Most policy debates treat federalism as a marketplace where states compete to offer the best deals to mobile citizens. Cyril Hédoin dismantles this tidy economic model, arguing that it is a beautiful fiction that fails to explain how actual governments function. He suggests that the real engine of federal stability isn't competition, but the messy, sticky force of local loyalty—a distinction that matters deeply as we watch centralization trends reshape modern governance.
The Myth of the Perfect Market
Hédoin begins by exposing the idealized nature of "competitive federalism," a concept beloved by economists and libertarians. He notes that in this theoretical world, jurisdictions act like firms in a market, competing to supply public goods while citizens act as rational shoppers. "The virtue of competitive federalism is to create the conditions for a form of political competition that mimics market competition," Hédoin writes. The goal is to achieve what Milton Friedman called "unanimity without conformity," allowing individuals to opt out of political arrangements they dislike by simply moving to a different jurisdiction.
This framing is intellectually seductive because it promises to minimize the coercive nature of politics. As Hédoin paraphrases James Buchanan, the model suggests that "individual sovereignty" is maximized when people can choose their political authority. However, the author quickly pivots to the harsh reality: this model relies on assumptions that crumble under historical scrutiny. He points out that the theory assumes zero costs for moving and perfect information, conditions that rarely exist. "The model of competitive federalism has a similar status to the model of perfect competition that still appears in microeconomic textbooks," he observes. "It is very helpful to understand the properties and mechanisms of (political or economic) competition, but what it says about concrete federal systems remains to be established."
The disconnect between theory and reality is stark. In the real world, the number of jurisdictions is small, the variety of policy "bundles" is limited, and the costs of moving are prohibitive. Hédoin argues that the principle of subsidiarity—the idea that decisions should be made at the most local level possible—is far more rigid in practice than the fluid, efficiency-driven model suggests. "The distribution of competences is in reality far more entrenched and rarely open to revisions," he notes, even when technological shifts demand change.
The model of competitive federalism is an ideal theory that abstracts from all imaginable historical contingencies.
Loyalty as the Real Bulwark
If competition isn't the driver, what holds federal systems together? Hédoin turns to political theorist Jacob Levy to propose a radical alternative: federalism survives on loyalty, not exit. This is a profound shift in perspective. Instead of viewing citizens as consumers shopping for the best tax-and-service package, Levy sees them as members of a community with deep attachments to their specific state or province. "A federal polity doesn't risk degenerating into a centralized governance system as long as individuals maintain a particular attachment to their states or provinces," Hédoin explains. This attachment acts as a "bulwark against the concentration of powers."
This historical lens offers a more robust explanation for why federalism persists. The Federalists, along with thinkers like Tocqueville and Acton, understood that local loyalties create an incentive for citizens to monitor the central government. When people care deeply about their local identity, they are more likely to resist overreach from the capital. Hédoin suggests that the drift toward centralization in places like the United States may actually stem from a lack of intense local attachment in a culturally homogeneous society. "The evolution of American federalism toward more centralization... is likely to find its roots in the relatively low intensity of local loyalties," he argues.
Critics might note that relying on local loyalty carries its own dangers. History is replete with examples where strong local attachments fueled ethno-nationalistic conflicts that tore federations apart. Hédoin acknowledges this, admitting that while local loyalty prevents centralization, it can also "degenerate under the weight of conflicts fed by strong local loyalties." Yet, he maintains that this risk is preferable to the alternative of unchecked central power.
Beyond Competition: The Polycentric Future
The implications of this critique extend far beyond the United States. Hédoin connects his argument to the broader field of "polycentricity studies," which examines systems with multiple, competing centers of decision-making. He observes that much of this literature blindly adopts the competitive federalism model, assuming that competition is the primary mechanism for stability and innovation. "A very interesting feature of a large share of polycentric studies is that they more or less assume the model of competitive federalism," he writes.
By challenging this assumption, Hédoin opens the door to new questions. If loyalty, not competition, is the glue of federalism, how do we design systems that foster healthy local attachment without descending into parochialism? He suggests that polycentric systems might be better understood through the lens of deliberation and resistance to centralization rather than market-style competition. "The critique of competitive federalism I've just surveyed should encourage us to explore this issue further," he concludes, urging scholars to look at how these systems resist the gravitational pull of central authority.
Bottom Line
Hédoin's most compelling contribution is his refusal to accept the economic metaphor of federalism as a literal description of reality; he correctly identifies that human loyalty, not rational choice, is the true stabilizer of decentralized power. However, his argument leaves the reader with a difficult practical question: how do we cultivate the specific local attachments needed to check central power in an increasingly globalized and mobile world? This piece is essential reading for anyone trying to understand why federal systems survive despite their theoretical inefficiencies.