Securing Subsidiarity:
Legitimacy and the Allocation of Governing Authority

Cary Coglianese
Kalypso Nicolaïdis


Table Of Contents


I. Allocation and Legitimacy from a Principal-Agent Perspective

II. Mechanisms for Securing Allocational Legitimacy

A. Delineation

B. Monitoring

C. Sharing

D. Reversibility

III. Allocational Legitimacy in the Global Economy


1. Susan A. MacManus, "Federalism and Intergovernmental Relations," in William Crotty, Political Science: Looking to the Future, vol. 4 (1991), p. 204.

2. These theories, which seek to provide a functional rationale for the division of federal vs state power to intervene in the economy, are usually constructed as decentralization issues for mature federations. As presented, for instance, by Oates, "the determination of the appropriate degree of decentralization for a particular government sector ... requires matching public functions with their appropriate levels of application." Wallace Oates, "An Economic Approach to Federalism," in Fiscal Federalism (Harcourt Javanovich, 1972), p3.

3. Treaty on the European Union, Article 3b, reads in full: "In areas which are not under its exclusive power, the Community shall act in conformity with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the member states and can therefore, by reason of the scale and efforts of the proposed action be better achieved by the Community." A similar test of where policy can be best attained is found in the The Single European Act's provision with respect to environmental policy: "The Community shall take action relating to the environment to the extent to which the objectives referred to in paragraph 1 can be attained better at the Community level than at the level of individual member states" (Article 130R).

4. The terms "devolution," "decentralization," "delegation," "federalism," and "subsidiarity" share a common concern with the proper allocation of authority in what we call tiered regimes. We use "tiered regimes" deliberately to include both nations organized along federal lines (e.g., the U.S., Germany) as well as inter- or supranational institutions comprised of nation-states as members (e.g., the European Union). Because we mean to encompass both kinds of tiered regimes, we use the terms "lower-level" and "upper-level" governments as the generic terms for units in either kind of regime.

5. For a summary of the advantages of decentralisation and centralisation, on which this paragraph draws, see Reiner Eichenberger, "The Benefits of Federalism and the Risk of Overcentralization," Kyklos 47:403-420 (1994).

6. Our use of the word "regime" to include federal and quasi-federal systems, as well as international institutions such as the WTO, may seem a bit unconventional. We do recognizing its conventional use, but also hoping to convey the similarities between the different kinds of governance structures. We do not mean to imply that important differences do not exist across these domains.

7. Sometimes actual changes in the conditions of the world do not drive allocational shifts, but rather changed knowledge about these circumstances do. The case of transboundary sulfur dioxide pollution is one such case. See Bill Clark, Project on Social Learning and Acid Rain (unpublished).

8. Jean-Luc Migué, Federalism and Free Trade, Hobart Paper 122, London: The Institute of Economic Affairs, 1993, p. 27.

9. For a discussion of the importance of shared cultural and territorial domains for federal structures, see Daniel J. Elazar, "International and Comparative Federalism," PS: Political Science & Politics 26:190 (1993).

10. In Europe, the principle of subsidiarity takes on at least two dimensions. The first involves the level at which authority should be vested for specific policy areas, and it mirrors the long-standing debate over centralisation and decentralisation. The second dimension arises once a decision is made to delegate authority to the center. This second dimension raises the question of how intrusive policy-making by the center should be, and is often referred to as the principle of proportionality or intensity of action. Commission of the European Communities, " The principle of subsidiarity" Communication of the Commission to the Council and the European Parliament", SEC (92), Brussels, 27 October 1992. Our approach encompasses these two dimensions, but also seeks to address a much broader question of how member states can retain some of their control over a policy area even after making a delegation to the center.

11. For the seminal overview, see John Pratt and Richard Zeckhauser, "Principals and Agents: An Overview" in John Pratt and Richard Zeckhauser, Principals and Agents: The Structure of Business, Boston : Harvard Business School Press, 1985.

12. Pratt and Zechauser, p 3.

13. White, p 188.

14. The spectrum of agency ties has been thoroughly explored in the business context, from the analysis of merchant networks to the running of large corporations. See Harrison C. White, "Agency as Control," in John Pratt and Richard Zeckhauser, Principals and Agents: The Structure of Business, Boston : Harvard Business School Press, 1985, p 187-209.

15. White, p. 189.

16. White, p. 205.

17. We acknowledge that in asking this question we are implictly treating governmental units as unitary actors. Although this assumption grossly misrepresents the workings of complex institutions and ignores the multi-level games that go on within them, we plead the need of modellers everywhere to make simplifying sacrifices for the larger cause (we hope) of analytical clarity.

18. K.C. Wheare, Federal Government, 4th edition, New York: Oxford University Press, 1964, p. 2.

19. The issue of optimal assignment obviously applies to the whole array of economic policy making functions, that according to Musgrave can be categorized under a triptych, encompassing, in his terms allocation, stabilization and distribution functions R. Musgrave & P. Musgrave, Public Finance, Theory and Practice , (New York: Mc Graw-Hill, 3d ed, 1980). Musgrave's functional classification is widely used in the EC context. See for instance the Padoa Schopa Report,Commission of the European Communities, Luxembourg, 1987. Note that we use the term "allocation" differently than Musgrave to refer to the assignment of policy authority to different levels of government.

20. See U.S. Constitution, article 1, section 8, clause 3 (the "commerce clause"); EU Treaty of Rome, articles 30 and 59; GATT articles.

21. See, e.g., Pike v. Bruce Church (1970); Hunt v. Washington State Apple (1977); Philadelphia v. New Jersey (1978); Hughes v. Oklahoma (1979); Raymond Motor Transportation (1980); New Energy Co. of Indiana v. Limbach (1988).

22. For a discussion see Kalypso Nicolaïdis, "Mutual Recognition of Regulatory Regimes: Some Lessons and Prospects," in Regulatory Reform and International Market Openness, OECD Publications, November 1996.

23. See, for instance, the review of the fifth environmental program.

24. Indeed, the only other work we know of which analyses U.S. federalism in principal-agent terms explicitly and only treats the federal government as the principal vis-à-vis the states. See John Chubb, "The Political Economy of Federalism," American Political Science Review 79:994 (1985). The U.S. Supreme Court has recognized that "the sovereignty of the States is limited by the Constitution." Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985). But cf. New York v. U.S., 112 S. Ct. 2408 (1992) andU.S. v. Lopez, 115 S.Ct. 1624 (1995).

25. See, for example, the Clean Air Act's provisions for state implementation plans. 42 U.S.C. 7407, 7410.

26. Senate Report No. 104-1, p. 5.

27. Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985)

28. The exclusion of the movement of people ( article 100a.2) constituted a political compromise with Britain who consistently argued that a common immigration policy ought to be a prerequisite to free movement of persons and refused to see immigration rules fall under a majority voting procedure --for fear of having to adopt Germany's more lenient rules of entry.

29. Under the Court's jurisprudence, after harmonization has been completed a member state cannot invoke Articles 36 for goods and 56 for services in order to avoid having to comply with a Council's decision.

30. See Pescatore, "Some Critical remarks on the 'Single European Act'," in Common Market Law Review 24: 9-18, 1987.

31. In the EU context, tand in areas of mixed competence, subsidiarity requires that action at the EU level must be based on an appaisal of how necessary the proposed measures are (can the objective be satisfactorily attained by member states) and how effective they will be (can the objective be better attained by action at the Community level?).

32. It is worth noting that, in the spirit of subsidiarity, mutual recognition had served to limit the transfer of sovereignty to supranational European authority. But mutual recognition is not actually a straighforward example of subsidiarity in that it consists itself in a delegation of authority between states.

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