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The Political Economy of Non-Territorial Exit


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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Chapter 6: Spontaneous order in the formation of non-territorial political jurisdictions

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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