Why Is Central Regulation of Local Spending Decisions So Pervasive? Evidence From a Case Study

While the “classical” theory of fiscal federalism argues that local authorities should have substantial discretion to set the local budgetary mix, surveys show that central regulation of local spending decisions is pervasive. Norway provides an ideal setting for studying spending regulations. An attempt to decentralize fiscal choice to the local levels, the block grant reform, has been reversed in recent years. This article presents a case study of the interaction between a county and the national government from 1986, when the reform was implemented, to 1992. The study concludes that the government introduced new regulations to prevent local authorities from distorting spending decisions in order to elicit higher grants.     

The state of nature in the shadow of contract formation: Adding a missing link to J.M. Buchanan's social contract theory

The social contract theory of J.M. Buchanan provides no clear-cut answer on the question which one of the multitude of possible Pareto-efficient contracts is chosen by individuals who shape a contract in an (imaginary) state of nature. This deficiency is remedied in this paper by adding the Nash-bargaining theory. It seems to be in line with at least part of Buchanan's reasoning. Whereas for Buchanan the configuration of contract depends unilaterally on the natural equilibrium of the state of nature, we are able to show that the parties' (rational) contractual expectations have repercussions for their behavior in the state of nature. That is why the location of the natural equilibrium proves to be heavily dependent on the chosen bargaining theory. The implication is that assessing the legitimacy of a given constitutional order or contract (on the basis of the natural equilibrium) depends on the particular bargaining theory chosen to solve the underlying constitutional distribution problem. I am grateful to D. Andrews, D. Schmidtchen and U. Witt for helpful comments on earlier drafts. The usual caveat applies.     

Norway's Full-Employment Oil Economy - Flexible Adjustment. or Paralysing Rigidities?1

Two stones may be told about Norwegian macroeconomic management since 1973. The first one is the flexible-adjustment story: Norway defended full employment using oil revenues to manage structural change. to keep manpower in the primary sectors and create new employment opportunities in the welfare state. The second is the paralysing-rigidifies story: Norway used oil revenues to shelter its manufacturing industries and low-productivity agriculture from competition, and to expand the welfare state which created numerous crowding out mechanisms. The first section below reviews some strong statements of these stories. while the following two sections review contemporary debates on the notions of flexibility and rigidity, relating also to the question of Norway's ‘democratic corporatism’. The final two sections attempt to take a more detached look at the events about which the two stories are told. Five phases are distinguished, and the two ‘consumption booms’ (1973-77 and 1984-86) and the following austerity phases (1977-81, 1986-) are compared.     

Fatal outcome of poisoning with the benzodiazepines flunitrazepam and diazepam

On a wintry day a 29-year-old woman was found dead beside her car showing head injuries and signs of hypothermia. Several empty packets of sedative and hypnotic drugs were lying inside the car. Toxicological analysis revealed the presence of flunitrazepam (heart blood of the left and right chamber 0.033 mg/L each), norflunitrazepam (left heart blood 0.029 mg/L, right heart blood 0.027 mg/L), 7-amino-flunitrazepam (left heart blood 0.090 mg/L, right heart blood 0.104 mg/L), diazepam (left heart blood 0.395 mg/L, right heart blood 0.386 mg/L), nordazepam (left heart blood 0.112 mg/L, right heart blood 0.115 mg/L) and temazepam (left heart blood 0.034 mg/L, right heart blood 0.033 mg/L). Neither alcohol nor other drugs were found. It was concluded that benzodiazepine intake led to a disturbance of consciousness. Whether the woman died in this situation due to the icy temperature as a result of hypothermia or whether she died or would have died solely due to benzodiazepine overdosage could not be clarified.     

Accidental drowning due to tropane alkaloid abuse

The cause of drowning deaths in good swimmers may be difficult to solve. After homicide, suicide and other kinds of immersion deaths have been ruled out, not only alcohol and narcotics, but also other psychotropic substances such as thornapple and angel's trumpet should be taken into consideration--at least in adolescents and young adults. The article reports on an accidental death by drowning under the influence of tropane alkaloids after consumption of a decoction of the flowers of angel's trumpet.     

Terrorism and pork-barrel spending

The horrifying, tragic events of 9/11 made Americans aware of their vulnerability to terrorist attacks and triggered the creation of the Department of Homeland Security along with a substantial increase in federal spending to both thwart terrorist attacks and to increase our ability to respond to such emergencies. Much of this large increase in spending was in the form of direct transfers to states and cities through several grant programs. Homeland Security grants may be used for protection against terrorist activities, thereby enhancing public interests, or as wealth transfers to state and local governments, enhancing the reelection efforts of incumbents, and thus, private interests. Using 2004 per capita Homeland Security grant funding to states and their cities, we find that the funding formula used for some of the grant programs, which allocates almost 40% of the funds in some grant programs through a minimum percent to each state with the rest allocated based on population, means that per capita funding is related to electoral votes per capita, i.e., to the politics of Presidential re-election. However, the funding in other grant programs is also related to some of the dangers and vulnerabilities faced by states and their cities. Some of the variation in per capita grant allocations is also explained by the amount of airport traffic in the state and the state's population density, which are variables closely linked to the state's vulnerability to attack. Per capita Homeland Security grant allocations, however, do not seem to be related to the closeness of the 2000 presidential race.