Handbook of Multilevel Finance
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Handbook of Multilevel Finance

Edited by Ehtisham Ahmad and Giorgio Brosio

This Handbook explores and explains new developments in the “second generation” theory of public finance, in which benevolent rulers and governments have been replaced by personally motivated politicians and the associated institutions. Following a comprehensive introduction by the editors, the renowned contributors present fresh and original perspectives on the key multi-level issues, along with recent developments in theory and practice, as they relate to taxes, budget systems, the management of liabilities and macroeconomic stability. The book also explores special issues concerning the poor and marginalized, structural change and the environment, natural disasters, and the task of overcoming conflicts whilst keeping countries together.
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Chapter 3: Toward a positive theory of federalism and political decentralization

Albert Breton


The meaning of the words ‘positive theory’ in the title of this chapter is not self-evident. A part, but only a part, of the meaning is provided by John Neville Keynes’s (1890[1955]: 34) well-known and widely accepted distinction between positive and normative science with the first defined ‘as a body of systematized knowledge concerning what is’ – or in the words of Paul Anthony Samuelson (1983: 7) concerning ‘some part of the world of reality . . . .’ In the present chapter ‘what is’ or ‘some part of the world of reality’ concerns federalism and political decentralization generally, a most important genus among the latter being decentralized unitary states. The title also makes use of the word ‘toward’ to emphasize that the approach adumbrated in the chapter is far from full or complete. Much more research will be required before one can do away with such words. Federalism and political decentralization are dimensions of the organization of governmental systems. Four among those that may be called the structural dimensions of these systems are: (a) the number of jurisdictional tiers or levels; (b) the number of units – such as provinces and municipalities – at all tiers below the central (or national) level; (c) the size and size-distribution of units at each level (again, except at the centre); and (d) the constitutional–legal status of units at each tier.

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