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Multilevel governments can be organised according to two basic principles: the principle of autonomy and the principle of vertical public administration. In between, there are a number of mixed systems which are questionable from the point of view of distribution of responsibilities. Subnational public debt crises typically occur in mixed federal systems. Preferable to such systems are pure systems with clear responsibilities. Nevertheless, courts can establish clear liability rules and hence contribute to a stabilisation of federal systems. However, court decisions do not supersede a political choice between either of the two pure systems. Two case studies on local governments illustrate under what circumstances a system of autonomy is preferable and how this result can be applied to the European Union.

SUMMARY Economists as advisers are often unsuccessful when proposing more Pareto efficient policies. The reason lies mostly in the fact that they disregard the distributive impacts of their proposals. Starting from the model of a rent‐seeking society, it is shown what field an economic adviser should concentrate on, in order to increase the effectiveness of his advice. This approach is then found to be relevant for the deregulation issue.