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Trent J. MacDonald

Much has been said about the vices and virtues of democracy. Democracy, said Benjamin Franklin, is two wolves and a sheep voting on what to have for dinner. Lord Acton warned that democracy is susceptible to a ‘tyranny of the majority’. Winston Churchill told us that democracy is actually the worst form of government . . . except for every other form that has been tried. Not without irony, he also said that the best argument against democracy is a five-minute conversation with the average voter. H. L. Mencken described democracy as the theory that people know what they want, and deserve to get it good and hard. These quotes speak to the majoritarian dimension of democracy and the reality that even in the best-of-functioning systems 49 per cent of the people can remain unhappy. To be sure, in most modern democracies even a less-than-majority popular vote can carry an election, due to the peculiarities of electoral systems.5 Democracy, in other words, is a system to ensure that some people get what they want; it is not a system to allow everyone to do so.

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Trent J. MacDonald

The non-territorial governance concept resembles closely the political philosophy of panarchism—a specific form of governance (i.e. ‘-archy’) that encompasses all others (i.e. ‘pan-’). The central idea is that individuals should have maximum freedom to join and leave the jurisdiction of any government they choose, without having to change their current location. The classical foundations of panarchism were laid more than a century and a half ago, but underwent a long dormant period until something of a contemporary revival of panarchist political theory and philosophy in the late twentieth century and today (Tucker & de Bellis 2015): 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. (Taylor 1989)

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Trent J. MacDonald

Territorial political organisation forms the backbone of western liberal democracies. However, political economists are increasingly aware of how this form of government neglects the preferences of citizens, resulting in dramatic conflicts. The Political Economy of Non-Territorial Exit explores the theoretical possibility of ‘unbundling’ government functions and decentralising territorial governance.
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Trent J. MacDonald

This chapter proposes an extension of the Coase theorem to the problems of political conflict and jurisdictional change. Most political interpretations of the Coase theorem take as given a prevailing political-jurisdictional system and describe Coasean bargains within it; for instance, how post-vote trades improve efficiency or otherwise, given transaction costs and institutional rule-constraints (Parisi 1997; Klick & Parisi 2003; Luppi & Parisi 2012). But seldom do they take a wider lens to the problem; to how an encompassing political-jurisdictional system is itself an assignment of ‘property rights in franchise’ (Buchanan 1973; 1975b), and to how the transformation of this very system can be evaluated in light of the Coase theorem. Given this, should there likewise be such a thing as the ‘jurisdictional Coase theorem’? If political exploits serve to reallocate property rights within the boundaries of a state then perhaps we can trace the Coase-theoretic reallocative consequences of changes across jurisdictional boundaries too. Coase—channelling Stigler—claimed that his theorem’s ‘logic cannot be questioned, only its domain’ (1992: 717). It is my purpose to consider whether its domain extends to political and jurisdictional change. This chapter argues that changes in political jurisdictions (territorial or nonterritorial) as well as the policies enacted within them (productive or redistributive) operate to reallocate property rights. And moreover, these processes are focused on internalisation of externalities while being beset by transaction costs and are therefore episodes of Coasean exchange.

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Trent J. MacDonald

In this chapter we present a framework describing the trade-off between inefficient markets, politics and jurisdictions, and apply it to the problem of jurisdictional design. The framework adapts the Djankov et al. (2003) model of the comparative social costs associated with an institution to analyse the institutional structures that exist in the political-jurisdictional Coase theorem. Different allocations of property rights and political authority associate to different institutional systems, which can be arrayed along a political-jurisdictional possibility frontier. We consider the tradeoffs as we move around that frontier, and suggest further applications of the model. Our approach provides an institutional efficiency-based approach to the evaluation of mixes of political-jurisdictional rules. We introduce a political-jurisdictional possibilities frontier (PJPF) to illustrate the space of property-authority allocations (as politicaljurisdictional rules) and a political-jurisdictional transformation frontier (PJTF) to illustrate movements about property-authority allocations. These build on the political-jurisdictional Coase theorem from the previous chapter, where three sources of inefficiencies were outlined: (1) political transaction costs (PTCs); (2) jurisdictional transaction costs (JTCs); and (3) market (contracting) transaction costs (CTCs). Consequently, these form the three axes of an institutional possibilities space, the contours of which represent the property right allocations (and hence societal efficiency) that are possible for a given society.

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Trent J. MacDonald

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Trent J. MacDonald

Citizens, as consumers of political goods, face a cost–benefit calculus associated with the decision to stay in a particular jurisdiction—a state, whether a nation-state or a regional state—or whether to exit to one with a better ratio of benefits to costs. In this way, Charles Tiebout (1956) argued that if different states made different competitive offerings of local public goods, and people were free to move between states in the direction of their preferences and willingness to pay, the result would be an efficient allocation of policies and people over jurisdictions. The Tiebout model was expressed as ‘voting with one’s feet’ but it is equally valid to think of this as ‘shopping for public goods’. The significance of the Tiebout sorting model is usually presented as a non-political solution to the free-riding problem, but at a deeper level it highlights a basic symmetry between the redrawing of political maps—whether by war and conquest, by negotiation and purchase, or by secession or integration—and the movement of people. If people can move, states don’t have to. In this chapter, as throughout this book, we are interested in the other side of this symmetry: if states can move, then will people not have to? Moreover, we explore how the jurisdictional shape of states can be understood as a spontaneous order outcome of this process at the level of personal secession and group formation. However, there are two limitations to the Tiebout model: (1) the spatial map of jurisdictions is in an important sense both given and arbitrary, and (2) the resulting constellations of citizens as groupings, which is an emergent property of the Tiebout sorting, takes place primarily over individuals selecting bundles of public goods (and, importantly, not bundles of other citizens). Both of these are problematic in real economies in real political systems. First, political choices are always bundled with economic choices (Tiebout’s original model assumed this complexity away by making all income a rent), and often the economic choices will be primary (Schleicher 2010). Second, citizens do seek to agglomerate with specific other citizens (usually in homophilic affinity groups; see McPherson, Smith-Lovin & Cook 2001; Currarini, Jackson & Pin 2009) and so choose groups as much as they choose local public goods.

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Trent J. MacDonald

The modern nation-state is a bundled territorial form of political organisation. The purpose of this book has been to explore variants of the political system almost diametrically opposed to this: unbundled and non-territorial governance. The various models and arguments have drawn on new institutional, public choice, and Austrian economic theory in undertaking these explorations. Particular focus has gone to panarchist and cryptoanarchist political theory (Ludlow 2003; Tucker & de Bellis 2015); the Coase theorem, the theory of fiscal commons and the new institutional economics (Coase 1960; Wagner 1992); institutional possibilities, political transformations and the new comparative economics (Djankov et al. 2003; Rodrik 2014); the theory of fiscal exploitation and internal exit (Buchanan & Faith 1987); and polycentric spontaneous political orders (diZerega 2000; Andersson 2012; Martin & Wagner 2009). All these diverse threads have come together in an analysis of the theory of unbundled and non-territorial governance. The book started with an appreciation of the many paradoxes and problems of majoritarian voting in bundled, territorially monopolistic nationstates, and contended that a more efficient system of governance is one in which citizens relate their political preferences in detailed and filigreed ways. A public choice style framework was used to find that decoupling political jurisdiction from geographical location (so that citizens can switch political jurisdictions without switching location) and unbundling government (so that collective goods and services can be provided separately by independent public enterprises) leads to greater efficiency in public good provision and more citizen welfare. The conclusion to this first chapter was not to rule out all political bundling but rather to promote an ‘unbundleable’ system of governance so that political entrepreneurs could discover ways to rebundle the various political goods and services. Non-territorial unbundling forms a platform for experiments in bundling, unbundling and rebundling, and ultimately fosters discovery of optimal scale of scope in political bundles.

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Trent J. MacDonald

It is no overstatement that James M. Buchanan was one of the most influential economists of the twentieth century. He is also, somewhat curiously, one of the most subversive—laying the theoretical foundations that explain a political dynamic that is only just beginning to unfold, and with the potential to transform governance as we know it. A Nobel laureate for his development of the contractual and constitutional bases for the theory of economic and political decision-making, Buchanan made seminal contributions to several fields within economics and was a major figure in the revival of classical liberal political economy in the late twentieth century. He founded no less than two distinctive schools and research programmes: (1) public choice theory, applying the tools of economic analysis to traditional problems of political science and turning on its head the notion of the benevolent, omniscient government social-planner (‘politics without romance’) (Buchanan & Tullock 1962; Buchanan & Wagner 1977; Buchanan & Tollison 1984); and (2) constitutional economics, the study of the legal–institutional–constitutional rules that constrain the choices and activities of economic and political agents (‘the rules of the game’) (Brennan & Buchanan 1985; Buchanan 1987, 1990).

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The New Global Politics of Science

Knowledge, Markets and the State

Mats Benner

Science has become a central political concern with massive increases in public investments and expectations, but resources are embedded in a complex web of societal expectations, which vary between countries and regions. This book outlines an insightful understanding of science policy as both concerning the governance of science itself (priority-setting, funding, organization and articulation with polity, society, and economy) and its extra-organizational connections, in terms of higher education, innovation and national policy concerns.