THE DESIGN OF GOVERNMENT: A REVIEW ARTICLE
| Author | P. M. Jackson |
| Date | 01 June 1978 |
| Published date | 01 June 1978 |
| DOI | http://doi.org/10.1111/j.1467-9485.1978.tb00249.x |
Scottish Journal
of
Political Economy,
Vol. 25,
No.
2, June 1973
Review
Section
THE DESIGN
OF
GOVERNMENT:
A REVIEW ARTICLE
P.
M.
JACKSON
Public Sector Economics Research Centre, University
of
Leicester
W.
E.
OATES
(ed.),
Financing the New
Federalism,
Resources for the Future, 1975,
pp. xiiiS-160. €2.75 (paper).
W.
E.
OATES
(ed.),
The Political Economy
of
Fiscal Federalism,
Lexington
Books,
1977,
pp. viii+355. €17.00 (board).
D.
MACKAY (ed.),
Scotland
1980:
The
Economics
of
Serf Government,
Edinburgh:
Q
Press, pp. 211. 52.40 net (paper).
M.
S.
FELDSTEIN
and
R.
P.
INMAN
(eds.),
The Economics
of
Public Services,
Mac-
Millan, 1977, pp. xiv+3-529. 520.00 net
(board).
For many years the discussion of federalism
was seen to be
a
problem in constitutional
law. The role of the economist in such dis-
cussions was never clear and frequently did
not exist. In recent years, however, econo-
mists have taken
a
more prominent and
active part in the debate. This has been due
mainly to the emergence and recognition
of
the problems of “fiscal federalism”-
broadly defined
as
the examination of inter-
regional/inter-governmental
fiscal relations
or
the economics of multi-level government.
Amongst the early pioneers of the subject
of
fiscal
federalism are included the names
of Breton, Musgrave, Oates, Olson, Tiebout,
Tullock and Wagner. One of those who has
spent the past
10
years clarifying the
problems involved is that of Wallace E.
Oates whose earlier work “Fiscal Feder-
alism’’ (1972) set the stage for further
developments.
“In
economic terms all governmental
systems are more or less federal; even in a
formally unitary system, for example, there
is typically
a
considerable extent of de facto
fiscal discretion at decentralized levels”
(Oates, 1977). The fact that
a
nation state
is divided into
a
number of different levels
of government or jurisdictions (federal,
state and
local
governments) each with
varying amounts
of
autonomy over tax and
expenditure decisions, presents
a
number of
extremely complex issues for the design of
government structures and government
policies.
First there is the whole question
of
the
“assignment problem”.
To
which levels of
government should the various functions of
government be assigned? Musgrave’s classic
tripartite division of economic functions of
government
into
allocative, stabilization
and distribution branches
is
a
useful place
to begin. Generally speaking it is agreed
that the federal or central level of govern-
ment is that most appropriately suited for
the pursuit of the stabilization and dis-
tributional objectives since that level
of
government is sufficiently aggregative to
contain the externalities which would
frustrate the pursuit of such policies by
lower levels of government.
It
is, therefore,
the allocative role of government which is
assigned to the lower levels of govern-
ment.
There
is,
however, always a potential con-
flict between the pursuit of these three
objectives of government and in
so
far as
these functions are carried out by different
levels of government there is
a
potential
conflict between the governments them-
selves. Countries like the
U.K.
for example,
have tended to reveal a preference for the
pursuit of stabilization policies whereas
other countries, such as West Germany have
placed a stronger preference on allocative
efficiency and growth.
The pursuit of the distributive objective
of central government leads it to provide
grants-in-aid to lower levels of government.
Such grants-in-aid programmes introduce
a
number of subsequent problems. Thus they
might prove to
be
pro-cyclical, thereby
213
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