Market-preserving federalism

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Market-preserving federalism refers to a type of federalism where the federal government has limited authority to regulate markets. In a market-preserving system, each state or province generally maintains primary authority over economic policy within its jurisdiction. The national government typically only retains the power to regulate trade between states.[1]

Background

Professor Barry R. Weingast credits market-preserving federalism for the economic growth seen in England in the 18th century, in the United States in the 19th and 20th centuries, and in China after that.[2] He argued that federalism "limits the ability of the state to confiscate wealth" and helps "commit the state to honor economic and political rights."[2]

Professors Jonathan Rodden and Susan Rose-Ackerman question the political theory of market-preserving federalism and argue that "under a range of plausible conditions, federal systems will not bear out Weingast's predictions. When they do not, a move to greater decentralization may reduce rather than increase efficiency."[3]

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