Michael S. Greve, a political scientist and conservative expert on federalism, argues in The Upside-Down Constitution that the “competitive” American federalism that flourished in the nineteenth century has turned into its opposite: a system of state cartels, fostered by federal power, that stifles interstate competition and encourages state governments to profit by extracting rents nationwide. State governments are perpetrators, not victims, of the dystopian federalism that Americans now endure. Greve's inventive analysis aims to provide a broad, systematic public-choice theory for federalism that is more encompassing than the jerry-built originalism employed by conservative jurists.

Greve bases his argument on a public-choice postulate: If citizens were to have chosen a sensible government in 1787, they would have committed in principle to “competitive” federalism. This ideal type restricts government at all levels. Greve distrusts all governments, and argues that state governments constantly try to restrict interstate commerce and establish cross-state cartels to benefit themselves. Competitive federalism disciplines the federal and state governments by 1) forcing the provision of public goods downward to the most local level appropriate, and 2) forcing state and local governments to serve public preferences by ensuring that citizens can easily exit jurisdictions that provide an undesirable mix of taxes and services. Citizens (including businesses), like consumers in markets, must discipline unresponsive and inefficient states by abandoning them as they abandon undesirable products. State competition to charter corporations is a “pristine” example of this competitive federalism (p. 125). Competitive federalism limits federal powers, while it also checks the states' relentless efforts to legislate beyond truly internal matters and impose externalities on citizens in other states (p. 58).

The Constitution's Framers did not deliberately design a system of competitive federalism, but its provisions, along with two exceptional political circumstances, supported competitive federalism for more than a century. Sectional rivalry obstructed state demands for federal infrastructure funding and, after the Panic of 1837, for state budget bailouts. During the later nineteenth century, the Supreme Court smacked down the states' self-indulgent tax and regulation efforts with the dormant commerce clause (the implied constitutional prohibition on any state taxes or regulations that discriminate against interstate commerce) and the federal common-law doctrine. These court rulings nurtured the national market despite the states' efforts to confine or circumvent it. But the Court's expansive claims for federal jurisdiction over commerce also empowered future Congresses to use broadened federal commerce power to suffocate competitive federalism.

The New Deal turned competitive federalism upside down, replacing it with “cooperative” federalism, “a systemwide move to cartel federalism” (p. 193) that expanded government power at all levels. Cooperative federalism erased the role of citizen-consumers and substituted a system “by, of, for, and among government agencies and ‘responsible officials’” (p. 180). The Supreme Court decision in Erie Railroad v. Tompkins (1938) marked a paradigm shift that underwrote the power of state judiciaries to exploit out-of-state interests. Meanwhile, federal Grants-In-Aid constituted a “tax-and-spend cartel” (p. 272).

“Cooperative” federalism subsequently evolved into “Our” (contemporary) federalism, a consociational arrangement that protects groups and provides entitlements. Litigation is now the dominant form of state regulation in “Our” federalism, as exemplified in the Master Settlement Agreement (MSA) of state lawsuits against the tobacco companies. Greve concludes that “[t]his witches brew of institutional pathologies, illusions, interest groups, and ideology has over time produced public dissatisfaction and fiscal crisis” (p. 383).

Greve asserts that an overarching theory of competitive federalism is essential for breaking this disastrous system of government overreach. The Supreme Court's conservatives are bogged down by ineffective, narrow efforts to discover original intent and balance state and federal power. Instead, they need to articulate “what federalism is supposed to do” (p. 14). A conservative judicial strategy should inject more competition into federalism by reconstructing the dormant commerce clause, reenergizing federal common law, and preempting state interference with commerce (p. 355). But, the author cautions, the competitive American federalism that operated in the nineteenth century cannot be a model, because the conditions that stabilized it could not endure (p. 89).

The Upside-Down Constitution is learned, perceptive, and innovative. Greve insists that the question “Federalism to what end?” (p. 314) is central to the clash of politics and markets. His extraordinary scholarship synthesizes a vast literature that includes historians, legal professionals, and political scientists (who will recognize arguments of Theodore Lowi, Richard Bensel, Keith Whittington, and others). He challenges readers—especially conservatives, and most especially conservative jurists—to understand how government centralization and interstate relationships together expand government and undermine the checks on governments' pursuit of self-interest at both the state and federal levels.

The book's limitations will also frustrate readers, however. Many of them will grow impatient with the ambiguity of important concepts and relationships. Although state governments' exploitation of citizens in other states is a cornerstone of the book's analysis, it does not explain how to distinguish state exploitation from legitimate state efforts to protect state citizens. The book also fails to help us distinguish legitimate from abusive public goods, or legitimate from illegitimate externalities, although the latter distinction seems easy enough to Greve, since “Every econ. freshman can invent ‘externalities’ that render local projects of general importance” (p. 164). The book's causal explanations are loose and inconsistent. At some moments, important outcomes are inevitable, as when “[t]he political economy that had sustained the Commerce Clause collapsed, and the demise of the old understanding was a foregone conclusion well before the New Deal” (pp. 204–5). At others, actors seem to have considerable influence over outcomes, as when New Deal judges chose to abandon the policing of horizontal federalism.

Another limitation is that the book shifts back and forth between ideal types and empirical reality, leaving readers wondering whether an assertion is driven by theory or evidence (or perhaps evidence selected to illustrate the theory). The three ideal types—competitive, New Deal, and contemporary federalism—significantly overlap in actual American history. It is easy to show that the Constitution's Framers built a foundation for state policy cartels under national government auspices. Neither New Deal nor “Our” federalism has wiped out interstate competition for business investment, at huge costs for state governments and without a clear payoff for the national economy.

Many readers will criticize the book for emphasizing market-driven economic growth at the expense of more important values, such as individual economic security and equality of opportunity. Reasonable people have different opinions about what should be marketable and what should not, and Americans have settled these issues through the political process. After World War I, the people—not just bootleggers or greedy elites—supported a constitutional amendment that devastated large and perfectly legal American alcohol industries. But the democratic process plays little role in this public choice analysis. Here, the most important vote that American “citizen-consumers” cast is with their wallets and their feet, not with their ballots, hearts, and hands. Perhaps the plundering elites of the political class have hoodwinked some of the people some of the time, but broad and deep popular support sustains many government intrusions into markets.

Greve's analysis of federalism will be influential for years to come. The author strengthens the theoretical tools of conservative judges and lawyers. But although he himself emphasizes that politics shape constitutional interpretation, his strongest admirers will regret that he does not suggest how a conservative politics can be constructed that will restore and sustain this competitive federalism.