Does government need to be based on geographic contiguity?

by on January 28, 2017 at 12:42 am in Economics, Law, Political Science, Uncategorized | Permalink

That is my rewording of this request from Thijs:

At which point does technology allow another model of social organization than that based on shared territory?

I am reminded of Estonia’s e-citizenship model, but taken much further.  To flesh this out, imagine EU citizens could choose to which government they would pay their taxes.  So you could live in Lyon, but pay taxes to Germany and have your pension set by German policy and your legal disputes settled by German courts and so on.

What can’t be done this way, even say twenty years from now?  Well, your water supply, your primary education system, your electricity, your local police, and your roads, to name a few government services.  For those you have to deal with Lyon or some other local provider.  Germany can’t step in, except perhaps for some on-line parts of education but even then it wouldn’t mesh well with your local face-to-face provider, even putting aside differences of language.

Given all that, should Lyon and Germany let you peel off your potentially portable pension choice to the government provider of your choice?  It seems the wealthy people would cluster their fiscal and pension obligations with governments that were not so progressive in their fiscal policies.  In this regard it would be like a partial privatization of pension schemes.  But it would be a funny privatization rule: “allow pension choice, but only from local infrastructure-producing entities.”  You still would have the usual problems of selection, namely that the wealthy would opt for the pension and tax schemes of Luxembourg and Monaco — hey, wait, isn’t that the status quo?

Well, not quite.  In essence this plan would be further reducing the residency requirements for locales and tax havens such as Luxembourg, Monaco, the Cayman Islands, and so on.  You wouldn’t have to live there at all.  I suppose this is a way of privatizing the redistributive services of the state, without having to say you are doing so.  Does that make it more politically stable or less?

I suspect a lot of “local” pension schemes would stay in place for reasons of familiarity, nationalism, and the gravity equation.  (Just think how long it took many Greeks and Cypriots to withdraw their euros from their domestic banking systems.)  So many middle class Danes will stick with the Danish system, which they know and the like, though many of the Danish wealthy would secede from it and opt for Monaco.

Overall I think of this policy as one way to improve the lot of the wealthy.  Is it the way and the framing that will most induce additional effort and creativity from them?  I don’t see that case has been made.

1 A.G.McDowell January 28, 2017 at 1:11 am

What this really shows is how our view of the services expected from government has expanded.

The earliest services, such as defense and justice, would be difficult to transfer – it shouldn’t be an international incident if I get into a fight with my next door neighbour.

Many of the post-WWII services amount to redistribution of wealth. I don’t think the UK tax authorities would relinquish their claim on my earnings if I claimed Irish citizenship. (In theory I could, and so could a surprisingly large percentage of UK citizens. There are in fact a large number of Irish citizens living and working in the UK, but to all intents and purposes they are treated as UK citizens while here – they pay taxes and can legally vote in UK elections).

2 mulp January 28, 2017 at 1:55 am

Economics is 100% about wealth redistribution. You buy a car and set off a chain of wealth redistribution, your wealth redistributed to the car distribution which redistributes the wealth that was your to producers of cars that the redistributed wealth to thousand of firms who redistribute wealth to workers who redistribute wealth to food vendors, banks holding debt, landlords.

We could go back to an imagined 1700 when 80% of households had no wealth to redistribute, but simply lived off the land at little to no cost. GDP was very low because 70% of what was produced and consumed never had a price. That is how hundreds of millions of people live on less than $2 a day. To economists they produce nothing and consume nothing because they never sell the product of their labor nor pay for what they consume.

The safety net was the tribe or community.

What is fascinating to me is economists who consider only things with a price to have value, but the call for “self reliance” like in in the old days when no one paid support others who couldn’t support themselves. But people supported other without pay, just like everything else they was without pay. When everything has a price, those who are well off must pay to support those who aren’t, just like in the past when nothing had a price assigned.

The proposal to shop around is as absurd as suggesting tribes and communities were something you could shop for a few hundred years ago. I’ll live in the farm house, but work like a hunter gatherer. Hunter gatherers worked less because they invested only inhuman capital: how to make Flint tools which you learned to locate and you learned the migration paths a habits of game and how to find fruits, roots, etc. Farmers learned less, but built physical capital which required more labor, labor that resulted in no consumption.

3 Ricardo January 28, 2017 at 9:49 am

That sounds right. The more non-public goods a government provides, the more feasible a non-geographic arrangement becomes.

4 tlb January 28, 2017 at 10:32 am

The essence of “Government” is sovereign control of a geographical area and its population.

There is NO requirement for geographical “continuity” of a specific government’s area (e.g., US government control of Hawaii… or the expansive British Empire at its peak).

Dual or divided sovereignty of the same area by separate independent governments is not possible. At some near term point… serious disputes between the ruling governments will arise. These disputes can only be resolved by yielding formal or de facto sovereignty to a single government entity… either by mutual negotiation or force.

If individual persons in a specific geographical area were to have actual choice in services, courts, defense, taxes/fees, etc …. you are no longer talking about “government” at all.

5 Dan Lavatan-Jeltz January 28, 2017 at 2:26 pm

Yes, it is very odd. Even today most electricity providers are private and the increase in solar in the future would mean more people off the grid. Water can be provided by wells at the same cost as laying pipes, but only the first owner or the developer sees the connection fees. The only reason for city water is fire protection. Roads should be privatized, as they are with many HOAs, and there is no need for face to face education providers. They can just ship Bunsen burners around for the one day a year you use them and meet at home for group projects.

There are a lot of noncontiguous territories like Campione and there is no reason they can’t be the size of an HOA or even a single house.

6 Nodnarb the Nasty January 28, 2017 at 1:12 am

Interesting, thanks. Zack Weinersmith also has some good thoughts on this topic. He called it a “polystate.”

7 Timothy January 28, 2017 at 1:22 am

Interestingly enough, one non-territorial sovereign, the Holy See (the Pope holds the Vatican, but his sovereignty derives from the Holy See, not the city-state), is currently endeavoring to annex another non-territorial sovereign, the Sovereign Military Order of Malta, formerly the crusading Knights Hospitaller.

8 mulp January 28, 2017 at 1:24 am

If you chose Greece’s pension because it’s cheap with high benefits while living in Germany, you will be evicted from Germany to Greece when the pension benefit is cut to 25% of German living standards. Germans should not have to put up with homeless Greek pensioners, even if they were Germans for their working life.

9 carlospln January 28, 2017 at 1:24 am

To ‘improve the lot of the wealthy’?

As if every bit of financial deregulation, changes in tax & accounting treatments since 1979 haven’t been sufficient?

I don’t think you’ve caught the, ahh, ‘changes’ in the Zeitgeist.

10 Lanigram January 28, 2017 at 2:04 pm


11 R.G. January 28, 2017 at 1:30 am

At which point does technology allow efficient pay-per-use provision of all government services, thus allowing for unbundling?

With schools and pensions it’s already pretty much solved, except maybe politically. With law – can you really live and do business in Lyon while relying on German courts only? With roads and local police there are good approaches (gps tracking allowing for pay per use of both roads and the police if presence is a reasonable proxy of local police usage). With defense it’s not so clear.. Well actually of course everyone should just pay the U.S. .
Welfare? Now that sounds like a real issue. Isn’t not paying for some bums in the states the real reason people like me would think of cayman islands citizenship (well mb it’s implicit in taxes but who are we kidding) ?..

Follow up question is of course: once these issues are resolved can we have international professional class become an actual political unit or there are some other more important constraints?

12 So Much For Subtlety January 28, 2017 at 1:47 am

Because when countries argue they tend to hold each other’s citizens hostage and do horrible things to them. If France and Germany go to war, French nationals in Germany and Germans in France will be interned. If they are lucky.

Suppose the US doesn’t like the way that Mexico investigates the murder of an American citizen who came under US law? What if Mexico declines to let US policemen into the country to investigate? What if they cannot threaten to railroad people if they do not co-operate? What if the locals tell them to take a hike?

It is absurdly impractical.

13 carlospln January 28, 2017 at 5:16 am

+ 1

14 Thiago Ribeiro January 28, 2017 at 5:39 am

As far as I know, the USA already can be as upset as they want with how the murders of American citizens are investigated in Mexico. Suffices to say, the poor trearment of a Brazilian diplomat by the Soviet militia ruffians forced Brazil, despite of its hopes for a sincere friendship between the two narions, to break off its diplomatic relations with the Soviet aggressor. Also, Brazil refused to intern and rorture Axis citizens umless they engaged in mass acts of terrorism. The idea of “collective guilt” is antithetical to Brazil’s legal order and moral principles.

15 Ricardo January 28, 2017 at 2:07 am

Social insurance, just like regular insurance, works best when there is a diverse pool of participants. This implies they work best at the national level at least.

The idea of choosing which courts have jurisdiction over civil disputes also seems like a recipe for avoiding responsibility. Courts don’t just referee disputes but also have the power to order local sheriffs or marshalls to use force to compel compliance with court orders and to seize assets to enforce judgments. If I don’t have assets in the place where the sheriff or marshall is allowed to operate, it adds an additional layer of complication and expense for anyone seeking a judgment against me. Of course, people play these games already but that is no reason to make it even easier.

16 Nicholas Marsh January 28, 2017 at 2:09 am

The Belgian constitution provides for both parliaments based upon territory (eg everyone living in Brussels) and for parliaments based upon linguistic communities (eg for everyone who speaks German no matter where they live). The latter only cover things like culture and education (eg German speaking schools in Brussels).


17 Larry January 28, 2017 at 2:10 am

Why get all your services from a single provider, government or otherwise? If I want these guys to do my pension and those guys to educate my kids, why not?

18 yo January 28, 2017 at 2:19 am

It’s entirely possible. Within the EU, you have freedom of establishment (also with a few other countries, most notably Switzerland). After an average of eight years, you get naturalized there (pretty easy to do) and presto, you have the result you wanted. Every year, tens of thousands of EU people become naturalized Swiss due to favorable tax law. I even know a few Germans who choose to be naturalized French because after so many years, France was their home in spite of the higher taxes.
Concerning pensions, there are often “wait periods” (you must work & contribute in your place for a minimum of five years) but after that you get part of your pension from that country. They tried pension reform for establishing a true EU pension scheme time and again in EUROPARL, but it never flies.

19 Axa January 28, 2017 at 5:49 am

Well, you don’t have to wait 20 years, it could be done now. Concerning pensions, most EU countries have the 3 pillar pension scheme. A worker may have retirement savings in several countries. The 3rd pillar is private pension and saving on it are tax deductible. The tax deduction is limited, a lower limited for salaried workers and a higher limit for self-employed. In the end, it makes sense to have a 3rd pillar account on the country where you pay taxes .

Concerning the laws that apply to workers, there are several cases: cross-border workers, posted workers, working in more than one country. The self-employed case is just what Tyler described: living in Lyon and selling consulting services in Germany, 3rd pillar savings in Germany and settling disputes under German law.

20 rayward January 28, 2017 at 6:51 am

Interesting Cowen would pick Germany, since German citizens qualify for generous retirement and other benefits even if they haven’t lived in Germany for decades (although they must return to Germany to receive them). As for Cowen’s friend Peter Thiel, he became a citizen of New Zealand in order to qualify for a very large benefit only available to New Zealand citizens: the right to purchase the land on which Mr. Thiel intends to build the refuge he will need when Armageddon arrives thanks to Mr. Thiel’s efforts in helping to elect the ignoramus Trump. I’d be curious to know who is on Mr. Thiel’s exclusive invitation list to join him in New Zealand when Armageddon arrives.

21 The Anti-Gnostic January 28, 2017 at 11:23 am

Hillary was the demonstrably more bellicose candidate. When China takes over Taiwan, I don’t think Trump will go to war. But I have little doubt we’d be in the Middle East right now, under Hillary, trying to depose Bashar Assad and having to confront Iran and Russia militarily. Scary stuff. There’s stupid, really stupid, and war-with-Russia-stupid

All billionaires have bug-out plantations somewhere. Zuckerberg’s is in Hawaii, in the event the four adjoining properties he bought in Palo Alto don’t give him sufficient lebensraum.

Billionaires pay for low-density living because they can, while insisting that we need more immigrants.

22 Lanigram January 28, 2017 at 2:50 pm

Aparthied Palo Alto is concerned about too many high tech companies in the tony downtown – they subtract from the cozy ambience of all the upscale restaraunts. This has been a hot issue on the pols agenda.

Low income housing? What’s that?
All the illegal immigrant nannies, house cleaners, and gardeners head back to Soweto after work.

Isn’t the end of average wonderful?

23 Boonton January 28, 2017 at 8:03 am

I imagined a possible end game for Israel and Palestine along these lines, ‘matrixed citizenship’. Two different nations could occupy the same area. Jews would walk around as citizens of Israel and Palestinians as citizens of Palestine.

They would vote in different elections and be subject to different laws however there would have to be a coordinating government whose job it was to synchronize the laws when two different citizens interacted with each other and the laws contradicted each other or in places where you couldn’t have the laws be out of sync (i.e. speed limits on a highway, which side of the road to drive on etc.).

In terms of business the two nations would be united by a very tight NAFTA/TPP/EU agreement on steroids so contract disputes, civil lawsuits would proceed seamlessly regardless of the different types of citizens involved.

But each group could express their values in their laws. For example, the Palestinian version of Social Security could utilize a Muslim view of inheritance while the Israeli version would follow the US model more.

24 Ricardo January 28, 2017 at 8:56 am

In the 19th century, European powers in Asia sought to exempt their people from local criminal law and instead have crimes committed by their citizens tried by judges or consular officers under their own laws. This era is not remembered fondly, especially by the Chinese.

I think tribalism and mutual distrust will always get in the way of any sort of shared sovereignty when it comes to law and order.

25 Lanigram January 28, 2017 at 2:21 pm

The tribal, automatic, instantaneous, and beyond-conscious-control processes of the human brain will never allow such an arrangement.

I fear we are headed for a reckoning – Trump was only the first wakeup call.

It might get loud.

26 TMC January 28, 2017 at 10:06 am

Boonton, draw that as a Venn diagram and the overlap section is what government should be involved with. Outside of people interacting with other people everything can be contracted for privately. And this is where it will end up. How does the nation of TMC, with one citizen, interacted with the Israeli and Palestine govts when I’m visiting for a week? I get diplomatic immunity of course.

27 Art Deco January 28, 2017 at 11:15 am

I imagined a possible end game for Israel and Palestine along these lines, ‘matrixed citizenship’. Two different nations could occupy the same area. Jews would walk around as citizens of Israel and Palestinians as citizens of Palestine.

And the bull session slides into insanity.

28 Josh January 28, 2017 at 8:26 am

If only there was some way to bring the high quality oh European government to, say, Africa. Surely, that would work out splendidly for the populations there.

29 Some Guy January 28, 2017 at 8:45 am

Another variation of the libtertardian dream of a society composed of high IQ white sociopaths.

30 Lanigram January 28, 2017 at 2:23 pm


31 CMOT January 28, 2017 at 8:45 am

Extraterritoriality worked so well the last times it was tried! The Chinese especially loved it.

32 anon January 28, 2017 at 8:49 am

The connection from tribe to land is ancient, and not limited to man. Most social animals have territory. As many national conflicts are rooted in that context, it might be tempting to hope for something new.

I am not sure it would be such an improvement .. but odds are against, and a billion years of evolution.

33 anon January 28, 2017 at 10:08 am
34 Lanigram January 28, 2017 at 2:28 pm


35 Becky Hargrove January 28, 2017 at 9:51 am

In order for decentralized economic structure to work for lower income levels, the aggregate time value of the group needs to apply for what had previously been centralized activity, coordinated across millions of citizens.

36 John Phillips January 28, 2017 at 9:55 am

I went to an international school where some countries paid the school fees of their expats. A less regressive way of doing what you imagine is to have the citizen pay taxes to his or her national government and have that government compensate the local government for any local services used by the citizen. Since citizenship is not usually elective, tax arbitrage is less likely. Instead, you may have some modest service arbitrage Of course, I don’t know how that works for dual citizens.

37 TMC January 28, 2017 at 10:09 am

Outside of true public goods, government is an insurance company. My preference is like car insurance, not medical.

38 TMC January 28, 2017 at 10:14 am

Then you get to socialism, which is more like an all inclusive resort, which is great, but I can’t afford for forever.

39 derek January 28, 2017 at 9:59 am

Isn’t this happening already?

Fine. If someone doesn’t have a stake in the community, do they get any say on how things are done? If they screw something up, they just leave.

There was an article about this last week. It is the roots of the political unrest all over the world. Someone from somewhere else with no interest or stake figures they can say what should be done. If it goes sour, well they can leave.

40 anon January 28, 2017 at 10:02 am

You mean like Canadians for Trump?

41 TMC January 28, 2017 at 10:18 am

Pipeline says different.

42 anon January 28, 2017 at 11:02 am

And the free long term home heating.

43 derek January 28, 2017 at 11:35 am

You say that like it is a bad thing.

44 derek January 28, 2017 at 11:39 am

A real benefit is that it short circuits the Canadian suckuptitude strategy for getting a security counsel seat in the UN.

And I had some US company demanding that I follow EPA regulations. I told them go to hell. If you want that you better get Obama to send the marines over the border. I suspect that won’t happen anymore.

45 cliff arroyo January 28, 2017 at 11:32 am

“Overall I think of this policy as one way to improve the lot of the wealthy”

Tyler’s being the change he wants to see in the world!

46 Walt Guyll January 28, 2017 at 12:28 pm

This has been in the back of my mind since reading Heinlein’s Double Star, which featured floating constituencies, along with asexual Martians.

47 J January 28, 2017 at 12:34 pm
48 Edgar January 28, 2017 at 1:42 pm

“Overall I think of this policy as one way to improve the lot of the wealthy.”

Not really. Most of the wealthy in the US are people like Tyler on government payrolls who are shielded from international competition by nativist employment laws. Despite the federal government,s overall dearth of competent,intelligent employees, for example, it is illegal to hire from abroad to fill government positions. Introducing direct global competition into the labor markets of the upper middle class and wealthy in the US would benefit all US citizens through lower labor costs and improved competency. What passes for an intelligentsia in the US is strictly bush league on the global level. If we are going to surrender our autonomy to experts, as Tyler, the Niskanen Center, and other hard left libertarian types constantly urge us, we really do need access to a better grade of expert.

49 Lanigram January 28, 2017 at 2:38 pm

You mean what’s good for the goose is good for the gander? That’s not in the union contract…

50 Lanigram January 28, 2017 at 3:03 pm


51 uair01 January 28, 2017 at 5:21 pm

I searched the comments but it seems no one made the Snow Crash reference: Much of the territory ceded by the government has been carved up into sovereign enclaves, each run by its own big business franchise (such as “Mr. Lee’s Greater Hong Kong”, or the corporatized American Mafia) or the various residential burbclaves (suburban enclaves). – The concept of a distributed republic is that of a fluid republic consisting of land and citizens scattered around the globe, changing far more frequently than conventional nation-states. In fiction, many of these republics are corporate entities, while others are more loosely connected anarchist communities. The concept is rooted in the anarcho-capitalist, dystopian cyberpunk subgenre of science fiction, and was used extensively by novelist Neal Stephenson in his books Snow Crash and The Diamond Age.

52 Bob January 28, 2017 at 10:02 pm

While I agree with Tyler’s assesment on fully elective government, I wonder if this is a more interesting question when we look at ways to do representation within the same government. Does it really make sense that I share a house representative with people in my neighborhood? How local are our problems, really, when it comes to federal policy?

I think that a very real problem of the US system is how many people feel completely unrepresented at the federal level: That’s ultimately what all the complaining about gerrymandering is about. Could we, technologically, build a more representative house? Would that help?

53 Plucky January 29, 2017 at 9:33 pm

In an odd way, this would be a modern re-booting of a very ancient principle. The origin of ethnic/national quarters in assorted cities, ancient & medieval, was precisely that within that quarter, the law of whatever resident foreigners made up the quarter would rule. Only in cases outside the quarter or in disputes between quarter-residents and the main city would the main city authority and/or sovereign get involved.

54 JonFraz January 30, 2017 at 3:27 pm

For several generations after the Germanic barbarians took down the Roman Empire in the West, their lands were ruled under two different legal systems: Germani were governed by Germanic tribal law, while Roman citizens continued to live under Roman law.

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