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State and Local versus Federal Regulation
The Issue: Is there any inherent advantage
to federal regulation as compared to local or state regulation (or vice-versa)?
Example of local regulation
| Zoning ordinances |
| Restrictions on the use of fireworks |
| Sale of mixed drinks at restaurants |
| Rent controls |
| Smoking in public places |
State Regulations
| Regulation of state-chartered financial institutions |
| Regulation of the insurance industry |
| Legal drinking ages |
| Speed limits |
| Regulation of the gaming industry |
| The term new federalism is meant to distinguish it from the old federalism of the New Deal, an era marked by the increasing concentration of power and regulatory authority at the federal level. |
| The new
federalism signifies an increased commitment to power sharing among
governmental units--that is, the devolution or "passing
back" of power and regulatory responsibilities to the states.
Federalism is viewed by some as a code word for "states
rights." Federalism was a concept idea favored by President Reagan and his domestic policy team. Why federalism? |
| Federal laws and regulations often imposed costs on states--so called "un-funded mandates." |
| States can regulated commerce in more cost-efficient fashion. |
| Regulation of business should not necessarily be uniform across jurisdictions--that is, preferences for clean air, safe cars, gambling, etc. differ across states and therefore the character of government regulation should be state or region-specific. |
| Experimental regulatory design is less costly if unsuccessful at the state and local level. |
Advantages of National or Federal Regulations
| It is more efficient to have a federal agency (the FDA) doing drug testing than to have 50 state agencies. | |||
| Regulatory
compliance costs would tend to be less if firms face the same regulations
in all 50 states as opposed to a situation where they are have to comply
with one set of product safety standards in Alabama and another set in
Oregon. What if Detroit had to cope with different emission standards in
every state in which they sell cars?
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