Economics

A laboratory of laboratories: Non-territorial secession and laboratory panarchism

Competitive governance is sometimes put forward as a mechanism of policy experimentation and innovation. Indeed, it was U.S. Supreme Court Justice Louis Brandeis who coined the term ‘laboratories of democracy’ to describe how “one of the happy incidents of the federal system is that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of country.”

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Examples of such political systems include competitive federalism (in this context, known as ‘laboratory federalism’) and other variations on the theme of political decentralisation e.g. devolution, autonomous regions, special economic zones, charter cities, and seasteading. But there is another model of federalism and policy experimentation that is worthy of consideration: laboratory panarchism.

The base idea is that a simple territorial division into regional or even local jurisdictions allows people to sort themselves into the government that best represents their political preferences; this is the ‘voting with feet’ mechanism. In general, better political choice and more competition can be achieved two ways: (1) raising the benefits of switching governments by devolving control over more policy areas to lower-level political units, thereby generating conditions for greater variety in the government bundles on offer; or (2) lowering the costs of switching by making jurisdictions smaller and easier to move between. In effect this heightens political competition between units, incentivising them to better fulfil the preferences of potential citizens but also to experiment and innovate in their policy offerings.

These institutional features generate a political choice setting that begins to resemble a competitive market; so we should expect greater incentives for citizens to inform themselves of political options and more information to be revealed about citizens’ political preferences. And a further benefit is that as a result competition between political units serves as adiscovery process. Since the risks associated with innovation are less for sub-national governments, they will, other things being equal, have a greater propensity to innovate.

In this setting, the political system as a whole is characterised by parallel experimentation (i.e., multiple policies are tested simultaneously by competing sub-national governments) rather than serial experimentation (i.e., multiple policies can only be tested singly by a central government). From an evolutionary perspective, political-jurisdictional competition can be compared to the process of natural selection; parallel experimentation and imitation of discoveries between constituent political ‘laboratories’ is key. Decentralisation therefore provides a framework for experimentation and learning about policy alternatives and their consequences; and the system as a whole incorporates—and discovers—far greater amounts of information than a more centralised, monolithic public service complex. All-in-all, market-like competitive constraints provide structural limitations on government power while promoting the avails of competition and innovation in governance.

But is this the best we can do? While it seems forthright to suggest territorially decentralised, polycentric systems (‘laboratory federalism’) outperform monocentric systems from the ‘evolution of knowledge’ and dynamic efficiency perspectives, this does beg the question: Isn’t parallel experimentation more accurately reflected in a system of non-territorially decentralised policy laboratories?

In a world of non-territorial governance people would be able to change their political affiliations, in effect memberships or subscriptions to club-like governance providers, as easily as one changes health insurance providers; without ever having to change location. Non-territorial governments would be defined by their memberships of citizen-consumers (more or less of whom may happen to reside in a given territory) and not necessarily the territory itself. In such a system, governance doesn’t follow the territory, but rather the person. In effect this supercharges the competitive environement between political units.

More importantly, it allows for multiple policy experiments to be carried out at the same time, in the same location, on the same people. When people then sort among the experiments—by selecting which political unit they are to be governed by, not by moving location—it is purely on the basis of its results, and not other factors like economic or social preferences (employment, friends, family, etc.).

To the extent that public, private, and social preferences over geographical space are non-identical, there exist structural efficiency limits of territorial political sorting. Non-territoriality provides the ability to subvert the trade-off between agglomerative efficiencies and political choice efficiencies that prevails when citizens sort themselves over a geographic space populated by territorial jurisdictions. It also spurs beneficial interjurisdictional competition without having to rely on citizen mobility, which therefore places even greater limits on government oversupply and over-taxation, ‘taming Leviathan.’

Parallel governance promotes parallel experimentation and learning about citizen preferences and policy alternatives, eliciting a quasi-Hayekian discovery process in institutional space. Non-territorial parallel governance could supercharge this discover process. David Ellerman makes the argument thusly: “parallel experimentation is a fundamental dynamic efficiency scheme to enhance and accelerate variation, innovation, and learning in contexts of genuine uncertainty or known ignorance.” While a territorial decentralised system does improve on a centralised system, so too does a non-territorial decentralised system improve on the territorial one. There is potential for more experiments, more competition, and overall, more innovation.

Now, in my opinion, every true economist is a social planner at heart; that is the very essence of the discipline. As an economist myself, I’m somewhat of an outcast, as I’ve been influenced by what Brian Loasby has termed Hayek’s Impossibility Theorem: “any apparatus of classification must possess a structure of a higher degree of complexity than is possessed by the objects that it classifies; and … therefore, the capacity of any explaining agent must be limited to objects with a structure possessing a degree of complexity lower than its own”. In my opinion, and in the light of Hayek’s Impossibility Theorem, the idea that social planners are capable of making calculations of such absurd complexity should be treated with ridicule. For this reason institutions like markets and competitive federalism are vitally important if we are to discover knowledge of and improve our systems of governance. Parallel governance is key: for a long time it has been carried out in territorial units, but we should now consider the possibility of parallel governance carried out in non-territorial federations of political units.

So not without irony, allow me to propose a social plan of my own: laboratory panarchism. Rather that attempting to carry out ‘scientific’ evidence-based policy, or heroic society-wide social plans, with humility, we would truly apply the scientific method to social planning. That is, the Popperian version: we would carry out conjectures and refutations, but more than mere thought experiements or econometric modeling these would be actual experiments—institutional experiments. This is the only way to generate valid institutional knowledge since such knowledge can only be created in the act of choosing, as citizens sort themselves among non-territorial policy experiments.

This is the point made by James M. Buchanan on the logical impossibility of replicating an emergent order: it is incoherent to compare a ‘rationally constructed’ suite of policies that is presumed ‘optimal’ to one that emerges from the process of political entrepreneurship and citizen choice. Such an order can only emerge from individual interaction and any comparison is epistemologically and ontologically suspect.

While territorial federalism might seem like a fitting setting for political choice, the fact that people sort over territory based on other factors (economic and social preferences) means that there is additonal noise in the patterns of citizen movements. The purest and most reliable form of policy experimentation is laboratory panarchism.

Panarchism is a political philosophy emphasizing each individual’s right to freely join and leave the jurisdiction of any governments they choose, without being forced to move from their current locale. It is a system that dissociates political unit from territory, so that multiple governments might reside in one location. Seminal contributions to the political philosophy of panarchism include have been made by Paul Emile de Puydt and Max Nettlau, while John Zube, Roderick Long, Max Borders, and Aviezer Tucker have recently addressed the subject.

And there are other forms of non-territorial goverance besides panarchism. These include market decentralisation (i.e., anarchocapitalism, privatisation and private governance), multi-level governancepolycentric governance, functional, overlapping and competing jurisdictionsparallel governance and autonomous spacesnon-territorial and nationalcultural autonomymilletsextraterritoriality, andthe new medievalism,’ or even Robert Nozick’s ‘framework for utopia’ which is a reinvention of club theory in what is essentially a non-territorial context. But wait, there’s more: ‘Schlick states,’ polystates, liberal archipelagos, anarcho-culturalism, and technologically-enabled, post-Westphalian reconceptions of sovereignty.

“For a long time I have been fascinated by the thought how wonderful it would be if at last, in public opinion on the succession of political and social institutions, the fateful term ‘one after another’ would be replaced through the very simple and self-evident ‘simultaneously’.”

Max Nettlau (1909) ‘Panarchy: A forgotten idea of 1860

So as a ‘policy laboratory’ perspective, panarchism would allow for every conceivable institutional design imaginable: a utopia of utopias, to use Robert Nozick’s phrase. And therefore, a great many experiments. To echo Errico Malatesta: “Probably all possible forms of ownership, use of the means of production and all forms of distribution will be experimented with simultaneously, in the same or other locations, and they will be merged together and adapted in various ways until practical experience identifies the best form or forms.” This would favour a kind of ‘non-territorial secession’ as the laboratory of institutional experimentation. Groups of people living in states within states, as the basis of comparative analysis: a laboratory of laboratories, so to speak, which is why I call it ‘laboratory panarchism.’

Is this possible? That is doubtful. It must be admitted that an institutionalised right to personally secede into parallel political units would be extremely difficult to implement, at least in the pure form of allowing each and every citizen to completely exit their jurisdiction at will. While it is better to have a system that generates jurisdictional rules from within, i.e., constitutionally permit non-territorial secession and enable political entrepreneurship, in the absence of this cryptoanarchist technologies enable a sort of de facto mechanism for non-territorial secession and parallel experimentation.

Consider that personal secession is akin to non-territorial secession. If we could enable personal secession, we could kickstart the discovery process of laboratory panarchism. Interestingly, cryptographic technologies facilitate non-territorial, personal secession. BitcoinBitnation, blockchain, Ethereum, etc. currently empower individuals to ‘economically secede’ from incumbent states—future developments might enable full ‘personal secession.’ Other forms of personal secession include the shadow economy and Systeme D; agorism and counter-economics and parallel poleis in civil society. While these tend to be presented as anti-social or in a negative light, they are potentially quite beneficial to a polity. They provide institutional experiments on a non-territorial basis. This is bottom-up, spontaneous, laboratory panarchism in action.

One might even argue this is the supreme public good—the public good of public goods—as it provides institutional knowledge (of market-state order) at a meta-(constitutional) level. It follows that the central role of government is to facilitate, or in the very least unrestrain, non-territorial secession: to maintain the economic conditions of interstate panarchism, to paraphrase F.A. Hayek. You won’t hear any credible economist make such wild, unsubstantiated pronouncements. This might make me an anti-economist. Then again, a plan by any other name…

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