Federalism for market

Samriddhi Foundation will be conducting  Liberty Discussion Series on June 30, 2017 at Gaia Restaurant and Coffee Shop, Thamel at 5:30 – 7:00 pm. The discussion is on the theme ‘federalism and market’. The suggested article is ‘Federalism as a Commitment to Preserving Market Incentives’ by Y. Qian and B. R. Weingast. The article can be downloaded here.

‘How do governments commit to providing efficient public goods and preserving market incentives? The answer lies in the governance structure of the state (Williamson, 1996). Preserving markets requires that the state be effective yet limited. Several mechanisms are known to further this objective, such as the rule of law, horizontal separation of powers (for example, into the executive, judiciary and legislative branches), and democracy, but all such mechanisms are imperfect. In this paper, we suggest that federalism—the appropriate decentralization from the central to local governments—provides another solution.

Through the appropriate decentralization of information and state power, federalism can establish positive incentives to limit the state predation problem and negative incentives to reduce the soft budget constraint problem. Increases in efficiency may arise in a dynamic setting when the central government gives up a combination of information and authority. Increasing the transaction costs of future government intervention may be essential for credible commitments and thus for efficiency.’

As always, how we roll during the discussion is the same. It is a pre-requisite to read the articles to sit in the discussion. We will begin by hearing from everyone what is his/her favorite line/idea in the whole article. So please highlight your favorite lines as you go through the article.Then we will move on to talk about things you did not like/do not agree with and raise the points you would like to discuss.

As there is a larger pool of invitation going out, the maximum we can accommodate is 12 people. So a confirmation email from your side would help us with the arrangements. If your time allows and you are willing to come to the discussion, please simply write a one-liner and send it to

We look forward to a lively discussion as always.