IVV, a loyal MR reader, asks:
With all the talks about sovereign debt and default, the various EU problems, libertarian rumblings and increasing globalization, I'm mightily curious about one thing:
Why do we care so much about sovereignty?
Why are we trying so hard to declare this patch of land one place or another, and not neither nor both? Why are we trying to identify the people on that land as under one or another jurisdiction? What does being under a jurisdiction mean, and why must that choice be kept out of the hands of individuals? What's the economic value of all this?
We need units which produce public goods and we need people willing to declare their income and pay their taxes and, sometimes, fight and die for those units. Therefore we need some amount of irrational belief in the idea of sovereignty, nation, and the like. (Read Benedict Anderson's Imagined Communities.) Today's distributional pattern of nation-states probably isn't ideal (I would prefer smaller units on the whole), but when it comes to OECD nations it works well enough. We also don't know of good transition paths to something better, though within an overarching framework such as the EU such paths may be possible.
Arguably the whole thing is sustained by evolutionary programming. We cling to small groups, because we once needed to for purposes of survival. Political entrepreneurs piggyback upon this sentiment to give us a largely illusory attachment to a bigger unit than just a band of hunter-gatherers or however it worked. The large is made to feel small, through radio, TV, and local organization of political groups, among other methods.
At the margin, policies which "slip out" of sovereignty, without wrecking the entire superstructure of the nation-state, are usually a good idea. Such as more immigration. Diverting $1 million from Medicare to a helicopter drop over Haiti is also a good idea, although it cannot be made politically incentive-compatible on a larger scale. So we have a simple formula for massive gains: subvert sovereignty, at the margin, without subverting belief in sovereignty.
Elsewhere, here is Bryan Caplan on "the stranger":
What fraction of your "fellow citizens" have you actually met? Virtually zero. The vast majority of your countrymen are, in fact, utter strangers to you. When you tell your kid "Don't take rides from strangers," you don't make an exception for anyone who happens to share your citizenship. Modern government – and most of political philosophy – is just a massive effort to pretend otherwise.
Bryan's right, but he's not facing up to the need for a certain amount of false belief, even though his rhetoric brings him very close to recognizing it. If we all regard ourselves as nothing more than "strangers," what will happen to "the cement of society"? The price system does not suffice and in fact the price system itself requires legal and cultural foundations. Those foundations arise, and are sustained, only when people believe in something, and it can't be just anything they believe in. Some of those beliefs have to consist of a loyalty to a workable political unit, even to some irrational degree, compared to true cosmopolitanism.