Civil Society / Economics / Technology

Don Lavoie Memorial graduate student panel at SDAE meeting

This week I was in New Orleans for the Society for the Development of Austrian Economics meeting at the Southern Economics Association Conference. I presented my paper on ‘Spontaneous order in the formation of non-territorial jurisdictions’ in the Don Lavoie Memorial graduate student panel.

You should also check out the other panelists from the session. Stefanie Haeffele-Balch shared her work on non-profit social enterprise—how government intervention distorts effort away from the original mission goals and towards lobbying and compliance. (See also this very nice paper on bottom-up post-disaster recovery in New Orleans following Hurricane Katrina.) And Audrey Redford spoke about induced ‘malnovation’ in drug markets—again, how government intervention distorts effort away from producing better recreational drugs and towards new drug innovations that are increasingly difficult to monitor and regulate.

For those who aren’t inclined to read my entire paper, below is a loose transcript of the talk I put together on the flight over (and here are some slides):

The title of my paper is ‘Spontaneous order in the formation of non-territorial jurisdictions’ and what I attempt to do in it is apply the lens of spontaneous order theory—the interplay between spontaneous order on the one hand and rationally constructed order on the other—not to the problem of markets versus the state as it conventionally applies, but to nations versus the state.

The central question I ask is: can we imagine or conceive of a spontaneous jurisdictional order? Is it a thing or could it ever possibly be a thing? Or is the nation-state—and the jurisdictional boundaries between and within nation-states—actually an archetypal example of rationally constructed order?

I’m seeking to extend existing theories of spontaneous order in politics to a new theory of spontaneous order in jurisdictions. In doing so, I claim that under certain conditions the various kinds of jurisdictional changes—citizen mobility and migration, but also external and internal re-bordering, and secession and integration—do constitute spontaneous orders.

You may be wondering what this ‘non-territorial’ term is doing inserted in the title.

To skip to the punch line: that’s the condition that must be met for a political system to generate spontaneous jurisdictional order. It’s the non-territorial mechanism that is crucial.

And well may you ask: ‘what exactly do I mean by non-territorial jurisdiction or non-territorial governance?’

There are two ways to think about non-territoriality. The first is: say I’m a citizen of the state of Louisiana and I wish to become a citizen of the state of Colorado; in a non-territorial system I would be able to switch political jurisdictions without having to move territorial location. Secondly, what this would result in is a polycentric political system in which multiple jurisdictions were overlapping or layered over the same territorial location.

In a non-territorial polycentric system, individual citizens have the right or the ability to opt-in and opt-out, to choose the jurisdiction under which they will be governed. The resulting jurisdictional order is an emergent outcome of individual choices—not designed by omniscient, omnipotent, and benevolent planners.

Surely we might imagine a spectrum ranging from full-blooded non-territoriality at one end, to territorially decentralised federations somewhere in the middle, and to traditional territorially monopolistic nation-states at the other.

But anything short of non-territorial polycentricity also comes up short as a process of competitive rivalry, and entails some measure of jurisdictional planning. In the spirit of Don Lavoie we might call this ‘non-comprehensive jurisdictional planning’ but that’s another story.

That’s the argument in a nutshell. But I’ll also propose two more concepts.

The first is what I’ve called ‘the knowledge problem of the nation-state.’ This is the jurisdictional analogue of the knowledge problem, as we know it.

Just as central authorities lack the requisite knowledge for economic planning and cannot replicate the free market order, so too do central authorities lack the knowledge required for jurisdictional planning. They cannot replicate what would be an otherwise free jurisdictional order.

Related to this, I coin another new term: ‘constellaxy.’ This is an amalgam of ‘constellation’ (as in groupings of citizens) and ‘catallaxy’. Essentially it’s the jurisdictional analogue of catallaxy: the catallaxy is the free market order and the constellaxy is the free jurisdictional order.

It’s the order brought about by the mutual adjustment of many individual citizens in a non-territorial polycentric political system. And the constellaxy is potentially curative of the knowledge problem of the nation-state.

Let’s talk about territorial Tiebout sorting. I’m sure we’re all familiar with the model—if people are free to move between jurisdictions, we end up with an efficient allocation of policies and people to jurisdictions.

But another way of reading the Tiebout model is to highlight a basic symmetry between the movement of people and the redrawing of political maps: essentially if people move, states don’t have to. Generally speaking people moving is called ‘migration’ and states moving is called ‘war.’

But there are two limitations to the Tiebout model I’d like to mention: (1) the map of jurisdictions is given and arbitrary; and (2) the resulting constellation of citizens emerges from the choice of public goods and not from the choice of collocating with other citizens. Yet citizens do seek to agglomerate with specific other citizens and choose groups as much as they choose local public goods.

My point is that when people use the territorial political sorting mechanism to achieve efficiency in political goods, they often sacrifice agglomeration efficiency in other realms of life. They elevate their political preferences over their social and economic preferences for living in some other territorial agglomeration.

Moreover the territorial Tiebout model forecloses on non-territorial political sorting. Yet If citizens were able to seek out each other to form overlapping club-like associations for furnishing their political goods, then the tension between political sorting efficiency and social and economic agglomeration efficiency could be resolved.

And accordingly, these two points—(1) that the map of jurisdictions is given, and (2) the absence of non-territorial jurisdictional change—become elements of the theory of spontaneous jurisdictions that I outline in the paper.

Let me flag here that I draw upon three existing theories of spontaneous order in politics.

diZerega makes a similar distinction between ‘state’ and ‘democracy’ to that of Hayek between ‘economy’ and ‘catallaxy.’ He argues that democracy properly understood (and implemented) is a spontaneous order but only when it’s procedurally democratic and not behaving like states. And he has a list of conditions for this.

Andersson then moves to a polycentric setting, arguing that democracy comprises of two spontaneous orders: the lower-level order of diZerega and the higher-level order of Tiebout.

But he overlooks that the way borders move in a polycentric democracy (and policies change in response) is a complementary process of jurisdictional ordering. Together citizen and border movements contribute to the jurisdictional order, and under certain conditions, form the higher-level spontaneous order of polycentric democracy.

Wagner (with various co-authors) argues that states are orders and not organisations and that even monocentric states can be polycentric orders in and of themselves. That is, the state is not an organisation but an arena of interaction that hosts many distinct organisations. State action therefore emerges out of political entrepreneurial action and is not planned.

So I take a bit from each of these authors, but I’m interested in explaining not policy outcomes per se but jurisdictional outcomes. And one such jurisdictional outcome must be borders moving if we’re to tell a complete story.

That is to say: whether border change catalyses from civil society or from within the state, it too is a higher-level spontaneous order of polycentric democracy.

And in turn, instead of policy and jurisdictional change being linked solely to citizen movement across existing borders, border movement also stimulates the spontaneous order.

Here’s a representation of this. We have three ways that borders can move, just as we have three ways that people move.

As a cursory reading, I’m suggesting that from left to right jurisdictional change becomes ‘more spontaneous’ and that this applies for both citizen movement and border movement.

The easier it is for citizens to move or secede—and the more that it’s individuals making these choices and not other parties— the closer we get to spontaneous jurisdictional order.

Here are some illustrations of what I mean by this.

(1) The political elite could instantiate the change, as consciously planned order or emergent order. They can plan and execute population transfers or shift a border. Basically, either we have forced migration or Donald Trump (who knows precisely where the borders should be). Alternatively, the 1923 Greece-Turkey population exchange, the Louisiana Purchase.

(2) The citizenry-at-large can use democratic means such referenda, elections, protests. Examples of this are the ‘turn back the boats’ policy in Australia (which is electorally popular) or the Catalan secession movement.

(3) Or individual citizens can personally move or secede. Swiss sorting between cantons, or the Ottoman millet system. This culminates in the ‘open borders’ for citizen movement (as per Tabarrok and Caplan) and non-territorial permissionless secession (as typified by cryptoanarchists) for border movement.

This is the bit where I admit that this notion of personal secession might seem crazy in practice—and it is currently illegal in most (but not all) constitutions.

It must be admitted that an institutionalised right to personally secede 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.

But another approach is technology-enabled secession, which is de facto rather than de jure jurisdictional change.

Cryptoanarchist technologies such as bitcoin and blockchains currently empower individuals to ‘economically secede’ from incumbent states—future developments might enable full ‘personal secession.’ The crypto dream is networked individuals with the option to create parallel institutions and exit to them.

Even if you think it’s impossible, and I don’t quite know what I think about this, it still stands as a sort of conceptual endpoint of this thought experiment.

The ‘problem of the nation-state’ is how to design a jurisdictional order and assign political authority so as to discover a harmonious allocation of people to nations, states, and nation-states.

The knowledge problem of the nation-state stems from the fact that the information required for rational jurisdictional planning is distributed among individual actors throughout the polity and thus unavoidably exists outside the knowledge of a central authority.

This can be seen as a variant of Thomas Duncan and Christopher Coyne’s argument about foreign intervention and the limits of human reason and planning. However, it applies to the carving out of international (and sub-national) borders, not the political actions that occur within them. Moreover, states do this to themselves it’s not just about intervention (though oftentimes it is).

Rational constructivist planning of jurisdictional orders succumbs to the knowledge problem of the nation-state. Why? A crucial condition for economic calculation is genuine entrepreneurship and market rivalry; and this condition is lacking when a planner has predetermined the jurisdictional contours of the polity. Even if you add controlled migration into the mix, it’s still no fit solution.

And the twentieth century has demonstrated this all too clearly.

Attempts to resolve problems of multinational states by redrawing state structures only gave rise to more problems. From the knowledge problem perspective, this should be no surprise: planners lacked the requisite knowledge to make such calculations.

The other popular twentieth century tool of jurisdictional planning was to transfer populations between regions to execute a given jurisdictional plan. This was and is a much more brutal option than simply redrawing borders, and all I can really say is that this approach surrenders any pretence of trying to solve the knowledge problem by using the dispersed knowledge and preferences of the population.

In a certain morose sense, however, these do illustrate the appalling failures of ‘planning.’

I’ll conclude optimistically by saying once more, speculatively, advances in cryptography and blockchain technology may tip the balance in favour of spontaneous order in the formation of non-territorial jurisdictions.

This would greatly benefit citizens of would-be nations that have been suppressed by the homogenising forces of ‘the hyphen’ and harmed by the failures of planning—it could potentially provide a more potent correcting force to the mislaid designs of jurisdictional planners.

Given the twentieth century experience with jurisdictional planning, I’ll take experiments in non-territorial cryptosecession any day.

We should fear not the spectre of cryptoanarchy, for it heralds spontaneous order in politics and spontaneous order in jurisdictions, and the solution to the knowledge problem of the nation-state.

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2 thoughts on “Don Lavoie Memorial graduate student panel at SDAE meeting

  1. Pingback: Cold Soup: Innovation satire, Baltic Bitnations, and fatally conceited planners | Meso Soup

  2. Pingback: CryptoGoss podcast on emergent nations and emergent firms | Meso Soup

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