In the last two decades, many cases of actual or attempted federal preemption of state regulation have followed an intriguing new interactive pattern. While this pattern is not comprehensive enough to define a new theory of federalism (see Zimmerman 2004), it now occurs regularly enough to merit close attention and an attempted understanding of its dynamics (see Walters 2004). It is also an example of the kind of complicated federalism, with vertical checks, balances and thresholds, that has emerged in a 21st century America closely divided upon whether and how to use government policy to address various social and economic problems.

Was state financial regulation a major cause of the massive savings and loan (S&L) failures in the late 1980s? This question is critical at a time of continuing devolution of regulatory authority to the states. We employ a database of information on nearly 4,000 S&Ls in this period to understand the factors that led some of them to fail. We find that state-chartered S&Ls failed at higher rates than federally chartered firms, but that the extremely high failure rate of Texas-chartered S&Ls explains all of this difference. The actions of a single, large state can make an enormous difference in the American federal system of regulation. We also find that stock-owned S&Ls failed at a higher rate than mutually owned S&Ls, and that S&Ls chartered in jurisdictions with more autonomous regulatory structures failed at a higher rate. Thus, when the principal-agent relationship in S&L regulation was weakest, S&L failures were most prevalent.

Is American state regulation a quaint anachronism from the nineteenth century, hanging on like a faded Victorian mansion in a twenty-first-century neighborhood increasingly subsumed by modern, international regulatory architectures? Or is it a booming area of devolved powers in our federalist system, creating more innovation and efficient small-scale bargaining than out-of-touch regulators in Washington do? Surprisingly, state regulation is becoming more important in shaping American firms operating in global markets. I present a revised interpretation of American regulatory federalism, including the “gap filling” or “re-enforcement” efforts by some state legislatures or attorneys general as federal regulators relax enforcement efforts. I summarize the results of 10 new quantitative studies of major regulated industries across the 50 states and over time. Overall, capture or rent-seeking models do not explain most regulatory areas, which show considerable interest-group contestation and provide room for institutional actors to wield autonomous, influential power. The heightened salience of state regulation is reflected by increased gubernatorial effort in many states, parallel to recent presidential efforts to centralize regulatory policy-making.

Retail sales on the Internet are growing at a rapid pace. Some states have tapped into this potential revenue source with Internet sales taxes, while others have not. What are the factors that lead states to make these policy decisions? Using a 50-state comparative research design, we find that interest groups, as much as the partisan and economic factors emphasized in previous research on state tax policy, are correlated with adoptions of these state tax innovations. Furthermore, this interest group influence is not limited to a single industry, but comes from self-interested groups representing both sides of the issue, including newly emerging technology interests.

While the possible decline in the level of social capital in the United States has received considerable attention by scholars such as Putnam and Fukuyama, less attention has been paid to the local activities of citizens that help define a nation's stock of social capital. Scholars have paid even less attention to how institutional arrangements affect levels of social capital. We argue that giving parents greater choice over the public schools their children attend creates incentives for parents as “citizen/consumers” to engage in activities that build social capital. Our empirical analysis employs a quasi-experimental approach comparing parental behavior in two pairs of demographically similar school districts that vary on the degree of parental choice over the schools their children attend. Our data show that, controlling for many other factors, parents who choose when given the opportunity are higher on all the indicators of social capital analyzed. Fukuyama has argued that it is easier for governments to decrease social capital than to increase it. We argue, however, that the design of government institutions can create incentives for individuals to engage in activities that increase social capital.

In their 1993 article in this Review, Paul Teske, Mark Schneider, Michael Mintrom, and Samuel Best sought to establish the microfoundations for a model of a competitive market for public services between local governments in polycentric regions. An important part of their model focused on subgroups of informed citizens, especially recent movers. Theoretical analysis was supplemented by an empirical study of the factors shaping accuracy of Long Island homeowners' information about relative expenditures and tax rates of their school districts. David Lowery, W. E. Lyons and Ruth Hoogland DeHoog criticize the relevance of this empirical evidence, suggesting the atypical nature of education as a service (especially in this site) and challenging the sufficiency of the demonstrated levels of information for generating a competitive market. Teske and his colleagues reply by pointing out the general importance of education throughout American local policymaking and by defending the relevance of their measures and conclusions for their market model.

The Tiebout model of competition in the local market for public goods is an important and controversial theory. The current debate revolves around the apparent disparity between macro empirical studies that show greater efficiency in the supply of public goods in polycentric regions compared to consolidated ones and micro evidence of widespread citizen-consumer ignorance, which has been used to argue that individual actions cannot plausibly lead to efficiency-enhancing competition between local governments. We argue that competitive markets can be driven by a subset of informed consumers who shop around between alternate suppliers and produce pressure for competitive outcomes from which all consumers benefit. Using data from a survey of over five hundred households, we analyze the role of these marginal citizen-consumers and incorporate the costs of information gathering and the strategic interests of local governments into the competitive market model.

Political scientists have been increasingly interested in entrepreneurs—individuals who change the direction and flow of politics. In this research note, we synthesize aspects of an economic approach to entrepreneurship with concepts used in political science. We then tie these theoretical observations to the emergence of entrepreneurs in local governments and test components of our theory using observations from a large set of suburban municipal governments. Empirically, we identify several conditions that affect the probability that an entrepreneur will emerge in a local government, especially slack budgetary resources that the political entrepreneur can reallocate. We also find that the probability with which an entrepreneur is found in local government is a function of the difficulty of overcoming collective action problems in a community.