Property Rights, Entrepreneurship and Transaction Costs
Edited by David Emanuel Andersson and Stefano Moroni
Chapter 4: Governance by voluntary association
Governance consists of rules and rulers that apply to a set of persons. Governance typically also includes finances – budgeting, revenues and spending – and a domain of territory and other property. Governance is either voluntary or imposed, depending on whether the governors have a privileged sovereign status or else whether there is effective equal individual sovereignty. When there is legal equality in governance, or equal sovereignty, the persons who govern are under the same law as those whom they govern. When government is imposed, the governors are privileged with sovereign powers and immunity unavailable to the governed. When officials have sovereign immunity, the state and its governing agents cannot be subject to civil or criminal penalties for engaging in their official activity. In the United Kingdom, for example, the monarch was sovereign prior to 1947, immune from ordinary prosecution. In the United States, the federal government may not be sued unless it consents. The US states also have sovereign immunity as governments having parallel sovereignty together with the federal government. The imposition of government also implies that there is no explicit contract between the governing organization and those subject to the government. An explicit signed proper contract implies that the parties are entering into a voluntary agreement as equals and as knowing parties. Voluntary governance consists of explicit contracts and legal equality (Foldvary, 2006a).
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