Justice Louis Brandeis is famous for having characterized the various states as policy “laboratories.” Although Brandeis likely did not intend his words the way they are often interpreted, the fact is that states do have a great deal of autonomy over taxes, regulation and spending. In addition, each state has, at least to some degree, its own culture that feeds back on its institutions and policy choices. These characteristics combine to create an overall climate for business, arts, education and other endeavors. While states should not enter into head-to-head contests to attract specific businesses or industries by singling them out for special privilege, the states can and should pursue general policies that promote a vibrant economy and community.
There are at least three dimensions on which competition between states can thrive that are healthier than the current obsession with subsidies.