TY  - JOUR
AU  - Wallis,John Joseph
AU  - Weingast,Barry R.
TI  - Equilibrium Impotence: Why the States and Not the American National Government Financed Economic Development in the Antebellum Era
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11397
PY  - 2005
Y2  - June 2005
UR  - http://www.nber.org/papers/w11397
L1  - http://www.nber.org/papers/w11397.pdf
N1  - Author contact info:
John J. Wallis
Department of Economics
University of Maryland
College Park, MD 20742
Tel: 301/405-3552
Fax: 301/405-3542
E-Mail: wallis@econ.umd.edu

Barry Weingast
Hoover Institution &
Department of Political Science
Stanford University
Stanford, CA  94305
E-Mail: Weingast@stanford.edu
AB  - Why did states dominate investments in economic development in early America? Between 1787 and 1860, the national government%u2019s $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%u2019s 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.
ER  -