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Cognition, Incentives, and Public Governance

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  • Giampaolo Garzarelli

    (Università degli Studi di Roma, “La Sapienza,†Rome, Italy)

Abstract

The second-generation theory (SGT) of fiscal federalism, which draws upon contemporary economic and industrial organization theory, hitherto focuses only on the negative benefits of public decentralization: the potentially superior ability to align perverse incentives vis-Ã -vis the centralized governance alternative. The SGT neglects the positive benefits of decentralization (mistake-ridden learning, flexibility, and option discovery), although the limitations of organization theory do not justify such neglect. By likening intergovernmental grants to incomplete contracts, this work shows that the SGT can include the laboratory nature of decentralization.

Suggested Citation

  • Giampaolo Garzarelli, 2006. "Cognition, Incentives, and Public Governance," Public Finance Review, , vol. 34(3), pages 235-257, May.
    • Handle: RePEc:sae:pubfin:v:34:y:2006:i:3:p:235-257
    DOI: 10.1177/1091142105285593
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    References listed on IDEAS

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    1. Giampaolo Garzarelli & Matthew Holian, 2014. "Parchment, guns, and the problem of governance," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 27(1), pages 71-80, March.
    2. Garzarelli, Giampaolo & Limam, Yasmina Reem & Thomassen, Bjørn, 2007. "Open Source Software and Economic Growth: A Classical Division of Labor Perspective," MPRA Paper 3849, University Library of Munich, Germany.
    3. Garzarelli, Giampaolo, 2006. "The Organizational Approach of Capability Theory: A Review Essay," MPRA Paper 4362, University Library of Munich, Germany.
    4. Garzarelli, Giampaolo, 2018. "Internal Organization in a Public Theory of the Firm: Toward a Coase-Oates Federalism Nexus," MPRA Paper 86955, University Library of Munich, Germany.
    5. Giampaolo Garzarelli & Lyndal Keeton, 2016. "Policy Experimentation and Intergovernmental Grants in a Federal System," Working Papers 8/16, Sapienza University of Rome, DISS.

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