The second problem with competitive federalism is that it is difficult to create rules of competition which are fair.
Suppose the central government decides that all disputes between workers and employers must be decided by the regional government where the workers' union is based.
Now suppose the central government decides that all disputes between workers and employers must be decided by the regional government where the employer is based.
Disputes between workers and employers should be decided by the regional government where the factory is located.
bad federalism by statists:
Louis Brandeis, chief justice of american central government supreme court during 1930s, thought states had right to be more statist than other states, but no right to be less statist than other states
american product liability in year 2000: states with strictest product liability make policy for all states
bad federalism by antistatists:
state which makes best corporate charters makes corporate charters for all states
sales taxed at origin, location of seller: states with lowest sales tax set sales tax for all states
product liability based on location of headquarters of manufacturer: state with least liability sets liability for all states