Competitive federalism, individual autonomy, and citizen sovereignty

The paper examines the theory of competitive federalism, focusing specifically on Hayek's and Buchanan's significant contributions to this theory. Looking at the rivalry between sub-units in federal systems and drawing an analogy between market competition and intergovernmental competition, the theory of competitive federalism stresses the critical role viable exit options play as operating force in both arenas. The principal claim argued for in this paper is that by exclusively focusing on exit in its territorial dimension, the theory of competitive federalism obfuscates the fact that “exit” can mean two critically different things in federal systems. It can mean exiting from the territory over which a government exercises its assigned authority, and it can mean exiting from a polity in the sense of giving up one's membership status in the respective community. The paper discusses the nature, the significance, and the implications of the difference between these two kinds of exit.