Equilibrium Impotence: Why the States and Not the American National Government Financed Economic Development in the Antebellum Era / John Joseph Wallis, Barry R. Weingast.

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Wallis, John Joseph

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w11397.Publication details: Cambridge, Mass. National Bureau of Economic Research 2005.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Why did states dominate investments in economic development in early America? Between 1787 and 1860, the national government's $54 million on promoting transportation infrastructure while the states spent $450 million. Using models of legislative choice, we show that Congress could not finance projects that provided benefits to a minority of districts while spreading the taxes over all. Although states faced the same political problems, they used benefit taxation schemes -- for example, by assessing property taxes on the basis of the expected increase in value due to an infrastructure investment. The U.S. Constitution prohibited the federal government from using benefit taxation. Moreover, the federal government's expenditures were concentrated in collections small projects -- such as lighthouses and rivers and harbors -- that spent money in all districts. Federal inaction was the result of the equilibrium political forces in Congress, and hence an equilibrium impotence.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w11397 (Browse shelf(Opens below))	Not For Loan

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June 2005.

Why did states dominate investments in economic development in early America? Between 1787 and 1860, the national government's $54 million on promoting transportation infrastructure while the states spent $450 million. Using models of legislative choice, we show that Congress could not finance projects that provided benefits to a minority of districts while spreading the taxes over all. Although states faced the same political problems, they used benefit taxation schemes -- for example, by assessing property taxes on the basis of the expected increase in value due to an infrastructure investment. The U.S. Constitution prohibited the federal government from using benefit taxation. Moreover, the federal government's expenditures were concentrated in collections small projects -- such as lighthouses and rivers and harbors -- that spent money in all districts. Federal inaction was the result of the equilibrium political forces in Congress, and hence an equilibrium impotence.