I think a libertarian treatment . . . would argue that towns have the most right to pass restrictive laws when things like exit rights are most salient, and less right when they aren’t.
States and their governments have forever been tied to physical territories, and public services are often delivered through brick-and-mortar institutions.
Yet public sector infrastructure and services will soon be hosted on servers, detached from land and physical form.
1. The relationship between governance and the right of exit has long been of interest to economists. The Tiebout hypothesis is that when residents can exit freely, they will sort themselves into towns where the services, taxes, and regulations suit their preferences.
2. I don’t think that we get much Tiebout sorting in practice. Most jurisdictions are bundles of private and public amenities. You can’t exit from the amenities you don’t like without also losing the amenities that you do like.
3. Scott’s post suggests that a way to improve things would be to allow more start-up cities. In my most widely unread book, Unchecked and Unbalanced, I suggested instead making exit more powerful by enabling unbundling. Make it easy for me to choose an alternative trash-collection service, and alternative school for my children, etc.
4. Read the Diamandis post. In theory, Estonia could franchise its government model to other jurisdictions. In my book, I suggest something approximately like that. See also Neal Stephenson’s novel Snow Crash. But if governments will not let you unbundle, choice will be thwarted.
A little bit of this stuff would likely be a very healthy thing, but a more comprehensive approach would be very bad.
Markets work by allowing for failure. Having a mixture of tethered and untethered institutions is necessary. The untethered parts need the reliability of some fixed institutions to work. The value of some assets need to remain somewhat stable. If everything is untethered and frictionless, markets won’t be stable enough.
I think a libertarian treatment . . . would argue that towns have the most right to pass restrictive laws when things like exit rights are most salient, and less right when they aren’t.
This is more true in the US Gilded age of 1865 – 1914. It might surprise a lot of people that a good portion of the US had Prohibition before it became the 18th Amendment. (The map shows a more US territory having Prohibition but it had less population.)
1) After 1900 modern technology both increased the ease of exit abilities but also allowed an increased of national economic interference. So you needed national Prohibition to stop booze coming into your town in 1914 as opposed to 1894.
2) The local town used to have a lot more control but this was not always popular with residents. Old 1930 – 1950s Westerns the main villian is often the Big Rancher (think Koch Brother today) that owns the most land and water rights and then he hires lots of gun fighters to protect these assets against family farmers barely surviving. (Think Shane) So there used be a lot more local populism against the local economic elite. (Watch John Wayne Mclintock on youtube for his libertarian rebuttal even though the movie is just OK!)
3) We do sometimes see these dream libertarian Christian towns pop up from time to time in the US. Long term they have issues as they have issues bringing in new residents and often depend economically on one or two families. (which means the average citizen becomes dependent on the rich families and does not feel free) In reality most people don’t like living there.
One aspect of libertarian dream of making an easy exit creates the reality that community is not that important because you leave whenever you want.
2. I don’t think that we get much Tiebout sorting in practice.
But isn’t Tiebout sorting what is causing electoral problems for Democrats? All their voters concentrated into ‘blue states’ like California and New York and into ‘blue urban enclaves’ within those states? They win the states and districts that their voters have gradually sorted into by huge margins but then lose elsewhere?
Most jurisdictions are bundles of private and public amenities. You can’t exit from the amenities you don’t like without also losing the amenities that you do like.
To some extent, I think you can. Within a metro area, it’s possible to enjoy the parks, restaurants, museums, entertainment, etc of nearby cities and towns (obviously with some loss of convenience). About the only amenity you’re likely to lose is access to is the public school system (though even that is no longer true here in Michigan now that there is cross-district enrollment).
I suggested instead making exit more powerful by enabling unbundling. Make it easy for me to choose an alternative trash-collection service, and alternative school for my children, etc.
Personally, I’d like that, but it would be a non-starter in my ‘blue tribe’ university town. Here, city departments exist as jobs programs for union members (and political allies) as much as to provide services. I really don’t think the progressives who dominate local politics are interested in an approach that would reduce the number of public employees in order to make it more feasible for conservatives and libertarians to live happily in their midst — quite the reverse probably.
In general the rule seems to be that people will be treated about as badly as they can be to the extent they are a captive audience without other opportunities or alternatives or lack some power or way to fight back. That’s probably a progressive view of “oppression” when the context is family or employment and so forth, but of course it applies to government as well.
To the extent it ever happened, sorting was probably more important in more geographically decentralized and distributed eras, but when economies of agglomeration began to dominate certain Winner Cities captured the lion’s share of entire sectors in a way that neutralized the capacity for easy exit by relocation, and thus also eliminated the moderating influence of a fear of exodus and killing the goose that lays the golden eggs. If the goose can’t fly away, it can be squeezed right up to the point of the pips squeaking, that is, either death or the (significantly inferior) next best alternative.
This “Blagojevich Principle”, combined with some basic public choice analysis, is the first order explanation for why San Francisco has become such an awfully governed place, not despite being rich, but indeed because it is rich, that is, because the riches are captive.
I was indeed surprised to learn just how bad Scott Alexander considered San Fransisco as a place to live, given that he is probably the premier archetype that kind of place should appeal to. “It’s like an oil rig where everyone wants to leave the second they have the cash.” Yikes.
The under-discussed reason for some of the highest prices in SF real estate is the need to use price discrimination to insulate oneself from the consequences and fallout of terrible governance. No one recommends better government as the way to reduce the rents, but it certainly would.
It seems that this would give the people who have paid these inflated prices for their homes an interest in making sure that government does not improve. This might explain, in part, the proclivity of the urban affluent to vote for looney leftists like De Blasio.
Unbundling is a bad idea for obvious reasons. Exit gives people choices among bundles, which effectively explores trade spaces totally unavailable without bundling.
I live in an area in which garbage collection has been unbundled from the government, and I have my choice of two private firms which compete with one another. Quality is high, prices are good, and service is excellent. But more importantly, it isn’t a political issue or dependent or who I vote for, like in plenty of other jurisdictions.
That’s not much different from the fact that delivery of packages to my home is unbundled from government post and multiple private companies compete for the business. Indeed, Americans are often surprised when you tell them that what they have been raised to imagine as key government services or regulated monopoly utilities are in fact privatized and semi-competitive industries even in many of those European Social Democracies.
Healthy and vigorous competition of profit-seeking enterprises really is the holy grail of welfare generation. The whole point of coercive or captive-audience bundling is to eliminate that competition. So, choices among bundles just means choices among low equilibria. To have superior choices requires minimizing bundling.
I am Estonian and what Diamandis writes is not reality, but marketing talk.
In fact, Estonian e-residency is dead. Killed by ALM and KYC rules. Estonian banks are closing accounts of existing e-residents and not opening new ones. Government still tries to promote it a bit, but enthusiasm is dying.
Attitudes and regulations about cross-border finance have changed in recent years and killed e -residency.