Your Next Government

by on June 13, 2017 at 7:25 am in Books, Economics | Permalink

Private governments can learn from the commercial corporate world, where intense competition has driven the evolution of institutions capable of supporting large, complex, and consent-rich communities. Your next government might thus resemble a city-sized corporation, with you and other residents buying shares, electing the board of directors, and so forth. Think of it as residential co-op, upgraded for the big leagues.

Read Tom W. Bell for more, including his intriguing idea for “double democracy” and a generous appreciation of dominant assurance contracts.

1 Asher June 13, 2017 at 7:45 am

Worth examining the precedent of Pullman Chicago, which started as a company town but also in many ways as a “town company”.

2 Brett June 14, 2017 at 3:12 am

Positive or negative? I remember Alex writing a post about how Company Towns were supposedly not as bad as their reputation.

3 Anonymous June 13, 2017 at 7:53 am

After Alex’s last post about the topic, I became very enthusiastic about dominant assurance contracts. However, as long as the idea is not empirically tested, I can’t put too much trust in them. Would people really contribute to DACs either as entrepreneurs implementing the contracts or “customers” (or whatever they would be called) paying for the project? They might think that there is something fishy in the contract (“why would someone give me free money?”); they might think that it’s a problem that some people can free-ride (even if it’s not a problem from the economical point of view) and not contribute because of that (people can sometimes reject favorable propositions if they think that someone else benefits “unfairly” from it).

One more practical obstacle that I thought about is this: suppose a DAC is implemented in some platform that is perhaps similar to Kickstarter. If it looks like the contract is not going to be accepted by enough people (but is somewhat close to it), the entrepreneur can himself contribute the rest of the money in order to avoid paying the failure fee. The escrow service might try to prevent this by not accepting money from the entrepreneur himself, but it wouldn’t be too difficult find friend, family, etc. to do this for the entrepreneur. If the public knows that the entrepreneur always has the option of contributing the rest of the money himself and thus avoid failure, a DAC becomes just a normal assurance contract.

4 Axa June 13, 2017 at 8:04 am

George Mason quote: “all men are by nature equally free and independent, and have certain inherent rights of which . . . they cannot deprive or divest their posterity; namely, the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety.”

Tom Bell: “In double democracy, owners manage the community on a one share/vote basis while residents enjoy the power to veto select laws or officers on a one person/vote basis. Owners construct; residents correct.”

Perhaps it’s an emotional reaction…….if the sales speech of Utopia already talks about two classes of people (owners & residents) I doubt the outcome can be good. I’d stick with George Mason.

5 dearieme June 13, 2017 at 10:45 am

George Mason quote: “all men are by nature equally free and independent …” Except his slaves, obviously.

6 Anon7 June 13, 2017 at 7:50 pm

Not obviously: “The augmentation of slaves weakens the states; and such trade is diabolical in itself, and disgraceful to mankind. Yet by this constitution it is continued for twenty years, As much as I value an union of all the states, I would not admit the southern states into the union, unless they agreed to the discontinuance of this disgraceful trade, because it would bring weakness and not strength to the union.”

It’s easy to take potshots at someone’s hypocrisy while benefiting from the sacrifices of others. Some might call that complacency.

7 Brett June 14, 2017 at 3:15 am

That last sentence could certainly describe George Mason. He may have taken potshots at slavery, but he didn’t free any of his slaves (not even at death in his will).

8 Anon. June 13, 2017 at 8:38 am


9 The Anti-Gnostic June 13, 2017 at 10:24 am

Yes. Anarcho-capitalism is coming, whether the statists–and not least, even the anarcho-capitalists themselves–are ready or not.

10 msgkings June 13, 2017 at 12:27 pm

No it’s not.

11 Anon June 13, 2017 at 11:34 am

Reading Moldbug’s “Open Letter” really makes the connection here.

12 Fise Bane Hide June 13, 2017 at 8:55 am

A government that looks out for the interests of its shareholders is certainly better than a government which follows the outdated, extremist notion of looking out for the interests of its citizens. Open Borders(but not in my neighborhood) Now!

13 rayward June 13, 2017 at 9:19 am

Of course, the irony of Tabarrok’s posts on this topic is that the “shareholders” already own and control government: bought and paid for. The debate over the rights of owners of property and the rights of citizens is as old as representative government. The Founders were conflicted and, thus, produced documents that conflicted, the declaration of independence promoting the rights of citizens (i.e., equality) while the constitution protecting the rights of owners of property. Indeed, the constitution convention was called in order to adopt protections for the owners of property, the fear of an insurgency running very high. A further irony is that Lincoln is considered the father of today’s Republican Party, yet it was Lincoln who stood for the rights of citizens and equality rather than the rights of property owners. Yes, the property rights the framers wished to protect were the rights of ownership to other human beings. Tabarrok would make it official: the rights of owners of property would trump the rights of citizens. The more things change, the more they stay the same.

14 The Anti-Gnostic June 13, 2017 at 10:28 am

Here’s a thought-experiment: since they’re running the place already, we tell the billionaires they’re responsible for governance of the nation-state for life, and upon their death to their designees for life, and upon their death to the next designees, etc. You can refuse the appointment, subject to confiscation of all your wealth above $100M.

15 April 19th June 13, 2017 at 6:59 pm

Ptolemy’s orbital lobes spoke in a way to Lincoln’s holy trinity. The cause of Individual Rights, the cause of Minority Rights, and the cause of Democracy. (see kepler’s 2nd law)

A line joining a planet and the Sun sweeps out equal areas during equal intervals of time. Over the period of orbit, an area let it be called a holy ghost, is kept constant though it changes in perimeter.

One can look at Christianity, Calvinism, and Catholicism. Hinduism, Jainism, and Buddhism.

In the social sciences, as behavioural economics suggests, while it is impossible to find constants even enough to accurately predict and publicize a depression or a bubble, the neurobiology of a racist, a murderer, and psychopath must have some rational constraint. What is therefore a moral authority except the dharma of a purely mechanical understanding of ethics.

But what duty for the holy ghost has been carved between the declaration, the bill of rights, and Lincoln and FDR? It must be the function of an orbital lobe.

In the 15th century, Ptolemy’s Geography began to be printed with engraved maps; the earliest printed edition with engraved maps was produced in Bologna in 1477


16 April 19th June 13, 2017 at 7:08 pm

matthew 4.1
Then was Jesus led up by the Spirit into the wilderness to be tempted by the devil.

17 April 19th June 13, 2017 at 7:30 pm

Benson Y. Parkinson of the Association for Mormon Letters noted that Christof represented Jesus as an “off-Christ” (“Christ-off”) or Antichrist, comparing the megalomaniacal Hollywood producer to Lucifer.

Thus, the devil has always been a trickster.

18 RPLong June 13, 2017 at 10:38 am

“Of course, the irony of Tabarrok’s posts on this topic is that the ‘shareholders’ already own and control government: bought and paid for.”

Sounds like a Metaphorical Fallacy to me.

19 Stormy Dragon June 13, 2017 at 9:32 am

Unless you consider “my way or the highway” to qualify as consent-rich, I don’t think that’s a term that applies to most of my interactions with private corporations.

20 ohwilleke June 13, 2017 at 9:35 am

As someone who regularly handles HOA law cases, I have to say that this sounds like a horrible idea. The quality of governance in HOAs and residential co-ops is absolutely abysmal, on average. Far, far worse than the vast majority of municipalities.

Likewise, the notion that corporations, with their Soviet style ballots, respond democratically to shareholders is pure myth.

21 mulp June 13, 2017 at 11:05 am

Hey, they get to strip citizenship and deport the poor and disabled and otherwise undesirable.

Which is why you get paid to deal with them on behalf of the deportees.

22 mpowell June 13, 2017 at 11:21 am

Some of the lines from that article read like a joke.

Interesting juxtaposition to Cowen’s latest post on security guarantees and how fragile they most likely, in fact, are.

23 Jess Riedel June 13, 2017 at 11:42 am

> The quality of governance in HOAs and residential co-ops is absolutely abysmal, on average. Far, far worse than the vast majority of municipalities.

OK, but the quality of governance in municipalities is far worse than at the state level. (State generally impose very strong rules on municipalities for this reason.) And I’m willing to be big municipalities do better than small ones. So isn’t this just an example of governance becoming worse as the body becomes smaller, probably due to less availability of expertise and competence? What does it have to do with the voluntary/involuntary aspect?

24 The Anti-Gnostic June 13, 2017 at 12:15 pm

Past a certain point, cities become diseconomies of scale. Resource sinks with enormous environmental footprints.

25 ohwilleke June 14, 2017 at 3:40 pm

While smaller governments are indeed less competent (something I learned defending local governments in court), it is also true that government entities have better governance institutions, a healthier political culture, and a legal framework that does a better job of encouraging both, than private governance institutions achieved, in theory, through contract.

Even HOAs with many thousands of units are governments much less well than municipalities of comparable population.

26 Art Deco June 13, 2017 at 9:38 am

Snooze. Here we have yet another exercise in the economists’ equivalent of science fiction in lieu of pondering and advocating anything that might cause other faculty members to dismiss or shun you.

27 Dick the Butcher June 13, 2017 at 10:45 am

That and the crony-capitalists, crony-socialists, deep state, democrats, green-hoaxsters, lobbyists, racial racketeers, special interest kleptocracy would kill it. They could not pillage and rape it.

28 efcdons June 13, 2017 at 9:45 am

So can another city state come ransack your city state? Or are we assuming some supranational body with a monopoly on violence which will protect the small population but wealthy city states from having their stuff liberated by the larger but less well off city states? I assume the city states no longer have the same financial obligations to one another (i.e. vastly reduced transfers from rich city to poor city). Why would the people who would be living in favelas outside of your nice “consent rich community” consent to you removing the obligations you have toward them while maintaining all the obligations they have toward you? Doesn’t actually sound very “consent rich”.

29 Some Guy June 13, 2017 at 10:49 am

The corporate governance of American companies is not exactly a great alternative.

30 JK Brown June 13, 2017 at 10:57 am

Most cities are all ready incorporated, although as special municipal corporations.

Some citizens do buy shares in the current corporation, known as real property, and are required to annually “buy shares”. The problem are all those who are not land owners if we view it this way. Although, local sales taxes do provide a means for the “none shareholders” to contribute whether they live in the city or just take advantage of its facilities as visitors outside the city limits.

Does anyone really believe that cities will return to a requirement of owning property to vote for the governing bodies such as the executive or city boards?

31 The Anti-Gnostic June 13, 2017 at 11:26 am

Eventually, yes. The common sense of that requirement will become clear after thousands of municipal bankruptcies due to pension obligations.

32 JK Brown June 13, 2017 at 11:02 am

p 126-127
“City governments thus constituted are something like state governments in miniature. The relation of the mayor to the city council is somewhat like that of the governor to the state legislature, and of the president to the national congress. In theory nothing could well be more republican, or more unlike such city governments as those of New York and Philadelphia before the Revolution. Yet in practice it does not seem to work well. New York and Philadelphia seem to have heard as many complaints in the nineteenth century as in the eighteenth, and the same kind of complaints, of excessive taxation, public money wasted or embezzled, ill-paved and dirty streets, inefficient police, and so on to the end of the chapter. In most of our large cities similar evils have been witnessed, and in too many of the smaller ones the trouble seems to be the same in kind, only less in degree. Our republican government, which, after making all due allowances, seems to work remarkably well in rural districts, and in the states, and in the nation, has certainly been far less successful as applied to cities. Accordingly our cities have come to furnish topics for reflection to which writers and orators fond of boasting the unapproachable excellence of American institutions do not like to allude. Fifty years ago we were wont to speak of civil government in the United States as if it had dropped from heaven or had been specially created by some kind of miracle upon American soil ; and we were apt to think that in mere republican forms there was some kind of mystic virtue which made them a panacea for all political evils. Our later experience with cities has rudely disturbed this too confident frame of mind. It has furnished facts which do not seem to fit our self-complacent theory, so that now our writers and speakers are inclined to vent their spleen upon the unhappy cities, perhaps too unreservedly.”

pg 194
“But if we Americans were to set about giving to the state governments things to do that had better be done by counties and towns, and giving the federal government things to do that had better be done by the states, it would not take many generations to dull the keen edge of our political capacity. We should lose it as inevitably as the most consummate of pianists will lose his facility if he stops practicing. It is therefore a fact of cardinal importance that in the United States the local governments of township, county, and city are left to administer themselves instead of being administered by a great bureau with its head at the state capital. ”

–Civil Government in the United States (1902), John Fiske

If he thought administration by a great bureau with its head at the state capital was bad, he never imagined with the head situated in Washington which we deal with today.

33 mulp June 13, 2017 at 11:34 am

What happens to the poor, disabled, in such a city-state?

Deportation? What if the surrounding city-States deny entry to your deported?

Creative destruction? Euthanasia and sale of body parts to the rich for transplants? Or for unique dining experiences?

34 B.B. June 13, 2017 at 12:08 pm

Aren’t condo associations and co-ops, and shopping malls just small privately-owned cities?

A private city won’t be Singapore or Hong Kong. It will be a company subject to US law.

35 mulp June 13, 2017 at 12:24 pm

The needy get deported. But what if no one will accept the deported and the condo association must provide perpetual care for its “citizens”.

36 Floccina June 13, 2017 at 12:09 pm

My parents lived here The Villages for a while. It is an interesting place. I is pretty much a private city.

37 mulp June 13, 2017 at 12:29 pm

What will happen if they can’t pay the $993.17 per month? Deportation? To your house?

38 Floccina June 13, 2017 at 5:37 pm

It was not that much. her is break down you do not need to get it all:

39 Viking1 June 13, 2017 at 12:49 pm

Cynicism is ok, but you guys are urinating in the punch! Why discuss if you have nothing to contribute.

The corporate model is probably superior to the current administration of local utilities, that are often saddled with pension obligation far in excess of any sane private or public corporation. Also, a corporate model, where the shares in the distribution utilities are publicly traded, will allow for more sane pricing when second and third suppliers enter the market.

Say you are a second supplier of natural gas. In a proper corporate model, if you wanted to get a 10 percent market share of the gas, you would have to buy 10 percent of the distribution network shares on the open market.

Likewise, for selling broadband services, instead of a daddy government forcing sharing of same physical lines, invest in the marketshare.

With market orientation, it would make sense that the first person to join a utility from the outskirts pays a much higher price, but gets paid back as more houses utilizes the trunk he paid for.

40 josh June 13, 2017 at 2:54 pm

Assume a can opener.

41 Michael Strong June 13, 2017 at 4:55 pm

For those who believe this direction is fantasy: Consider that Sandy Springs, Georgia, already outsources most municipal functions. Consider that multinational corporations already have access to choice of law in contracts subject to private arbitration in jurisdictions around the world – in order to avoid being held hostage to crappy national law and courts in most nations around the world. Consider that even low-income communities in much of the world are organized as gated communities with private security – because they are safer for their children (see this gated community housing development for maquila workers in Honduras with housing prices as low as $12K with no mortgage required,

Consider that huge percentages of the populations of many nations want to emigrate so that they and their children can have a better life (38% of the population of many African nations, Consider that despite the abusive quasi-slavery conditions of Dubai, and even worse conditions in Saudi, millions of Indians, Pakistanis, Nepalese, etc. voluntarily choose to work in both nations, and return voluntarily, each year. Some of those who choose not to suffer the indignities of quasi-slavery in the Arab peninsula sell their own children into sex slavery at a young age. Others starve. In the western hemisphere, Central Americans are willing to pay coyotes their life savings to smuggle them into the U.S., despite the fact that many of these coyotes rob or rape their “clients” or force them to smuggle drugs across the border in body orifices – and when they finally get into the U.S., they have no guaranteed rights here and are often abused by employers, law enforcement, etc. The Arab spring was launched by a street merchant who immolated himself after being harassed by bureaucrats for the umpteenth time. Looked at this way, a significant percentage of the global population happen to be locked in governance hell holes that keep them poor and constantly at risk of arbitrary violation of their so-called “rights” at any time.

When one compares the challenges of creating better quasi-private governments with the reality of governments in much of the world, then the question becomes, “Is it possible to improve upon the law and governance provided by existing nation states”? Put this way, I expect anyone who has much knowledge of the reality in many developing nations would say “yes.”

In all industries, allowing competition with minimal barriers to entry results in higher quality, lower cost, and more granular focus on niche consumers. Instead of a competitive market, with respect to law and governance we have a global oligopoly in which most governments are made of some combination of rent-seeking leeches and incompetent bureaucrats who literally keep billions of human beings poor, miserable, and suffering.

Michael Huemer has a brilliant thought experiment in which he asks if we would feel confident about governance quality if we each owned one share in a corporation that had 300 million shares outstanding. The purpose of such an experiment is to show that the romance of “public” government is just that. Having one vote in any “democratic” nation guarantees nothing. There are many nations that go through the ritual of elections with the approval of international observers and yet the policies of those nations continue to perpetuate deep mass poverty. If I was an ordinary citizen in India or Kenya would I support outsourcing a few hundred acres to be governed by Singapore? For sure.

As we allow for a competitive market in law and governance globally, many thousands of entrepreneurs will develop very diverse models. In the long run, I predict that the ability to protect the rights of citizens will be a key selling point of the successful models. Moreover, with respect to protect the rights of citizens, not only will they outperform, say, the DRC or Kazakhstan, but they will also outperform municipalities such as Ferguson, MO, and the many other U.S. municipalities that practice a form of tax farming via fines combined with mass incarceration that is unconscionable.

Will all purveyors of law and governance in such a world be benign? Not at all. But over time will the average human being have access to better quality law and governance than they do at present? Almost certainly. If we get the enabling conditions right (and we do need to focus on this), the result will be a dynamic entrepreneurial market that results in endless improvements in quality, lower costs, and better services for niche demographics.

42 Brett June 14, 2017 at 3:22 am

The focus on individual votes not amounting to much is a distraction. Democracy is about factions and groups – you combine your vote with many others as part of a pact to achieve goals. That process used to be much more openly mercenary (see political machines before the 20th century in virtually every city that was democratically run), but the principle is still in effect now.

43 Ricky Tylor June 13, 2017 at 7:13 pm

I don’t like shares all that much, I believe it is far better that we do work on Forex and currency markets, as it is far better and beneficial. I find it ever easy through broker like OctaFX given they have outstanding set of features and facilities counting lowest possible spreads at 0.1 pips, high leverage up to 1.500 while there are over 70 instruments, zero balance protection, swap free account and much more, it’s all outstanding to work with.

Comments on this entry are closed.

Previous post:

Next post: