Australasian Public Choice Conference

I realise this blog has become nothing more than a venue for shameless self-promotion, but I’m okay with that.  I’ll be attending the Australasian Public Choice Conference next week. I’ll be presenting a paper on constitutions; Patri will be presenting our co-authored paper on seasteading as a plenary via video, and Eric will be presenting our co-authored paper on meddlesome preferences in anarchy.

I’m particularly chuffed with the seasteading paper, which considers jurisdictional competition from an evolutionary economics perspective and concludes institutional innovation requires low barriers to entry. And we have a plan!

The other papers at the conference look pretty cool also. I’m particularly looking forward to Xavier Marquez’s presentation on Epistemic Arguments for Conservatism, which he has been blogging about here, here, here, here, and here.


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.


Exit, Voice, and Liberty

There’s been some interesting, and heated, debate in the libertarian blogosphere about the importance of democracy to freedom. Will Wilkinson suggests that since charter cities (and presumably seasteads) are undemocratic, they might allow rulers of authoritarian regimes to reap the benefits of high economic growth without giving their subjects “real freedom.” I think Will’s point that charter cities may allow illiberal regimes to create market-facilitating institutions and increase economic freedom (most often good for dictators) while ignoring civil liberties (most often bad for dictators) is important.

Will seems to think that an important aspect of freedom is democracy, though, and that’s what has caused the debate. Arnold Kling argues that real freedom is exit, not voice. Charter cities and seasteading aim to make exit easier and thus remove the need for democratic voice:

The exercise of voice, including the right to vote, is not the ultimate expression of freedom. Rather, it is the last refuge of those who suffer under a monopoly. If we take it as given that the political jurisdiction where I reside is a monopoly, then perhaps I will have more influence over that monopoly if I have a right to vote and a right to organize opposition than if I do not.

The idea of charter cities (or seasteading) will be a success to the extent that it creates a viable exit option vis-a-vis government. … In fact, if we had real competitive government, then we would be no more interested in elections and speaking out to government officials than we are in holding elections and town-hall meetings at the supermarket.

Will Chamberlain and Patri Friedman expand upon Arnold’s argument at A Thousand Nations; Wilkinson responds to Arnold here. All of these posts, including the comments, are well worth reading. I’m with Arnold and the other competitive government types and I have little to add to their joint efforts.

As a side note to the debate, though, I think Wilkinson is right to suggest that exit, narrowly conceived, is not enough to produce real freedom. Seasteading aims to do more than simply make exit easier; it’s about producing the technology to lower barriers to entry in the governance market.

Most people are free to exit their jurisdictions (county, state, country) and move to another (albeit at a fairly large cost). What they are not free to do, though, is to start their own country. This is why Will’s second-guessing of Arnold’s commitment to exit as freedom on the basis that he hasn’t left his county are so off-base. A major reason for jurisdictional exit’s failure to do much to enhance freedom today is the poor selection of products in the governance market. Even with zero relocation costs, I only have the choice among some really bad autocracies and a fairly homogenous set of liberal democracies. It’s not simply freedom of movement (exit, narrowly conceived) which enhances freedom, but meaningful choice.

The only way I can see of getting meaningful choice of government is to lower the barriers to entry.  When there are literally a thousand forms of government from which to choose – and the possibility of creating your own if none are quite right – you’re surely orders of magnitude freer than you are today, even with freedom of movement and the cost of relocation remaining constant.

You think voice is important for liberty? Fine! Go somewhere with voice. I disagree, and strongly suspect that the bloated and liberty-restricting governments (relative to my standard of what a government should be, not to any actually existing governments) that we see today are pretty much an inevitable outcome of democratic decision-making. The only places to which I can currently relocate in order to get away from democracy, though, are even worse.

I don’t much care for voting and would prefer to live under a government run like an insurance firm. I think even voluntary governments run democratically will be subject to the problems of expressive voting and rational irrationality (see my somewhat related arguments here and here), and will therefore fail to satisfy people’s true preferences. If I’m right, we won’t see too many democratic seasteads survive too long: people will voice their prejudices and then exit once they realise they have to pay the cost.

The beautiful thing about competitive government is that we don’t need to argue about who’s right. I could be wrong, and maybe voting will prove to be an important part of freedom. I just don’t see, though, how one can maintain that voice is just as fundamental as exit (defined widely as freedom of movement combined with low barriers to entry in the market for governance). If you start with only the capacity for exit, you can move somewhere which gives you voice. If you begin only with the capacity for voice, there’s no obvious way to get the capacity for exit. This asymmetry is crucial: exit can give you any other freedom, including voice. Competitive government isn’t about securing any particular freedom, but giving people the freedom to choose whether or not they want other freedoms. Exit, thus conceived, is the most fundamental freedom.

Customer-Owned Protection Agencies

I suggested yesterday that protection agencies which credibly commit to not joining any nascent cartel are likely to attract more customers than those which don’t, potentially nullifying Cowen and Sutter’s critique of market anarchism. One obvious possibility is customer ownership of protection agencies. Cowen makes this suggestion in the final paragraph of his 1992 paper:

In the above scenarios, the network becomes a government because network shareholders are able to exploit successfully conflicts between network profit maximization and the interests of network consumers. If consumers are sufficiently far-sighted, they may prefer dealing with agencies that precommit to never becoming collusive or coercive. Consumers may attempt to control the network by owning the member firms; under this scenario, the protection agencies would become mutuals or cooperatives. Protection agencies could then be bound by democratic procedures, according to consumer vote. Collusion could not occur unless approved by agency customers (shareholders).

He expands a little in a footnote:

In mutuals, the corporation’s customers are also its owners. A mutual life insurance company, for instance, is owned by its policyholders, who serve as residual claimants. If the company makes money, the profits are refunded in the form of lower premiums; conversely, losses imply higher premiums. (Not all of the mutual’s profits are rebated to customers, however, as managers retain perks for themselves.) In so far as mutual shareholders succeed in controlling their company, their dual roles as owners and customers diminish conflicts of interest. Policies that deliberately defraud customers, for instance, would not be approved by mutual shareholders. Shareholders of traditional corporations, in contrast, will maximize profits at the expense of consumer interests, when possible. Cooperatives and nonprofit organizations are other possible organization forms for protection agencies. Although these forms differ from mutuals with respect to many details, they also eschew direct profit-maximization and allow managers to maximize the flow of perks, although subject to different institutional constraints.

Customer ownership of protection agencies is probably the simplest and most effective way of avoiding a despotic cartel emerging from libertarian anarchy. The problem with such arrangements, though, is that they introduce many of the same problems which currently plague democratic politics.

Customer-shareholders need some way of making sure management acts in their best interests. The most obvious way of doing this, as Cowen suggests, is to have shareholders periodically vote for the CEO, or directly vote whenever particularly important decisions arise. As in any firm, this won’t entirely prevent managers from exploiting their position, but it will place fairly tight limits on the extent of corruption.

Whenever a moderately large group of people vote to decide some course of action, no individual is faced with a genuine choice of which path to take. They can express their preference, but, except in the case of an otherwise tied election, the outcome will be unrelated to their choice. This means that nobody has an incentive to think carefully about their decision, and have every incentive to vote expressively and indulge their irrational biases. This has been well-documented with respect to ordinary democratic politics, but is relevant to any large-group voting situation.

This doesn’t seem to be particularly important in ordinary shareholder voting (though as far as I know, nobody has looked into it and I can imagine it having some effect), presumably because voting rights are allocating by the share rather than the person – giving those with the most at stake the most say – and because the activities of corporations don’t tap into expressive preferences or cognitive biases to the same extent as democratic politics.

Unfortunately, collective choice within customer-owned protection agencies more closely resembles political than shareholder voting in this respect. While customers with more expensive premiums may be given extra votes, the inequality of voting power will be nowhere near that of an ordinary corporation. Further, law enforcement and the definition of rights seem like areas in which expressive preferences are likely to dominate.

Expressive shareholders will not only make protection agencies run inefficiently, they will also be more likely to violate the rights of others and engage in destructive conflict. People are more bigoted and bloodthirsty when freed of cost considerations. These are problems we live with under democratic rule today, however, and it’s hard to see why they would get worse under anarchy. While anarchy with customer-owned protection agencies will be far from perfect, it should be considerably better than centralized government.

Protection agencies will initially behave like lots of little governments, with all the inefficiency and bigotry we see in politics today. The crucial difference, though, is the option of exit. A thousand nations will bloom and efficient protection agencies – those managing to minimize the harm of foolish voters and corrupt managers – will gain more customers than inefficient ones. This could result in many small agencies which give each customer a significant voice, or agencies with supermajority rules and other limits on strict majoritarianism. Of course, the potential for innovation will be lower than in a market with entrepreneurs making profit-seeking decisions. People will flock to efficient agencies, but agencies’ decision rules will be unresponsive to consumer demand.

There may be ways for an ordinary shareholder firm to credibly commit to avoid a cartel, and the market would provide every incentive entrepreneurial discovery. I can’t think of any entirely plausible way, but that doesn’t mean one doesn’t exist. We might see a customer-ownership equilibrium eventually give way to a shareholder equilibrium once commitment mechanisms are devised.

I do have some niggling concerns over collective action problems (one shareholder-only firm would be more efficient than its competitors, would have no peers with which to form a cartel, and would therefore be attractive to customers when all other firms are customer-owned), but it seems that customer-owned anarchy would be preferable to the status quo, and would improve over time.

This is why I am now a tentative anarchist.


The Space Frontier Foundation looks like an interesting organization. Their central goal of colonizing space is obviously a long-term one (though we should not underestimate the law of accelerating returns), but I suspect they’ll have an important role to play in the short term agitating for the removal of regulatory barriers to present-day commercial spaceflight.

The Space Frontier Foundation is an organization composed of space activists, scientists and engineers, media and political professionals, entrepreneurs, and citizens from all backgrounds and all nations. We are transforming space from a government-owned bureaucratic program into a dynamic and inclusive frontier open to people. We are determined to convert the image held by many young people that the future will be worse than the present, and we reject the idea that the world’s greatest moments are in its past.

Our central goal is the large-scale permanent settlement of space. We believe people have the “right stuff’ and that everyone will benefit from opening the space frontier. We believe that free markets and free enterprise will become an unstoppable force in the irreversible settlement of this new frontier, and that our world is on the verge of a truly historic breakthrough – cheap access to space.

We are changing the basic assumptions about space. Foundation speakers present a future that excites and inspires citizens from all nations, and through awards and briefings, our ideas are driving the portrayal of space into new directions. According to Dr. Robert Zubrin, “The Space Frontier Foundation is pound for pound the most effective space group in the world.”

Hat tip: Seasteading Institute.

419 Baiting, Altruistic Punishment, and Ideology

Al Roth at the excellent Market Design points out that 419 baiting is a form of altruistic punishment. Spending your own time and resources in order to waste the time and resources of email scam artists makes it less likely that they’ll bother the rest of us. 419 baiters are voluntarily contributing to a public good. This video of Nigerian scammers performing Monty Python’s dead parrot sketch in order to obtain a scholarship from a fake production company is perhaps the pinnacle of 419 baiting, but the wooden carving of a Commodore 64 keyboard has to be close.

Altruistic punishment is extremely important for libertarians, and particularly those in favour of a completely voluntary society. Many social problems can be solved through entirely contractual arrangements among only the affected parties. Some problems, though, cannot be solved in the marketplace. For the anarchist, this makes the non-market voluntary institutions of civil society, along with nonmarket individual action, vitally important. Many social problems will require altruistic punishment. Thankfully, humans seem to have evolved such a disposition.

I think the best example of a problem which needs to be solved through altruistic punishment is child abuse within a community. Say there’s an isolated cult which likes to torture to death one in five of its children to appease a bloodthirsty God, and will violently protect their territory from interference by outsiders. The children aren’t in any sort of situation to be able to contract their way out of such a cruel fate, since they have nothing to trade (to head off any complex contractual arrangements, suppose also that the present value of their expected lifetime earnings is less than the cult is willing to expend to prevent their escape). In a world of self-interested utility-maximisers, these children would be tortured to death. In a world of sufficiently motivated altruistic punishers, they may be saved. Altruistic punishment is a good thing for the liberal.

Altruistic punishment, though, also has its dark side. In a world where people react to homosexuality or drug-use as strongly as they do to child torture; child-tortue, homosexuality, and drug-use will prove equally difficult. To have a decent voluntary society, we need the people to be willing to punish child-torturers, but leave gays and drug-users alone. Beating up gays produces a public good wrt bigots, in the same way rescuing tortured children produces a public good wrt decent people. This is not a situation which depends on political institutions or structures, but ideology. Preferences always matter.

Seasteading will make inter-community altruistic punishment more difficult by increasing the costs of monitoring and enforcement. This will be good for those who like gay sex and cocaine, but bad for those worried about child-torture. Altruistic punishment can produce great good or great evil, depending on human motivations.  For any given realistic distribution of preferences, changes in the tendency to engage in altruistic punishment will have opposing effects on the freedom of people to use drugs, and of children not to be tortured. The only way for both drug-users and torure-victims to simultaneously become more free is for the ratio of anti-drug and anti-torture sentiment to reduce. As I’ve said before, this makes ideology a crucial part of a free society. Changing ideology is not easy, of course, but I don’t think it’s impossible.

Where’s the Love? Or the Indifference?

The brouhaha over libertarians having the gall to think about leaving current political structures to seek self-determination is flaring up again. Peter Thiel’s Cato Unbound essay, which innocently but unwisely pointed out that women are more likely to vote for statist policies than men, is once again to object of much ridicule and anger. Brad Reed of AlterNet, for example, makes fun of libertarians’ (wet) dream of freedom in international waters, heaping scorn of the idea that rich white males have anything to complain about:

In the end, the strangest part about the seastead project isn’t its founders’ impracticalities but rather their base motivations.

Normally, when a minority of people want to break off from their homeland to form a new country it’s because of genuine oppression such as religious persecution, ethnic cleansing or taxation without representation. Thiel, on the other hand, lives in a society whose promotion of capitalism has let him grow rich enough to blow $500,000 founding his own personal no-girls-allowed treehouse in the middle of the Pacific Ocean.

What exactly does he have to be angry about, again?

Patri Friedman nicely summarises what it is that libertarians (even rich ones) have to be angry about here. What I find really worrying, though, is the tendency for people to think rich libertarians like Thiel (and presumably non-rich libertarians like me) have a duty to stay on land and contribute to the society which enabled them to propser. This attitude is most on show in this Metafilter thread (hat tip Cheryl Cline, who has excellent posts on the topic here and here). Some of the Metafilter comments are downright hateful:

[T]he more I hear about libertarianism the more I am convinced that it is nothing more than pure-selfishness codified as a political doctrine. So let me be the first in this thread to say “Fuck you, you selfish dicks. I hope you sink.”

If this is a success, it will be a two (or more) -tier society. And that’s what Libertarianism is really all about. Vast wealth for some, minimal poverty for others. After all, if people are able to save money, well that’s just capital sitting on the table! It’s only fair that money be taken by regulatory rents squeezed out of a corrupt government!

If you can have an emotional response to Libertarian capitalism that isn’t “fucking eww”, you’re disturbed.

Libertarians don’t give a shit about individuality. They just want to benefit from society without contributing to it.

The idea of seasteading is to move away from bigotry like this and create a free society. I’m really not sure how well that’s going to work. Many people believe (at least in the political sense) that seasteaders are raping the planet or taking from society and not giving anything back. If the voters which collectively (and irrationally) control the powerful militaries of current governments see seasteaders as villains, intervention seems inevitable. This, among other reasons, is why I think folk activism remains important, even to seasteaders. Political institutions (and meta-institutions) shape the way individual preferences are transformed into enforceable rules, but every political system must take preferences as its input, and sufficiently bigoted preferences will produce bigoted rules under any set of institutions. True independence is impossible even in the ocean, since those with meddlesome preferences can always catch up with you.

When doing positive political economy, we can’t just assume that good ideas will be accepted and bad ones rejected by political actors. We need to consider the preferences people actually have, and ignore the normative implications those preferences have for us. I think everyone would agree that a seastead specialising in farming babies to run a  child sex and torture tourism business would attract the attention of land-based governments and be shut down. If the voting populations of land-based countries see moving offshore to avoid taxes as similarly evil, we should expect similar intervention. As long as a majority of people worship at the altar of democracy and coercive communitarianism, we can’t expect to be left alone.

I suspect an important  factor in the likelihood of government intervention will be the degree to which the voters in a given country feel a particular seasteading community rightly belongs as part of their nation. For example, if Patri and a whole lot of other Americans relocate off the coast of America and trade almost exclusively with American landlubbers, interference or annexation by the US seems much more likely than if people from many countries formed a community in the middle of the Pacific and traded with people from a variety of countries.


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