Governing Seasteads

[Cross-posted at LaTNB]

The Seasteading Institute has just published my paper on governance mechanisms for seasteads. As I point out in the paper, trying to predict what will work ahead of time is not what letting a thousand nations bloom is all about. We do, however, need to start from somewhere and the experience of customary law, private communities, and corporate governance have a lot to teach us. From the conclusion:

Perhaps the single most important point we should take from these case studies, though, is that humans will find ways of solving their problems when low-cost experimentation is possible. In some sense, governance is a hard problem: we simply cannot foresee all the problems ahead of time and devise a good system of rules. In another sense, though, the problem is easy. We know from history that institutional evolution works on land, and there do not seem to be any barriers to it working on the ocean. Of course, this institutional evolution will require careful thinking: it is through conscious effort that good ideas are developed. The magic of ex-post selection only happens ex-post, and a healthy dose of ex-ante common sense and historical knowledge will go a long way in ensuring that early seasteads do not fail due to poor governance.

The paper was a lot of fun to write.  It was great getting extensive feedback along the way from some very smart and distinguished people and putting some of the ideas we discuss here at LaTNB in a form which will hopefully prove useful to future marine real estate developers.


Technology and Public Goods

As a wise man once taught me in a public choice class, excludability depends on the state of technology. Example:1 the Pay & Sit park bench.

Design student Fabian Brunsing has devised a fiendish device that makes pay toilets seem positively munificent: Dubbed “Pay & Sit: The Private Bench,” it consists of a bench covered with retractable metal spikes and a coin slot. If you want to sit down on the bench without an array of spikes jamming you in the keister, you’ve got to pay €0.50 (about 70 cents US).

As seen below, this causes the spikes to retract so you can sit on the bench, and also activates a timer. Shortly before the timer expires, you’re warned by a buzzer to get up; then, the spikes shoot back up. Beware!

Spikes, it seems, provide strong incentives.

Hat tip: Anthony Martin.

1. Jumper Colon!

Brutus on the Optimal Size of Nations

In a republic, the manners, sentiments, and interests of the people should be similar. If this be not the case, there will be a constant clashing of opinions; and the representatives of one part will be continually striving against those of the other. This will retard the operations of government, and prevent such conclusions as will promote the public good. If we apply this remark to the condition of the United States, we shall be convinced that it forbids that we should be one government. The United States includes a variety of climates. The productions of the different parts of the union are very variant, and their interests, of consequence, diverse. Their manners and habits differ as much as their climates and productions; and their sentiments are by no means coincident. The laws and customs of the several states are, in many respects, very diverse, and in some opposite; each would be in favor of its own interests and customs, and, of consequence, a legislature, formed of representatives from the respective parts, would not only be too numerous to act with any care or decision, but would be composed of such heterogenous and discordant principles, as would constantly be contending with each other.

That’s from Brutus #1. He has half (and by far the most important half) of Alesina and Spolaore’s model of the optimal size of government. Speaking of which, you should go check out today’s secession week topic at LaTNB!

When I first read the Federalist Papers, I remember being struck by the subtlety of Madison’s public choice theorising. Now that I’m reading the Anti-Federalist Papers, I’m far more impressed with them and inclined to see Madison as naive in comparison. Sadly, I suspect he remains more realistic about politics than any politician who has come since.

Reasonable Homunculi Can Disagree: The Impossibility of Welfare Economics

I’ve just uploaded a new working paper, which is a slightly edited version of a chapter from my thesis, to SSRN. Here’s the abstract:

This paper draws on the “preference reversal” literature in psychology and behavioural economics to argue for the impossibility of welfare economics. The effect of normatively-irrelevant contextual factors shows that humans do not have a coherent preference function which pre-exists and informs choice. Every choice is a constructive act which forces us to choose among incommensurable values: choice creates preference. This rules out the possibility of a value-free welfare economics and forces social scientists wishing to make normative conclusions to engage in indeterminate moral reasoning.

Analytical Anarchism

I’ve been remiss in not plugging this excellent collection of writing on the positive analysis of anarchism created by Michael Wiebe. There’s a list of published papers and books, and some working papers (including one by Eric and I).

Here’s how Michael introduces the site:

The purpose of Analytical Anarchism is to create an open forum for the academic community to promote and discuss research in analytical anarchism.

What is analytical anarchism? As the subtitle says, it is the positive political economy of anarchism, or simply, anarchism from the economic point of view. Anarchism here simply means the absence of government. Peter Boettke divides anarchist thought into three categories:

1. Utopian — following in the tradition of William Godwin’s An Enquiry Concerning Political Justice (1793).
2. Revolutionary — following in the tradition of Mikhail Bakunin and the First International, 1864-76.
3. Analytical — in the tradition of Murray Rothbard’s For a New Liberty (1973) and David Friedman’s The Machinery of Freedom (1973).

The analytical anarchism research program has developed out of this last tradition, and is currently being pursued by economists such as Pete LeesonEd Stringham, and Chris Coyne.

Why anarchy? Research in anarchism has a fundamental theoretical importance for understanding the mystery of cooperation among strangers, which forms the basis of modern social order. Understanding anarchy also has a critical practical importance for transition economies, Third World development, and post-war reconstruction. Economic analysis of these problems cannot assume a functioning state.

For an introduction to the subject, see Boettke’s “Anarchism as a Progressive Research Program in Political Economy.”

Scholars and students working in this field are invited to submit working papers and posts discussing the literature, general issues, potential research topics, etc.

Behind the Moral Curtain

I’m slow in posting this video of Elise Parham presenting her monograph Behind the Moral Curtain: The Politics of a Charter of Rights. The paper and video are both well worth checking out. Astute viewers may even be able to spot the back of my head in the video.

Elise’s argument is that bills of rights are fundamentally political, rather than legal, documents. This is true in the sense that rights will be interpreted and enforced based on political expediency and prevailing ideologies, as Robert Higgs and others have argued. Elise’s argument is that the writing of a bill of rights is also political. Once a government decides to draft a charter, many competing interests will compete to have their preferences reflected and the end result is unlikely to be a liberal document. Rather, we’ll end up with a whole lot of illiberal, and constitutionally protected, positive rights.

The Key Speech

John Key’s speech to parliament today hardly signalled the commitment to reform he has been talking up. Summaries of the speech here and here, with commentary with which I largely agree here.

There’s unlikely to be much in the way of tax reform.  With only the possibility of a 2.5% increase in GST, probably some minor tinkering with depreciation rules, and no indication of spending cuts, there could only be very minor reductions to income and corporate tax rates.  The rejection of the introduction of new taxes, notably on land, is good, though for public choice rather than public finance reasons. There was some empty rhetoric about welfare reform, but major changes to the god-awful Working for Families were ruled out.

One thing really pissed me off though: the suggestion of unspecified reforms to liquor licensing rules to address the Problem of Binge Drinking. This means that beer is likely to get more expensive and less conveniently available so the government seems like they’re doing something. Not cool, John.

Alan Bollard Doesn’t Understand Economics

Alan Bollard repeats the common claim that the difference in economic performance between Australia and New Zealand is due to Australia’s abundance of natural resources:

Speaking on TVNZ’s Q+A programme yesterday, Alan Bollard said Australia had been “blessed by God sprinkling minerals” and had handled its economy well. He said New Zealand would do better to make the most of the “crumbs that come off the Australian table”.

He said it was up to the Government what its own goals were, but he did not believe catching up with Australia was possible.

I haven’t watched the show, but I’m assuming Bollard is arguing that changes in commodity prices favourable to Australia explains the fact that living standards across the ditch are around a third higher. This is just not true. The 2025 Taskforce (led by Don Brash, who does understand economics) does a good job of summarizing the evidence.

While movements in terms of trade have made Australians richer in recent years, most of its improved performance came well before any significant and sustained changes in commodity prices. Further, New Zealand has fallen in income relative to other OECD countries which should have been hurt by changing commodity prices.

Bollard seems to be stuck in a materialist mindset when it comes to economic performance. While resource endowments do matter, assuming that New Zealand’s relative lack of minerals destines those living here to a permanently lower level of income than Australians is absurd. As the Taksforce points out, many high performing countries such as Taiwan and Ireland are extremely resource-poor. Many extremely poor African countries are also very rich in minerals. People become richer when the institutional environment allows them to cooperate for mutual advantage, not when there are lots of shiny things to take out of the ground.

New Zealand’s economic stagnation has nothing to do with resource endowments or commodity prices and everything to do with poor institutions. Australia’s economic reforms since the 1980s have been much more constant and thoroughgoing than ours, and have not produced the same destructive regime uncertainty.

Fear the Boom and Bust

Hayek versus Keynes rap battle.

Many hat tips; most recently Daniel Aguilar via email, which gave me the impetus to post.

I hope Russ Roberts and the econstories crew will consider a rap video of Tullock explaining why government performs poorly. I imagine a hype-man (Charles Rowley?) yelling “Trapzoid, motherfuckers!” somewhere in the chorus.

I Don’t Think the Word “Land” Means What You Think it Means…

Federated Farmers are unsurprisingly upset at the prospect of a land tax:

Federated Farmers’ Rangitikei-Manawatu president Gordon McKellar said a land-based tax would be “a pretty dumb idea”.

The projected profit for a typical 220 hectare Manawatu beef or sheep farm would be about $21,000 for the next financial year but a land tax on the same property could be as much as $24,000 if buildings were included.

If buildings were included, though, we’d be talking about a property tax rather than a land tax. The rationale is to tax something which we don’t need to worry about discouraging: you can’t make more land.

As I’ve said before, I would be very much in favour of replacing current taxes with land taxes, for both moral and economic reasons. Public choice concerns, as they often do, make things more complicated.


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