Can the States Lead?

With the federal government plagued by gridlock, policy advocates have increasingly turned to the state level to address broadly-scoped economic concerns like inequality and climate change. Yet, the ability of states to adopt transformative policy reforms is constrained by inter-state competition, coordination issues, influence of concentrated interests, and budgetary limits. Scholars have long recognized that, given these limitations, state governments are most influential when they can influence politics and policies beyond their borders—in other states and the federal government. My book project, “Can the States Lead? American Federalism and the Political Economy of Reform” offers a new approach for understanding and studying the cross-state and national-level political implications of state policy reforms.

The conventional lens for studying policy interdependence in American federalism is policy diffusion, which refers generally to how adoption of a policy in one unit can increase the likelihood of its subsequent adoption elsewhere. Two mechanisms have emerged in the federalism literature as central to the diffusion process: learning and competition. At a basic level, in the policy diffusion perspective, re-election motivated lawmakers learn and compete in order to select policies that work well for their constituents. This approach implicitly assumes that policies are chosen to maximize constituent well-being. In doing so, it misses the powerful role of organized interests in determining whether policy reforms succeed.

The book’s core theoretical innovation is a model of policy interdependence that accounts for how state policies affect the power and preferences of organized economic interests engaging across the federal system—that is, in other states and at the federal level. This framework builds on a robust literature exploring how enacted policies reshape politics (“policy feedback”), but considers how feedback effects can manifest across sites and levels of government. First, state policies can provide fertile ground for the formation of new pro-reform economic interests and organizations. Second, state policies can strengthen existing pro-reform organized interests. Third, state policies can compel existing organized interests to adapt to new policy environments, which in turn shifts their preferences in the pro-reform direction. As a result, the adoption of new policies at the state level can, depending on their design, generate and strengthen coalitions that advocate for the adoption of those and aligned policies in other states and at the federal level.

I examine four policy areas in which state governments have experimented with new policies ahead of the federal government: rooftop solar policy, marijuana policy, charter school policy, and electric vehicles policy. Each is highly relevant to contemporary policy and political debates. Drawing on a mix of quantitative and qualitative evidence, I show how state-level policies reshaped the interest group politics in states where policy reforms were achieved—but also in other locales. For instance, in the case of solar policy, in a chapter that builds on my 2021 Perspectives on Politics article, I show that state policies were not only fundamental to the emergence of large installer firms, but also affected the resources these firms had at their disposal to expand and defend pro-solar policies across the country. Using firm-level installation data and lobbying disclosure data, as well as case studies, I demonstrate that installers leveraged growth in states with favorable policies to engage politically in other states. Their engagement, in several cases, led to policy shifts that turned states into new markets for installers to then expand into. I also show how state policies reconfigured national politics, as members of Congress representing states with robust rooftop solar growth became key supporters of national-level pro-solar policies.  

However, demonstrating the causal effect of state policy decisions on national politics is fraught—state policies, after all, are not randomly determined. In the chapter on marijuana policy reform, I leverage exogenous variation in likelihood of legalization from ballot initiative rules (using instrumental variables analysis) to estimate the causal effect of legalization on representation in Congress. Results suggest that legalization—chiefly through the mechanisms of industry growth—had a causal effect on the likelihood that members sponsored and voted for liberal marijuana legislation. That members represent the business interests in their districts is not novel. Critical to my argument is the idea that which businesses grow and attain political influence in Congress is a function of prior state policy decisions. This is very clear in the case of the marijuana industry’s dependence on legalization.

I highlight similar dynamics in the book’s other cases: electric vehicles and charter schools. But each is different in ways that add nuance to the broader argument. For instance, in the case of electric vehicles, the adaptation of incumbent carmakers in response to new state policies was fundamental to the emergent pro-electrification coalition. In the case of charter schools, the key actors in emergent pro-charter political coalitions were not charter schools themselves—which depended directly on charter laws—but rather the large philanthropists that started to fund them.

By highlighting the national-level political implications of state-level policy decisions, the book supports the notion that state politics and policy is more consequential than traditional perspectives on federalism suggest, and in doing so, helps to explain why national groups have made such massive investments in state politics in recent years. Indeed, findings suggest that state policy reform can be a crucial ingredient in building coalitions for policy change with national scope.