A Note on Interpreting Jurisdictional Competition in U.S. History
Originally published in Journal of Prices and Markets
Stephanie Moussalli’s The Fiscal Case Against Statehood is an institutionally rich and genuinely interdisciplinary contribution to understanding the incentives faced by political actors in the states and territories of the 19th century United States. One of Moussalli’s key findings is that local governments exercise less fiscal restraint after achieving statehood than they had as federally managed territories. There are two ways to interpret this result. Moussalli’s preferred interpretation is that competition between politically decentralized states was not an effective mechanism for constraining local political actors. In this note, I suggest the alternative interpretation that due to the significant gains associated with statehood and the fact that attracting population was an important part of the quest for statehood, territorial politicians may actually have been more susceptible to the influence of jurisdictional competition than state politicians. Consequently, admission to the union removed a source of competitive pressure that had previously constrained fiscal behavior.