Nudging Federalism towards Productive Experimentation

Abstract

Formal constitutional amendment can be difficult to achieve and, without the confidence of experience, may introduce changes that too quickly and too rigidly alter the balance of authority between federal and state governments. Therefore, in federal systems it is preferable to experiment with alterations prior to formal adoption. In this article I address how federal systems encourage two types of policy experimentation that are either unlikely to be tried or unlikely to be accepted. To encourage costly state experimentation, the federal government can alter financial incentives, nudge states towards a new policy by shifting public attention, set a pre-emptive floor and offer party-based rewards. To smooth union acceptance of selfish experimentation, a set of safeguards encourages deliberation and experience with the policy that leads to public acceptance or rejection.