I want to make the argument that the Coase Theorem can be applied to a bargaining problem between two (or more) states. More specifically, I want to suggest that the logic of Coasian bargaining potentially undermines the idea of a monopolistic state, and any such state can only be justified insofar as it does not suppress the formation of new states (i.e., does not quell secession). This has implications for theories of territorial secession and federation, the protection of territorially dispersed minorities, and the emergence of non-territorial, ‘virtual’ states.
I recently read a couple of interesting economic history papers on the interactions between institutions, economic and political power, and economic growth. The first was the econ-famous paper, The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth, by Harvard economists Daron Acemoglu, Simon Johnson, and James Robinson, which has managed to rack up 682 citations (so says Google Scholar). The second was the less-cited (12) but equally-good paper, The Open Constitution and its Enemies: Competition, Rent Seeking, and the Rise of the Modern State, by Oliver Volckart of LSE.
I recently came across a newish article titled ‘Schumpeter and the end of Western Capitalism’ by William Kingston in the Journal of Evolutionary Economics. This line in particular caught my eye: “The decline of capitalism began when financiers were released from this discipline, and it ended with the catastrophe caused by belief that bureaucratic control could replace it.”
Overall the paper sketches what is a very interesting thesis (Schumpeter’s, that is) placed in the context of the GFC and beyond. Well worth the read. It is good to see someone calling out the crisis for what it was – something of a Schumpterian-Minskian-Olsonian-Hayekian Frankenstein’s monster. The common thread: overcentralisation and the pathology of control. It blows my mind that people writing decades ago, up to a century ago, could be so prescient.
The abstract is below and a link to the article is here.
In part I, I introduced a distinction between ‘natural’ and ‘artificial’ non-territorial group formation as a basis for looking at examples of non-territorial practices in governing. In this post, I’ll go into a bit more detail on the natural category, and how particular examples from the past have facilitated non-territoriality.
The first commonality between historical cases of non-territorial governance, e.g. Roman Empire, Icelandic Free Commonwealth, establishment of extra-territorial consular jurisdictions, Austro-Hungarian Empire, territorially-dispersed minorities (Maori in New Zealand, Sami in Norway), and Belgium; seems to be that they tend to occur when already-existing ‘group identities’ are incorporated, marginalised or homogenised by an encompassing state or dominant group.
One of the things I have been looking at recently is the concept of ‘non-territoriality’ in governance.
The idea bears some relation to the political philosophy of panarchy:
PANARCHY (pan-archy: many chiefs; multi-government) is a system of competing, co-existing governments which conduct their operations within the same geographical territories without making any claims to those territories, and whose only powers derive from the consent of those they govern, i.e., those who voluntarily agree to submit to a particular government. These voluntary governments are constituted and operate on the basis of contractual personal law rather than the coercive territorial law of the Nation-State.
David Taylor (1989), For Panarchy
Non-territoriality also crops up in the (small) literatures on functional federalism (FOCJ) by Bruno Frey and multi-level governance by Liesbet Hooghe and Gary Marks. Not to mention to concept of extraterritorial jurisdiction that dates back to medieval merchants and modern(-ish) colonial practices.
Two questions stick out: (1) has non-territorial governance ever came to be?; and if so (2) when, where, and why?
(For part I click here)
The “how to be a constitutional architect” conundrum dovetails with the questions of why constitutions matter and whether they really do evolve; whether they can or should be rationally designed or allowed to adapt in a process of spontaneous ordering. Most scholars think they have an angle on constitutional design – that is, as constitutional architects – that is rational because they frame the problem as axiomatic. They position themselves as constitutional architects and endeavour to draw up blueprints that are fitting for today, and forever. This makes constitutional analysis an exercise in logical reasoning (Locke, Kant, Mill, Rawls, etc.). The master social planer is the master architect; and essentially this amounts to an exercise in constitutional monument building.
Gerald Frug has coined a nice term: The architecture of governance. He uses it to describe the vast array of service delivery arrangements at the local government level; the way that authority is allocated to a variety of different kinds of institutions – city neighborhood associations, city governments, private enterprise, and the like. See him speaking about this here.
The term architecture has also been applied to organisations; most notably by Carliss Baldwin and Kim Clark in their work on the power of modularity in organisation design. Their work has spawned an entire sub-genre of study on organisational structure and performance.
I am interested in meshing these two approaches into what might be termed a kind of ‘evolutionary constitutional economics’. In content, this is more closely aligned to Frug’s work; but in practice it would look a lot more like the Baldwin and Clark approach.