“What is important to note, however, is that transaction costs associated with relocation matter. The relative success of protectionist and subsidyseeking groups in post-war Britain, Australia, and New Zealand was facilitated by the high costs associated with exercising the exit option. Both Britain and New Zealand are unitary and centralized nation states. Although Australia is a federation, there are only six states, each of which has less fiscal and regulatory autonomy than American states or Canadian provinces.
Polycentric democracy works most effectively when exit-related transaction costs are low and when the number of viable options is large. The closest approximations of a genuine polycentric democracy are the 50 American states and the 26 Swiss cantons.”
Read the rest (pdf). (Yes, I know this was part of last night’s “nightcap,” too.)
It is widely accepted that good institutions caused the massive increase in living standards enjoyed by ordinary people over the past two hundred years. But what caused good institutions? Scholars once pointed to the polycentric governance structures of medieval Europe, but this explanation has been replaced by arguments favoring state capacity. Here we revitalize the ‘polycentric Europe’ hypothesis and argue it is a complement to state capacity explanations. We develop a new institutional theory, based on political property rights and what we call polycentric sovereignty, which explains how the medieval patrimony resulted in the requisite background conditions for good governance, and hence widespread social wealth creation.
By Alexander Salter & Andrew Young. Read the whole excellent thing here. I wonder how much the author’s conception of “polycentric sovereignty” has in common with Madison’s compound republic?
Salter & Young do a great job bringing decentralization back into the overall “economic growth and political freedom” picture. Over the past two decades, political centralization as a good thing has been making a comeback under the guise of “state capacity.” This isn’t a bad trend, but it has left several large gaps in understanding how economic development and political freedom works. (For example, how to prevent centralized states from pursuing illiberal ends, or using illiberal means to pursue supposedly liberal ends.)
This article brings decentralization back into the picture, using Elinor and Vincent Ostrom’s conception of polycentricity as a model. However, I don’t think they spend enough time on Vincent Ostrom’s understanding of the American compound republic. The American federalists were concerned with exactly the same thing that we are concerned about now: how to maintain a proper balance of centralized power and decentralized power so that liberty may flourish. I’ve emphasized the important part with italics. The liberty aspect gets de-emphasized to make room for the sexier “economic growth” aspect, but political freedom is still paramount when it comes to thinking through matters of politics.
The American federalists, and especially Madison, came up with the compound republic to address the centralized/decentralized debate. Scholars continue to underrate its genius and usefulness for capturing humans as they are. Ostrom’s book on the Madisonian compound republic is worth your time and money. Read it in tandem with this book on the Federalist Papers and this book on the formation of the American republic and this short paper on the continued viability of the compound republic to today’s world. Once you’ve done the readings, start writing (or better yet: blogging!).
There have been a number of excellent discussions in the ‘comments’ threads these days. Dr Khawaja adds more depth to the discussion on Iran and foreign policy. Me and Chhay Lin are in the midst of a debate on democracy and libertarianism. Michelangelo’s post on splitting up California generated a good discussion. You can see what’s hot in the threads by looking to your right, of course. I wanted to highlight this ‘comment’ by Rick in the threads of Edwin’s recent post on liberalism and sovereignty:
“[S]overeignty is a constitutional idea of the rights and duties of the governments and citizens or subjects of particular states.”
To me, a constitution is like a contract. It’s close to set in stone and it lays out these rights and duties. But the idea of sovereignty Jackson is pointing toward in that quote would be better understood as laying out a sort of meta-prize; it’s a delineation of the commons that potential groups within that area may compete over or cooperate in. To be fair, a constitution is a similar sort of commons (especially when that constitution includes the right to collect tax and lead armies). The question of how to govern the commons is *the* question on the domestic side.
On the international end of things, anarcho-capitalism calls for muddying the borders of these commons. This has obvious costs and benefits: it makes the emergence of a productive polycentric order easier, but it also opens access to what would have been relatively closed commons. I think the missing piece in the world governance question, whether from a classical liberal, minarchist, or anarchist perspective is the question of how a polycentric order would emerge and function (e.g. standards associations, norms of arbitration/dispute resolution, etc.).
More discussion is needed on this point…