The Theory of Collective Action Federalism

I thank Eugene Volokh for inviting me to blog about my work in this highly regarded venue.  Today, I will present the theory of collective action federalism, which I have developed with Robert Cooter of Berkeley Law in a recent article.  Tomorrow, I will clarify what the theory is and is not.  Later in the week, I will offer some thoughts in response to Prof. Kurt Lash’s important new paper.

According to many respected histories, the Framers of the U.S. Constitution met in Philadelphia during the Summer of 1787 and wrote Article I, Section 8, primarily in order to address several collective action problems facing the United States during the 1780s.  They especially wanted to protect the states from commercial warfare against one another and from military warfare by foreigners.  In the Critical Period, the states often acted individually when they needed to act collectively, discriminating against interstate commerce and free riding off the contributions of other states to the federal treasury and the U.S. military.  Moreover, Congress lacked power under the Articles of Confederation to address these problems.

James Madison saw the difficulty in his Vices of the Political System of the United States. Recording various problems with the Articles, Madison underscored “want of concert in matters where common interest requires it,” a “defect . . . strongly illustrated in the state of our commercial affairs.  How much has the national dignity, interest, and revenue suffered from this cause?”  When activities spilled over from one state to another, Madison and other nationalist Framers recognized that the actions of individually rational states produced irrational results for the nation.  

This is the definition of a collective action problem.  The solution lay with the establishment of a more comprehensive unit of government.  The federal government would require the authority to tax, regulate interstate and international commerce, raise and support a military, and act directly on individuals.

The delegates at the Philadelphia Convention, in considering the scope of congressional power that would become Section 8, focused on collective action problems among the states.  The Convention instructed the midsummer Committee of Detail that Congress would have authority “to legislate in all Cases for the general Interests of the Union, and also in those Cases to which the States are separately incompetent, or in which the Harmony of the United States may be interrupted by the Exercise of individual Legislation.”  This language, particularly the astute reference to separate state incompetence, apprehends the need to address collective action problems facing the states.  When the Committee made its report ten days later, it had changed this language, derived from Resolution VI of the Virginia Plan, into an enumeration of powers closely resembling Section 8 in its final form.

This enumeration was uncontroversial among the delegates; the Convention accepted it without discussion.  The delegates apparently grasped the link between the general principles stated in Resolution VI and the specific powers conferred in Section 8.  As Robert Stern, Donald Regan, Akhil Amar, Jack Balkin, Andrew Koppelman, and other scholars have concluded, the Committee was embracing, not rejecting, the Resolution’s concern about interstate collective action problems when it provided an enumeration. 

Robert Cooter and I have observed that the eighteen clauses of Section 8 mostly concern collective action problems created by two kinds of spillovers: interstate externalities and national markets.  Clauses 1 and 10 through 16 give Congress the power to internalize the externalities associated with funding the national government, providing for the common defense, establishing a postal network, and securing intellectual property rights.  Clauses 3 through 6 give Congress the power to combat impediments to the successful operation of interstate markets.

The theory of collective action federalism draws from this history, from this evidence in the constitutional text, from subsequent historical understandings and mistakes, and from modern economics to provide a structural account of the American federal system established in part by Section 8.  Its various clauses form a coherent set, not a collection of unrelated powers.  Coherence comes from the connection that the specific powers have to collective action problems that the federal government can address more effectively than the states can address by acting alone.  

The states often cannot achieve an end when doing so requires multiple states to cooperate.  According to collective action federalism, the clauses of Section 8 empower Congress to solve collective action problems that predictably frustrate the states.  In the language of the Commerce Clause in particular, such problems are “among the several States.”

Conversely, governmental activities that do not pose collective action problems for the states are internal to a state or local.  They are beyond the scope of federal power.  Thus the foundation of federalism in Section 8 flows from the relative advantages of the federal government and the states.  The theory of collective action federalism reads the clauses of Section 8 as giving the federal and state governments the power to do what each does best.

The distinction between individual and collective action by states gives independent, sensible meaning to the phrase “among the several States” in the Commerce Clause.  According to collective action federalism, this phrase references a problem of collective action involving two or more states.  This is the key inquiry in determining whether “Commerce,” understood by the Court in terms of its economic/noneconomic categorization, is interstate and thus regulable under Clause 3, or is intrastate and thus beyond the scope of the commerce power.  Regardless of whether the economic/noneconomic categorization suffices as a definition of “Commerce,” a question on which collective action federalism takes no view, this categorization cannot define when such commerce is “among the several States” and when it is internal to one state.

The distinction between activities that pose collective action problems for the states and those that do not best explains why Congress may not usually use its commerce power to regulate such crimes as assault or gun possession in schools, but may regulate an interstate market for guns, wheat, or drugs.  That is, collective action federalism offers a way to distinguish the “truly national” from the “truly local” in the context of the Commerce Clause, justifying the outcomes in Wickard v. Filburn, United States v. Lopez, United States v. Morrison, and Gonzales v. Raich.

The Rehnquist Court implicitly considered collective action problems in determining the constitutionality of congressional regulation.  Chief Justice Rehnquist wrote in Lopez that the Gun-Free School Zones Act “is not an essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated.” This statement suggests that the absence of regulation of guns near schools in one state would not undercut the effectiveness of regulations prohibiting them in other states.  Justice Kennedy similarly wrote that if a state or local government “determines that harsh criminal sanctions are necessary and wise to deter students from carrying guns on school premises, the reserved powers of the States are sufficient to enact those measures.”

The key question presented by these cases is whether there is a spillover of welfare that causes a collective action problem.  For example, enforcing a prohibition on guns within school zones seems the opposite of a problem requiring coordination among law enforcement in different states.  It seems local: local officials presumably have better information concerning who might carry firearms near schools and better incentives to do something about the problem.

Raich, by contrast, did involve a potential spillover problem.  Because it is impossible to distinguish marijuana used for medicinal purposes from marijuana used for other purposes, and because the market for marijuana disrespects state borders, California’s authorization of marijuana use for medicinal purposes might make it more difficult for other states to ban marijuana use.  If there is no spillover problem for state policing, states should be permitted to go their own way as far as the commerce power is concerned.  But if there is a spillover — for instance, medical marijuana use in California makes it more difficult to police drug traffickers at the Arizona border — there is a rationale for federal intervention.