Collective Action Federalism: A General Theory of Article I, Section 8

The Framers of the United States Constitution wrote Article I, Section 8 in order to address some daunting collective action problems facing the young nation. They especially wanted to protect the states from military warfare by foreigners and from commercial warfare against one another. The states acted individually when they needed to act collectively, and Congress lacked power under the Articles of Confederation to address these problems. Section 8 thus authorized Congress to promote the “general Welfare” of the United States by tackling many collective action problems that the states could not solve on their own. Subsequent interpretations of Section 8, both outside and inside the courts, often have focused on the presence or absence of collective action problems involving multiple states—but not always. For example, the Supreme Court of the United States, in trying to distinguish the “truly national” from the “truly local” in the context of the Commerce Clause, United States v. Morrison, 529 U.S. 598, 617–18 (2000), has differentiated “economic” activity, which Congress may regulate, from “noneconomic” activity, which Congress may not regulate. A federal constitution ideally gives the central and state governments the power to do what each does best. Economic activity does not generally cause collective action problems among the states, and noneconomic activity is not generally free from collective action problems. Consequently, Congress is not generally better at regulating economic activity, and the states are not generally better at regulating noneconomic activity. The distinction between economic and noneconomic activity seems mostly irrelevant to the problems of federalism. We propose a better foundation for American federalism in Section 8. Our theory distinguishes activities that pose collective action problems from those that do not. This approach flows directly from the relative advantages of the federal government and the states. We show that Section 8 mostly concerns collective action problems created by interstate externalities and national markets. We conclude that Section 8 authorizes Congress to tax, spend, and regulate to solve these collective action problems. Collective action federalism finds that the limits and expanse of congressional power in Section 8 turn on the difference between individual and collective action by the states. The theory uses this distinction to differentiate interstate commerce from intrastate commerce, not the economic/noneconomic distinction. Our distinction best explains why Congress may not ordinarily use its commerce power to regulate such crimes as assault or gun possession in schools. Collective action federalism also identifies a constitutional “hook” for Congress to regulate multi-state problems of collective action that may not involve commerce: Clause 1 of Section 8 authorizes some forms of regulation of noneconomic harms that spill over state boundaries, such as contagious diseases and certain kinds of environmental pollution

The future of the USO - Economic rationale for universal services and implications for a future-oriented USO

Universal service obligations (USO) in the postal sector currently enjoy considerable attention among politicians, practitioners and academics. The primary areas of interest have been the viability, costing and funding of the USO in a completely liberalized market. However, the purpose and the scope of the USO itself have so far not been questioned fundamentally. In this paper we first analyze the possible rationale for USO from an economic point of view. Then, we discuss the impact of converging postal and telecommunications markets on potential alternative means to provide USO in a more efficient way.Universal service, USO, covergence, postal sector

Platform Rules: Multi-Sided Platforms as Regulators

This paper provides a basic conceptual framework for interpreting non-price instruments used by multi-sided platforms (MSPs) by analogizing MSPs as "private regulators" who regulate access to and interactions around the platform. We present evidence on Facebook, TopCoder, Roppongi Hills and Harvard Business School to document the "regulatory" role played by MSPs. We find MSPs use nuanced combinations of legal, technological, informational and other instruments (including price-setting) to implement desired outcomes. Non-price instruments were very much at the core of MSP strategies.Platforms, regulation, network effects, distributed innovation

Network Rules

Crawford compares the debate between the telcos and the online companies over broadband access regimes often called the network neutrality debate to the ongoing tussle between intellectual property maximalists and free culture advocates which are strikingly parallel sets of arguments. The maximalists claim that creativity comes from lone genuises (the romantic author) who must be given legal incentives to works but intellectual property scholars have carefully examined the incentives of their arguments and have pointed out that granting overly strong property rights to copyright holders might not be socially appropriate. Moreover, the network providers claim that they (the romantic builders) must be allowed by law to price-discriminate vis-a-vis content sources in order to be encouraged to build the network

The limits to competition in urban bus services in developing countries

The authors make the case for the return of regulation in the organization of urban bus services in developing countries. During the past three decades urban public transport policy has gone through several phases. The 1980s and 1990s were characterized by liberalization of the sector from public ownership and monopoly provision. The experience of several countries, in particular Chile, indicates that a full liberalization of the sector may not be the welfare-maximizing option. The authors discuss the market failures that justify this claim and present the regulatory options available in this emerging new role of government. Throughout the paper they illustrate ideas with examples from Chile, Colombia, and a few other countries.Labor Policies,Roads&Highways,Economic Theory&Research,Environmental Economics&Policies,Banks&Banking Reform,Urban Transport,Inter-Urban Roads and Passenger Transport,Roads&Highways,Environmental Economics&Policies,Banks&Banking Reform

Private Regulation by Platform Operators – Implications for Usage Intensity

Platforms operators act as private regulators to increase usage and maximize profits. Their goals depend on the development of the platform: overcoming the chicken-egg problem early on requires attracting platform participants while quality becomes more important later on. Private regulators influence third-party business models, entry barriers, and usage intensity. We analyze how drivers of usage intensity on Facebook’s application platform were affected by a policy change that increased quality incentives for applications. This change led to the number of installations of each application becoming less important, applications in more concentrated sub-markets achieving higher usage, and applications staying attractive for longer

Regulation and the New Economy

The fundamental theorem of welfare economics asserts that under conditions of perfect competition Pareto efficiency will obtain. This has provided the conceptual basis for the market failure approach to regulation, which focuses on failure to satisfy the conditions for perfect competition as potentially justifying government intervention in markets. The approach is evaluated in the context of a number of key characteristics of the industries of the New Economy. Three areas of regulatory focus are examined: policy approaches relating to competition, intellectual property, and information privacy. It is apparent that the applicability of the market failure approach is open to question, particularly in regard to competition policy. The exploitation by dominant market players of what may be termed "natural" barriers to entry resulting from some of the characteristic features of the New Economy (scale and scope economies, network effects and consumer lock-in) should be judged in the light of Schumpeterian competition rather than that of neoclassical perfect competition. The difficulty facing regulatory authorities is how to differentiate between situations requiring intervention and those that do not. The discussion of intellectual property highlights the fact that, in general, government intervention is not necessarily the only or even the best solution to instances of market failure. Finally, the case of information privacy illustrates how the spillover effects of regulatory actions in one jurisdiction can impact on other jurisdictions and necessitate coordination in a globalised economy. The need for countries to cooperate and coordinate their policies is perhaps the key conclusion of the analysis.New Economy, regulation, government intervention