Competition and Federalism

"Should governments — of nations, states and towns — compete like business rivals?"

This question opens Greg Mankiw's opinion piece in the Sunday, April 15, print edition of The New York Times.  The column reflects the Harvard professor's perspective, of course, but I found this a fairly even-handed discussion of the subject as it relates in particular to the matter of federalism.  And he approaches it in a somewhat novel way.  After explaining how competition among governments may benefit citizens, he summarizes the economic point in terms of political philosophy:

Whether competition among governments is good or bad comes down to the philosophical questions of what you want government to do and how much you fear government power. If the government’s job is merely to provide services, like roads, schools and courts, competition among governmental producers may be as good a discipline as competition among private producers. But if government’s job is also to remedy many of life’s inequities, you may want a stronger centralized government, unchecked by competition. 

What is noteworthy about this quote and the larger column is not that there exist philosophical differences about the purpose of governments.  Noteworthy, rather, is how the economic notion of competition serves as a helpful heuristic for understanding these political differences.  The point Mr. Mankiw is making is not about what sort of government sponsors a certain type of economic system.  That is well-worn.  His point, instead, it strikes me somewhat afresh, goes the other direction.  It is how one may apply an economic idea as a way of grasping something central about a certain political system.  In the present case, the political system in question is a federalist one, that is, one in which power is shared between a central, national government, on the one side, and discrete, state (and local) governments, on the other.

To be sure, that an economic system can throw light on a political system is not new (hence I say "somewhat novel").  You see that with rote rehearsals of Marxism all the time.  I had not seen it before applied to federalism per se.

Mr. Mankiw's full essay may be found here.