A federal constitution ideally gives the central and state governments the power to do what each does best. But economic activity does not generally cause collective action problems among the states, and noneconomic activity is not generally free from collective action problems. Consequently, Congress is not generally better at regulating economic activity, and the states are not generally better at regulating noneconomic activity. The distinction between economic and noneconomic activity seems mostly irrelevant to the problems of federalism. We propose a better foundation for American federalism in Section 8. Our theory distinguishes activities that pose collective action problems from those that do not. This approach flows directly from the relative advantages of the federal government and the states. We show that Section 8 mostly concerns collective action problems created by interstate externalities and national markets. We conclude that Section 8 authorizes Congress to tax, spend, and regulate to solve these collective action problems. Collective action federalism finds that the limits and expanse of congressional power in Section 8 turn on the difference between individual and collective action by the states. The theory uses this distinction to differentiate interstate commerce from intrastate commerce, not the economic/noneconomic distinction. Our distinction best explains why Congress may not ordinarily use its commerce power to regulate such crimes as assault or gun possession in schools. Collective action federalism also identifies a constitutional “hook” for Congress to regulate multi-state problems of collective action that may not involve commerce: Clause 1 of Section 8 authorizes some forms of regulation of noneconomic harms that spill over state boundaries, such as contagious diseases and certain kinds of environmental pollution.

Despite hundreds of cases, including recent challenges to initiatives on same-sex marriage, illegal immigration, eminent domain, and taxes on oil profits, judges and scholars have been unable to define a “subject” with precision. This has led to inconsistent case outcomes, accusations of judicial activism, calls to repeal the rule, and anxiety among judges who must decide inflammatory issues by applying an undefined concept.

Judges and scholars will never find a legal definition of “subject” by focusing exclusively on logic and language. Instead, the definition must be drawn from political theory. In the legislature, representatives of the citizens can bargain with each other, allowing compromise among groups that disagree politically. In contrast, hundreds of thousands of unorganized voters must accept or reject initiatives as presented to them. Those voters cannot bargain among themselves, but they can override legislative bargains that serve special interests. This political vision exposes the true justification for the single subject rule: to empower the majority on issues where there is one, and to channel bargaining and compromise into the legislature where it belongs.

In Solomon’s Knot, Cooter and Schäfer propose a legal theory of economic growth that details how effective property, contract, and business laws help to unite capital and ideas. They also demonstrate why ineffective private and business laws are the root cause of the poverty of nations in today’s world. Without the legal institutions that allow innovation and entrepreneurship to thrive, other attempts to spur economic growth are destined to fail.