Constitutional Political Economy

, Volume 7, Issue 4, pp 267–279 | Cite as

A directly democratic and Federal Europe

  • Bruno S. Frey


This paper endeavors to take up the neglected aspects of federalism and direct democracy. It emphasizes the mutual dependence of the two for reaching the goals of efficiency and trust. Direct democracy is seen to preserve federalism, but even more importantly, federalism is taken to enable and to preserve effective direct democracy. Empirical evidence is adduced showing in particular that direct democracy leads to higher efficiency in the sense of lowering transaction costs. A proposal for a novel combination of federalism and direct democracy—which is called FOCJ (the acronym for “Functional Overlapping Competing Jurisdictions”)—is suggested for Europe.

JEL classification

D7 H1 H7 PO 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Arnim von, H. H. (1993) Staat ohne Diener. Was schert die Politiker das Wohl des Volkes? München: Kindler.Google Scholar
  2. Amim von, H. H. (1995) “Demokratie vor neuen Herausforderungen.” Zeitschrift für Rechtspolitik 28(Sept.): 321–60.Google Scholar
  3. Arrow, K. J. (1974) The Limits of Organizations. New York: Norton.Google Scholar
  4. Barro, R. J. (1990) “Economic Growth in a Cross Section of Countries.” Quarterly Journal of Economics 106: 407–43.Google Scholar
  5. Baumol, W. J., and Baumol, H. (1994) “On the Economics of Musical Composition in Mozart's Vienna.” Journal of Cultural Economics 18: 171–98.Google Scholar
  6. Blankart, C. B. (1992) “Bewirken Referenden und Volksinitiativen einen Unterschied in der Politik?” Staatswissenschaften und Staatspraxis 3: 509–24.Google Scholar
  7. Bohnet, I., and Frey, B. S. (1994) “Direct-Democratic Rules: The Role of Discussion.” Kyklos 47: 341–54.Google Scholar
  8. Buchanan, J. M. (1965) “An Economic Theory of Clubs.” Economica 32 (Febr.): 1–14.Google Scholar
  9. Buchanan, J. M. (1990) “Europe's Constitutional Economic Opportunity.” In: Europe's Constitutional Future. London: Institute of Economic Affairs: IEA Readings No. 33.Google Scholar
  10. Buchanan, J. M. (1991) “An American Perspective on Europe's Constitutional Opportunity.” Cato Journal 10(3): 619–29.Google Scholar
  11. Buchanan, J. M. (1991a) Constitutional Economics. Oxford: Blackwell.Google Scholar
  12. Buchanan, J. M., and Tullock, G. (1962) The Calculus of Consent. Logical Foundations of Constitutional Democracy. Ann Arbor: University of Michigan Press.Google Scholar
  13. Burt, S. (1993) “The Politics of Virtue Today: A Critique and Proposal.” American Political Science Review 87(June): 360–68.Google Scholar
  14. Butler, D., and Ranney, A. (eds.) (1994) Referendum Around the World. The Growing Use of Direct Democracy. Washington, D.C.: AEI Press.Google Scholar
  15. Casella, A., and Frey, B. S. (1992) “Federalism and Clubs: Towards an Economic Theory of Overlapping Political Jurisdictions.” European Economic Review 36: 639–46.Google Scholar
  16. Coleman, J. S. (1990) Foundations of Social Theory. Cambridge, Mass.: Harvard University Press.Google Scholar
  17. Cronin, T. E. (1989) Direct Democracy. The Politics of Initiative, Referendum and Recall. Cambridge, Mass.: Harvard University.Google Scholar
  18. Downs, A. (1957) An Economic Theory of Democracy. New York: Harper and Row.Google Scholar
  19. European Constitutional Group (1993) A European Constitutional Settlement. (Draft) London.Google Scholar
  20. Feld, L. P., and Savioz, M. R. (1996) “Direct Democracy Matters for Economic Performance: An Empirical Investigation.” Mimeo, SIASR: University of St. Gallen, Switzerland.Google Scholar
  21. Forbes, K. F., and Zampelli, E. M. (1989) “Is Leviathan a Mythical Beast?” American Economic Review 79: 587–96.Google Scholar
  22. Frey, B. S. (1978) Modern Political Economy. Oxford: Blackwell.Google Scholar
  23. Frey, B. S. (1992) “Efficiency and Democratic Political Organisation; The Case for the Referendum.” Journal of Public Politics 12(3): 209–22.Google Scholar
  24. Frey, B. S. (1994) “Direct Democracy: Politico-Economic Lessons from Swiss Experience.” The American Economic Review 84(2) May: 338–48.Google Scholar
  25. Frey, B. S. (1997) “A Constitution for Knaves Crowds Out Civic Virtues.” Economic Journal, July 1997.Google Scholar
  26. Frey, B. S., and Bohnet, I. (1994) “The Swiss Experience with Referenda and Federalism.” Idioma. Revue de linguistique et de traductologie 6: 147–60.Google Scholar
  27. Frey, B. S., and Eichenberger, R. (1993) “American and European Economics and Economists.” Journal of Economic Perspectives 7(4): 185–93.Google Scholar
  28. Frey, B. S., and Eichenberger, R. (1995) “Competition Among Jurisdictions. The Idea of FOCJ.” In: Gerken, L. (ed.) Competition Among Institutions, pp. 209–29, London: McMillan.Google Scholar
  29. Frey, B. S., und Eichenberger, R. (1996) “FOCJ: Competitive Governments for Europe.” International Review of Law and Economics, forthcoming.Google Scholar
  30. Fukuyama, F. (1995) Trust. New York: Free Press.Google Scholar
  31. Gambetta, D. (ed.) (1988) Trust: Making and Breaking Cooperative Relations. Cambridge: Cambridge University Press.Google Scholar
  32. Gwartney, J., Lawson, R., and Block, W. (1996) Economic Freedom of the World: 1975–1995. Vancouver: Liberty Institute.Google Scholar
  33. Habermas, J. (1985) Erläuterungen zur Diskursethik. Frankfurt: Suhrkamp.Google Scholar
  34. Habermas, J. (1992) Faktizität und Geltung: Beitrdge zur Diskurstheorie des Rechts und des demokratischen Rechtsstaats. Frankfurt: Suhrkamp.Google Scholar
  35. Hayek, F. A. (1960) The Constitution of Liberty. London: Routledge.Google Scholar
  36. Jones, E. L. (1981) The European Miracle. 2nd edition 1978. Cambridge: Cambridge University Press.Google Scholar
  37. Kelman, S. (1992) “Adversary and Cooperationist Institutions for Conflict Resolution in Public Policymaking.” Journal of Policy Analysis and Management 11: 178–206.Google Scholar
  38. Kirchgässner, G. (1994) “Constitutional Economics and Its Relevance for the Evolution of Rules.” Kyklos 47(3): 321–39.Google Scholar
  39. Kramer, R. M., and Tyler, T. R. (eds.) (1996) Trust in Organizations. Thousand Oaks: Sage.Google Scholar
  40. Mansbridge, J. (ed.) (1990) Beyond Self-Interest. Chicago: University of Chicago Press.Google Scholar
  41. Matsusaka, J. G. (1995) “Fiscal Effects of the Voter Initiative: Evidence from the Last 30 Years.” Journal of Political Economy 103: 587–623.Google Scholar
  42. Mehay, S. L. (1984) “The Effect of Governmental Structure on Special District Expenditures.” Public Choice 44: 339–48.Google Scholar
  43. Möckli, S. (1994) Direkte Demokratie. Ein internationaler Vergleich. Bern and Stuttgart: Haupt.Google Scholar
  44. Mueller, D. C. (1989) Public Choice 11, 2nd edition. Cambridge: Cambridge University Press.Google Scholar
  45. Mueller, D. C. (1996) Constitutional Democracy. Oxford: Oxford University Press.Google Scholar
  46. Nelson, M. A. (1987) “Searching for Leviathan: Comment and Extension.” American Economic Review 77: 198–204.Google Scholar
  47. Oates, W. E. (1972) Fiscal Federalism. New York: Harcourt Brace Jovanovich.Google Scholar
  48. Oates, W. E. (1985) ldSearching for Leviathan: An Empirical Study.“ American Economic Review 75: 748–57.Google Scholar
  49. Olson, M. (1969) “The Principle of ‘Fiscal Equivalence’: The Division of Responsibilities among Different Levels of Government.” American Economic Review 59(2): 479–87.Google Scholar
  50. Pak, H. M. (1995) “Effective Competition, Institutional Choice and Economic Development of Imperial China.” Kyklos 48: 87–103.Google Scholar
  51. Pommerehne, W. W. (1978) “Institutional Approaches to Public Expenditure: Empirical Evidence from Swiss Municipalities.” Journal of Public Economics 9(April): 255–80.Google Scholar
  52. Pommerehne, W. W. (1982) “Steuern, Staatsausgaben und Stimmbürgerverhalten: Eine empirische Untersuchung am Beispiel der öffentlichen Subventionierung des Theaters.“ Jahrbücher für Nationalökonomie und Statistik 1975: 437–62.Google Scholar
  53. Pommerehne, W. W. (1990) “The Empirical Relevance of Comparative Institutional Analysis.” European Economic Review 34(May): 458–69.Google Scholar
  54. Pommerehne, W. W., and Frey, B. S. (1976) “Two Approaches to Estimating Public Expenditures.” Public Finance Quarterly 4: 395–407.Google Scholar
  55. Pommerehne, W. W., and Frey, B. S. (1993) “The Effects of Tax Administration on Tax Morale.” Unpublished manuscript, Department of Economics, University of Saarbrücken, Germany.Google Scholar
  56. Putnam, R. D. (1995) “Tuning In, Tuning Out: The Strange Disappearance of Social Capital in America.” PS: Political Science and Politics (Dec.): 664–83.Google Scholar
  57. Rosenberg, N., and Birdzell, L. E. (1986) How the West Grew Rich. The Economic Transformation of the Industrial World. London: I.B. Tauris.Google Scholar
  58. Schneider, F., and Pommerehne, W. W. (1983) “Macroeconomia della crescita in disequilibrio e settore pubblico in espasione: il peso delle differenze istituzionali.” Rivista Internazionale di Scienze Economiche e Commerciali 33: 306–20.Google Scholar
  59. Schumpeter, J. A. (1942) Capitalism, Socialism and Democracy. New York: Harper.Google Scholar
  60. Tiebout, C. M. (1956) “A Pure Theory of Local Expenditure.” Journal of Political Economy 64 (Oct.): 416–24.Google Scholar
  61. Tocqueville, A. de [1835–1840] (1945) Democracy in America. New York: Vintage.Google Scholar
  62. Tullock, G. (1985) “A New Proposal for Decentralizing Government Activity.” In: Milde, H., and Monissen, H. G. (eds.) Rationale Wirtschaftspolitik in komplexen Gesellschaften. Stuttgart: Kohlhammer.Google Scholar
  63. Tullock, G. (1994) The New Federalist. Vancouver: Fraser Institute.Google Scholar
  64. Vaubel, R. (1992) “The Political Economy of Centralization and the European Community.” Journal des Economistes et des Etudes Humaines 3: 403–37.Google Scholar
  65. Vaubel, R. (1994) “The Political Economy of Centralization and The European Community.” Public Choice 81: 151–90.Google Scholar
  66. Vibert, F. (1995) Europe: A Constitution for the Millenium. Dartmouth: Aldershot.Google Scholar
  67. Weede, E. (1993) “The Impact of Interstate Conflict on Revolutionary Change and Individual Freedom.” Kyklos 46: 473–95.Google Scholar
  68. Weingast, B. (1993) “Constitutions as Governance Structures: The Political Foundations of Secure Markets.” Journal of Institutional and Theoretical Economics 149(1): 286–311.Google Scholar
  69. Weingast, B. (1995) “The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Growth.” Journal of Law, Economics and Organization 11: 1–31.Google Scholar
  70. Williamson, O. E. (1992) “Calculativeness, Trust and Economic Organization. Organizational Behavior and Industrial Relations.” Journal of Law and Economics 36(April): 453–86.Google Scholar
  71. Wilson, J. Q. (1993) The Moral Sense. New York: Free Press.Google Scholar

Copyright information

© Kluwer Academic Publishers 1996

Authors and Affiliations

  • Bruno S. Frey
    • 1
  1. 1.University of ZurichInstitute for Empirical Economic ResearchZurichSwitzerland

Personalised recommendations