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• W3125280455 abstract "Innovations in government produce positive externalities for other jurisdictions. Theory therefore predicts that local government will tend to produce a lower than optimal amount of innovation, as officials will prefer to free ride on innovation by others. As Susan Rose-Ackerman observed in 1980, these predictions, if true, tend to undermine arguments by proponents of federated government that decentralization will lead to many competing “laboratories of democracy.” In this Article, we review and critically assess nearly three decades of responses to Rose-Ackerman’s arguments, none of which have been discussed in depth in the legal literature. In addition, we ∗ Associate Professor, Georgetown University Law Center (visiting 2008–2009); Assistant Professor, Florida State University College of Law. † Visiting Assistant Professor, Seattle University Law School; Assistant Professor, South Texas College of Law (as of July 2009). The authors are grateful for helpful comments and suggestions from Bill Bratton, Mike Dorf, Malcolm Feeley, Amanda Frost, Anup Malani, Rob Mikos, Larry Ribstein, Susan Rose-Ackerman, Jim Rossi, Ed Rubin, David Schleicher, Rich Schragger, Manuel Utset, and Don Weidner, as well as from attendees of presentations at Vanderbilt Law School and the Canadian Law and Economics Association Annual Meeting. GALLE&LEAHY GALLEYFINAL 6/2/2009 12:18:03 PM 1334 EMORY LAW JOURNAL [Vol. 58 sketch and evaluate other possible grounds for believing that local officials may have incentives to innovate in the face of the temptation of free-riding. We conclude that there are no demonstrably overwhelming replies to RoseAckerman’s skepticism, and analyze the policy implications that follow. For instance, we suggest that one implication may be that certain regulatory regimes, such as corporate governance regulation, might best be centered at the national level, where collective action problems affecting public officials are lessened. However, we also caution that this result would depend on the likely effectiveness of industry itself propagating “good” regulation, or the effectiveness of contracting regulatory functions out to intermediaries, such as private consulting firms or nonprofit organizations, who might use property rights to more fully capture the gains of policy innovation. INTRODUCTION 1335 I. SPILLOVERS AND THE ROSE-ACKERMAN THESIS 1341 II. INFORMATION EXTERNALITIES 1346 A. Opportunities for Free-Riding 1346 1. Relevancy 1347 2. Information 1351 a. Nature of Information 1352 b. Ease of Distribution 1355 c. Access and Individual Incentives to Share 1355 3. Costs of Adopting 1357 4. Summing Up 1360 B. Is There a First-Mover Advantage? 1361 C. Will States Really Experiment? 1368 D. Free-Riding Summary 1370 III. AGENCY COSTS AND OFFICIAL RISK AVERSION 1371 A. The Base Case of Risk-Averse Officials 1371 B. Risk Aversion and Innovation Under Public Choice Theory .... 1375 C. Extra-Jurisdictional Effects 1379 1. Fundraising 1379 2. Ambitions for Higher Office 1382 3. Policy Evangelism 1386 D. Challengers, Not Incumbents? 1389 E. Other Psychological Factors 1390 F. Role of Political Parties 1394 G. Summary 1397 CONCLUSION 1398 GALLE&LEAHY GALLEYFINAL 6/2/2009 12:18:03 PM 2009] LABORATORIES OF DEMOCRACY? 1335" @default.
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• W3125280455 title "Laboratories of Democracy? Policy Innovation in Decentralized Governments" @default.
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