The term ‘substantive subsidiarity’ characterizes a radical position in the major debate in the European Union (EU) on how to structure territorially‐based power in a closely interlinked economy. A similar debate took place in the period between the 1950s and the early 1990s over the need for radical reform of spatial economic and power structures in Canada and less developed countries. The difficulty in constructing supporting arguments from economics for both these positions can be better understood by looking at the whole range of economic thought on spatial structures. A characterization of this range into three models reveals how economics generally supports centralizing tendencies. The assumptions required to make a case for stronger, more local authorities in the EU, Canada or less developed economies are shown to be restrictive. The article concludes that the case for substantive subsidiarity in the EU, which calls for radical decentralization to more local levels of government, claiming efficiency and equity gains, faces a similar challenge to that faced by earlier economists writing on less developed economies.