Libertarianism and Federalism

21 Pages Posted: 10 Oct 2014 Last revised: 24 Oct 2014

See all articles by Ilya Somin

Ilya Somin

George Mason University - Antonin Scalia Law School

Date Written: June 30, 2014


Federalism is a political system with multiple levels of government, each of which has some degree of autonomy from the others. The United States has a federalist system that encompasses the national government, states, and localities. The United States adopted federalism in part to prevent abuses of power and to preserve individual liberty. Federalism serves those goals by helping individuals to “vote with their feet,” thereby fostering interjurisdictional competition. Such benefits are most likely to be found in federal systems where subnational governments have an incentive to compete for residents and businesses because they must raise most of their revenue from their own taxpayers, as opposed to receiving subsidies from the central government. In many ethnically divided societies, federalism can also enhance liberty by reducing ethnic conflict and oppression. However, federalism can also endanger liberty or property by empowering subnational governments to exploit owners of immobile assets, most notably land. Federalism can also permit local majorities to oppress local minorities. Contrary to James Madison’s expectations, federalism in the current era is unlikely to constrain the national government since states have incentives to support the expansion and centralization of power in Washington. Whether federalism enhances liberty depends on circumstances and institutional design.

Keywords: central government, check on power, ethnic conflict, federalism, foot voting, freedom, interjurisdictional competition, libertarianism, liberty, minority groups, oppression, political philosophy, property, subnational governments

JEL Classification: Z18, Z19

Suggested Citation

Somin, Ilya, Libertarianism and Federalism (June 30, 2014). Cato Institute Policy Analysis No. 751, George Mason Law & Economics Research Paper No. 14-55, Available at SSRN:

Ilya Somin (Contact Author)

George Mason University - Antonin Scalia Law School ( email )

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