clause, their theory would uphold taxes and regulations that address collective action problems, while rejecting those that do not. In effect, they interpret the phrase “general welfare” as a synonym for “solving interstate collective action problems.”

The greatest strength of Cooter and Siegel’s analysis is that it accounts for the interconnections between the various congressional powers and expresses their underlying unity. As they point out, this has advantages under both originalist and nonoriginalist theories of interpretation. From an originalist standpoint, collective action federalism  dovetails with statements by the many Founders who argued that powers granted in Article I were intended to curb free-riding by state governments of the sort that had become a serious problem under the Articles of Confederation. For nonoriginalists, the theory has the virtue of taking account of modern economic analyses of federalism, most of which stress the key role of collective action problems.

Despite its impressive strengths, Cooter and Siegel’s analysis also has a few problems. It is far from clear that Article I really gives Congress unfettered authority to solve any and all collective action problems among the states. If that were the case, why would the Founders have bothered to carefully enumerate seventeen separate powers plus the Necessary and Proper Clause, instead of a single catch-all “Collective Action Clause?” To their credit, Cooter and Siegel foresaw this issue and tried to address it by arguing that the enumerated powers are not meant to be an exhaustive list, but an illustrative one. Yet it seems unlikely that a merely illustrative list would be so long and precisely detailed. Moreover, treating the list as illustrative renders the Necessary and Proper Clause superfluous. Under that approach, Congress would already have had the power to enact any measures “necessary” to solve any collective action problem, even if they were not specifically listed.

Second, Cooter and Siegel’s framework might actually negate certain specifically enumerated powers if it turns out that they are not needed to solve any collective action problems. Consider Congress’ power to  “establish post offices.” It is now clear that private firms such as Federal Express can deliver the mail just as effectively as the federal government, if not more so. And they can easily exclude would-be free riders who try to get away with not paying for postage. Does that render the US Postal Service unconstitutional?

Most importantly, Cooter and Siegel do not consider the possibility that the Constitution should be interpreted to curtail federal government policies that create “public bads,” as well as facilitate those that provide public goods. Just as Congress can solve collective action problems, it can also create them. To take one common case, it can enact special interest legislation that benefits small, well-organized groups at the expense of the general public. The repeal of such laws then becomes a nationwide collective action problem, one that the public often fails to solve because individual citizens and states have strong incentives to free ride on such matters. Curtailing such interest group legislation is one possible rationale for interpreting Congress’ enumerated powers relatively narrowly. Obviously, state governments often enact harmful special interest legislation of their own. But only Congress can impose such  a law on the entire nation at one fell swoop.

The famous 1942 case of Wickard v. Filburn illustrates this dilemma well. Wickard ruled that the interstate Commerce Clause authorized Congressional legislation that restricted wheat production even in cases where the wheat in question had never crossed state lines or been sold in any market. Cooter and Siegel endorse Wickard because the law in question solved a collective action problem among the states. Many state governments wanted to raise the price of wheat in order to assist farm interests. But none could do so individually, because of the risk that their efforts would be undercut by competition from other states.

At the same time, however, the law upheld in Wickard also created a severe collective action problem. By artificially raising the price of food in the midst of the Great Depression, it increased the suffering of consumers, particularly the poor – many of whom already found it difficult to purchase adequate amounts of food. Because consumers faced severe collective action costs and in many cases did not even realize that the new law had harmed them (voter knowledge of the effects of federal policy is itself a nationwide public good), they were not able to mobilize against it effectively. Wheat production restrictions that were a public good for farm states turned out to be a public bad for consumers and also for nonagricultural states whose economies were damaged by the price increases.

Cooter and Siegel rightly argue that  “[a] federal constitution ideally gives the central and state governments the power to do what each does best.” But a federal constitution must also protect against the dangers posed by both state and federal power. A powerful central government is often “best” at solving national collective action problems. But it is also often the “best” at creating them. State governments acting on their own could never have established a nationwide wheat cartel that victimized poor consumers for the benefit of politically powerful farm interests. A more comprehensive collective action approach to constitutional federalism must consider both sides of this dilemma.

Despite these reservations, Cooter and Siegel’s work is a major contribution to the debate over federalism, and helps set the agenda for future scholarship. It is hardly fair to ask any one article to do more. Future writers will need to more fully consider the extent to which collective action theory sheds light on the appropriate scope of specific federal powers. They should also take due account of the danger posed by federally mandated “public bads.”

 

 
 
Discussion

1 comment
  1. 1
    On July 15, 2011 at 5:19 pm, Chris said:

    I’ve read the piece, and I agree that C&S’s interpretation of Congress’s list of enumerated powers is, on its face, is extremely odd: Art. I, Sec. 8 is just *not* an illustrative list, but an exhaustive one. But Mr. Somin’s post also discounts a significant–indeed, a gaping–logical hole in C&S’s argument, one that demonstrates how little content collective action federalism really supplies to Art. I: Their argument is that the federal government should have the power to step in to solve collective action problems–those that are caused by externalities. C&S recognize that the term “externalities” could apply to just about anything: The fact that Nevada gives me the right to vote might make Kim Jong-il really, really angry, and that is a cost of Nevada’s decision that Nevada doesn’t bear. But it would be silly to think that Kim Jong-il’s personal feelings about voting should factor into Nevada’s decision. We need a separate account of which externalities properly should be subject to federal regulation. Libertarians will argue for a limited account of the term, while social democrats will argue for a wider view. And as a result, C&S’s view offers no explanatory power: it’s flexible (or, one might say, vacuous) enough to incorporate even totally nutty political positions.