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The Political Economy of Non-Territorial Exit

Cryptosecession

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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Index

Trent J. MacDonald

access rules 94
accommodation 180
Acemoglu, D. 83, 136
advocacy campaigns, viral enthusiasm for 16
advocacy groups 31
agglomeration 153
economies in 148, 150, 1537, 176, 179, 189
efficiencies of 1920, 34, 121
markets and 123
Alesina, A. 88
algebraic analysis 29, 37
allocative efficiency 345, 144, 147, 156
anarchism 42
cyber-spatial realisation of 62
market 40
panarchism from 41
anarcho-capitalism 40
Anarchy, State, and Utopia (Nozick) 46
Andersson, D. E. 1846, 188
Assange, Julian 144
Austro-Hungarian Empire 567
Austro-Hungary non-territorial federalism 201
authority rights 109
allocation of 109, 111, 136, 142
autonomy 59
degree of 54
individual 59
legal 54
national-cultural 16, 45, 59, 78, 195
national personal 73
bargain/bargaining 75, 856, 110, 112, 187
cattle farmer 10910
Coasean 77, 108
latent state 11112
opportunities 79
polity-economy from 1323
strategic 76
subjective valuations into 133
Bauer, Otto 5, 567
Belgium
dual federalism 56, 578
political schisms of 40
regions of 57
Bitcoin 5, 649, 144, 190
Bitnation 42, 63, 667, 150, 178
blockchain 649, 190
cryptosecession 10
decentralised 67
governance 678
Bodin, Jean 1
Boettke, P. J. 120
Bolton, P. 88
boundary change 1868
boundary mobility 1859
boundary rules 97
Braude, Benjamin 54
Buchanan, J. M. 21, 30, 34, 434, 48, 7780, 8990, 94, 143, 1468, 15051, 165, 174, 17980
Buchanan–Wicksellian constitutional stage test 68
bundling 29, 200
governance 3, 23
Byzantine Generals Problem 65
Calabresi, G. 767
cartography 12
cattle farmer bargains 10910
Cheung, S. N. 75
choice
community of 87
complexity of 2831
criterion of 79
for groups and individuals 22
institutional 138
personal 56
political 1416, 18, 182
between property rules 77
public 41
strategy 166
of two community governments 6
Churchill, Winston 14, 334
citizens, capability of 10
classical contractarianism 43
classical contractarian political theory 42
Coasean bargaining 108, 11214
Coasean dictum 109
Coasean efficiency concept 179
Coasean political exchange 78, 71, 78, 845, 106, 113, 11516, 118, 142, 202
Coasean trade 86
Coase theorem 70, 738, 118, 201
jurisdictional 8490
political and jurisdictional interpretations of 113
in politics 83
positive conclusions of 76
collective action 32, 612, 71, 73, 81, 83, 85, 130, 1489, 188
equalises costs of 130
collective goods 1415, 22, 267, 61
allocation of 20
benefits of 24
consumption of 25
provision of 91
self-managing 30
and services 23
collective productive services 90
common identity, concepts of 191
commons property 96
communal units 59
comparative historical analysis 120
comparative institutional analyses 28, 36, 756, 122, 201
comparative social costs 119, 142
competitive federalism 1617, 19
competitive governance 16, 53, 86
mechanism and theories of 16
medieval polycentric system of 53
model of 182
theme of 17
competitive political sorting 149
complexity of choice 2831
conscription, functions of 159
constitutional permissibility of
jurisdictional change 130, 149
consumer sovereignty 30
contractarianism 423
contractarian justification 4, 42
contracting transaction costs (CTCs) 12, 113, 119, 121
controlled migration 12, 183, 193
conventional property rights 72
Cooter, R. D. 79
cosmopolitan culture 2
countervailence theory 53
Coyne, Christopher 183, 193
cross-border trade restrictions 122
cryptoanarchism 62, 190
theory and practice of 66
cryptoanarchist technologies 190
cryptoanarchist virtual states 69
cryptoanarchy 62
promises of 180
as secession and statecraft 624
spectre of 199200
theory and practice of 6, 62
cryptocurrency 645
growth of 63
cryptoeconomy 634, 667, 1579
institutional structure of 67
persistence of 179
self-sufficient 63
simultaneous operation of 63
cryptographic exit signals 63
cryptographic technology 41, 60, 626, 69, 149, 190
cryptography 60
growth of 11
internal exit 1778
Internet and 68
veil of 63
crypto infrastructure 1578
cryptoseceder pays tax 157, 160
cryptosecession 10, 64, 1489, 15674, 179, 194, 203
blockchain-based 10
bouts of 180
coefficient 1789
defined 634
impacts 161
internal exit model 15964
model of 158
non-territorial 150, 17480
option of 162
as partial internal exit 1569
permissionless 149
prevalence of 179
process of 158
proof equilibrium 17980
technologies of 11, 2034
threat of 174, 176
cryptosecession game 10, 16474
backward induction solution of 1745
extensive-form representation of 167
Nash equilibrium solution of 166
outcome of 176
cryptosecessionist internal exit 144
cryptosecession-proof tax rate 159, 1635, 1689, 1713
cryptostatecraft 64
crypto technologies 11, 63, 1623, 17980
information and diffusion of 180
CTCs see contracting transaction costs (CTCs)
cultural self-determination 45
Czechoslovakia
institutions in 46
parallel states in 46
DAOs see decentralised autonomous organisations (DAOs)
Dark Wallet 66
decentralisation 17, 19, 21, 24, 26, 34, 48
benefits of 15
blockchains 67
bundling problem and 23
jurisdiction 17
non-territorial 2021
principle virtues of 23
decentralised autonomous organisations (DAOs) 66
decision-making process 188
decoupling political jurisdiction 3
de facto allocations 80
de facto cryptosecession 157
de facto property
relations 98
rights 7, 107
de facto territoriality 578
de jure allocation of property rights 126
de jure polities 161
de jure property rights
allocations 104, 1067
relations 103, 105
demic order 199
democracy
classification of 1845
diZerega’s theory of 184
majoritarian dimension of 14
as spontaneous order 184
democratic decision-making 186
democratic politics 186
de Molinari, Gustave 4, 3940, 201
Demsetz, H. M. 746
de Puydt, Paul Emile 4, 40, 201
discriminatory fiscal transfers 145
distributional conflicts 113
distributive efficiency 35
diversity, proposed non-territorial responses to 191
diZerega, G. 184, 186, 188, 194
Djankov, S. E. 11921, 124, 126, 128
dominant assurance contract 612
dual federalism 56
quasi-panarchistic form of 40
dual-system 2
Duncan, T. 183, 193
economic decision-making 143
economic possibility frontier 135
economic preferences 3, 1718
economic theory 12
economy, fiscal capacity of 7
efficiency hypothesis 78
Eichenberger, Reiner 5, 4850
Ellerman, David 27
entitlements
allocation of 136
optimal allocation of 142
equilibrium fiscal surplus 153
equilibrium secession-proof 159
tax rate 1524
Ethereum 66, 178
ethnic cleansing 203
ethnocentrism 142
ethno-political conflicts 59
European Union 2
existing jurisdictional orders 199
exit
cryptosecessionist internal 144
external 147
internal see internal exit
model 15964
non-territorial 11
opportunity costs of 1889
partial 190
signals 63
experimentation 6, 1819, 25, 278, 30, 334, 43, 69
with bundling 4
framework for 19
external exit 146, 1489
role of 147
externalities 74
diversity of 23
interconnected 77
Pareto-relevant 74
presence of 734
spillover 267
failures 7, 12, 18, 73, 82, 87, 1212, 171, 183, 196, 199, 203
Faith, Roger L. 89, 144, 1468, 15051, 165, 174, 180
farming properties 109
federalism 17, 19, 21, 33, 49, 73, 78, 84,86, 89, 99, 182, 184, 197, 201
competitive 16
dual 56, 578
economic theory of 50
functional 23
market-preserving 84
non-territorial 51, 567, 59
traditional 59
federal majoritarian system 17
fiscal budgetary process 96
fiscal commons 7, 916, 200201
fiscal equivalence 24, 146
fiscal exploitation 1467, 151, 1613, 174, 180
internal exit and 14750
fiscal redistribution 1445
fiscal surplus 1512, 156, 15960
fiscal transfers 150
Flemish nationalism 40
FOCJs see functional overlapping
competing jurisdictions
(FOCJs)
framework for utopia 4
Franklin, Benjamin 14
free jurisdictional system 203
free market system 203
free-riding 61
Frey, Bruno 5, 23, 4850, 89
Friedman, David 88
Friedman, Patri 36
functional federalism 23, 49
functional governance units 59
functional overlapping competing
jurisdictions (FOCJs) 5, 4850, 78, 90
genuine entrepreneurship 29
ghettoisation 197
global capitalism 2
globalisation 2
governance 14, 96, 1289
anarchistic conception of 40
centralised system of 27
competition and innovation in 19
competitive 16, 53
concept of 1
contestable markets for 53
‘defence’/’protection’ function of 512
definition of 15
distinct function of 23
efficient system of 28
form of 334, 39
functions of 2, 6, 312, 37, 52, 567, 59
markets 86
models of 197
modes of 334
multi-level 16, 201
non-territorial 5, 15, 58, 196
optimal architecture of 30
parallel 16
‘para-territorial’ system of 51
providers 20
regionalisation and decentralisation of 6061
system of 15, 51, 200
territorial 1, 57, 196
unbundling of 34, 16, 25, 2930, 59
governmental competition 40
government failure 122
government policies 15
diversity in 22
Graziosi, G. R. 151
Greece 512
grievances 7, 73
group secession 150
Hahnel, R. 76
Hall, Abigail 193
Hartley, John 183
Hayek, F. A. 37, 50, 184, 192
heterogeneity 43, 1978
Hobbesian abstraction 68
Hobbesian legal tradition 68
Hobbes, Thomas 1, 43
homogeneity in political interactions 198
Hooghe, Liesbet 5, 50, 90
hypothetical agreement 43
Icelandic Free Commonwealth 5, 523, 201
incumbent entitlement holders 134
Inman, R. P. 87
institutional possibility frontier (IPF) 121
institutions 24, 119, 122
inter-jurisdictional competition 27
inter-jurisdictional externality 29
inter-jurisdictional relations 72, 77, 99100
inter-jurisdictional spillovers 267
inter-jurisdictional transfers 177
internal exit 15056, 158
basic 157
Buchanan and Faith model of 174
concept of 147
cryptosecession 15964
and fiscal exploitation 14750
results for various assumptions 155
theory of 1478
international economic integration 89
International Monetary Fund 2
Internet 2
IPF see institutional possibility frontier (IPF)
Islamic law (Shariah) 55
JTCs see jurisdictional transaction costs (JTCs)
jurisdiction 123, 1878
boundaries 89
Coase theorem 8490
constitutional permissibility of 130
design 289, 192
exchange, opportunity costs of 1223
formation, spontaneous order in 198
markets 86
modes of 202
planning 192
polycentric systems of 86
potential mechanisms of 182
property rights 72
relations 99
reorganisation, constitutional constraints on 122
rights 97
jurisdictional orders 188, 195
dynamic mechanisms of 186
existing 199
models of 197
modes of 188
planning of 193
spectrum of 187
jurisdictional transaction costs (JTCs) 116, 119, 1214, 129
knowledge problem 1112, 37, 94
of nation-states 1816, 1913
knowledge spillovers, potentials for 198
laboratory federalism 33, 356
laboratory panarchism 33, 36
Landauer, Gustav 40
latent state bargains 11112
Leeson, Peter 84
legal rights, transferability of 86
legibility 1, 60, 1589, 1634, 174, 1767, 180, 206
technologies of 1589
Les Soirées de la Rue Saint-Lazare (The Evenings of the Rue Saint-Lazare) (de Molinari) 39
Lewis, Bernard 54
Libecap, G. D. 83
Long, R. T. 5, 36, 47
majoritarian democracy 3
majoritarian voting 3, 34
markets 123
and agglomerations 123
allocation of resources 192
anarchism 40
decentralisation 16
decoupling of 6061
failure 122
socialist economic planning 192
transaction costs 122, 124
Marks, Gary 5, 50, 90
maximum social surplus 912
May, Timothy C. 62, 144
Medem, Vladimir 56
Melamed, A. D. 77
membership externality 93
Mencken, H. L. 14
‘millet’ system 5
misallocation, distinct sources of 122
mobility costs 19, 109
modern societies, heterogeneity of 197
monopolistic governance 23
multi-level governance 16, 50, 201
multiple majority coalitions 94
Muslim millet 545
Nakamoto, Satoshi 65, 144
national-cultural autonomy 16, 45, 59, 78, 195
national self-determination 45
nation-state
creation of 1
description of 1
harmonious 1949
knowledge problem of 12, 1813, 1913, 196
spontaneous order of 1913
natural resource depletion 92
Natur under Kultur (Schlick) 44
Nettlau, M. 40
network technology 32, 612
nominal property allocation 1056
nominal property rights 989, 102
structure of 105
transitions of 107
non-exploitative tax rate 1589, 165, 170, 172
non-territorial consociation 51
non-territorial cryptosecession 150
non-territorial decentralisation 1516, 2022, 25, 29
non-territorial exit, theory of 11
non-territorial federalism 212, 567, 182
non-territorial federal systems 56
non-territorial governance 2022, 29, 40, 54, 190, 196, 200201
concept 39, 51
system of 48
technology and 62
non-territorial identities 2
non-territorial internal exit 911, 180, 203
cryptosecession 15680
efficiency and exploitation 1437
and fiscal exploitation 14750
model 15056
non-territoriality 22, 33, 52, 5960
non-territorial jurisdictions 11, 24
non-territorial millet system 45
non-territorial minorities 59
non-territorial political jurisdictions
constellaxy 1949
knowledge problem of nation-state 1813
personal secession 18991
spontaneous order and knowledge 1913
spontaneous order in jurisdictions 1869
spontaneous order in politics 1845
non-territorial political organisation 49
non-territorial political units 37
non-territorial polycentric democracy 1213, 1925, 199
non-territorial publics 1945
non-territorial secession 144
non-territorial states 4, 2021, 45
non-territorial system of governance 15
non-territorial unbundling 1, 35, 10, 28, 30, 323, 36, 51, 132, 1446, 200204
complexity of choices 2831
concept of 31
cryptosecession and 17480
as discovery 314
dynamic of 177
functional overlapping competing jurisdictions (FOCJ) 4850
governance 58
historical and contemporary cases of 5169
institutions of 1312
limits of territorial political sorting 1920
model for 147
multi-level governance 50
non-territorial solution 2022
Parallel Polis 456
political choice problem 1416
political philosophy of panarchism 3944
process of 2, 10
prospect of 8
‘pure’ theory of 6
scale and spillover externalities 267
Schlick 445
system 910
traditional solution 1719
unbundled solution 224
utopia 467
virtual cantons 478
non-zero transaction costs 87
Nozick, R. 16, 468
Olson, M. 18, 24, 53
‘one-size-fits-all’ political monopolism 23
‘one size fits all’ social contract 43
opportunity costs 1889
optimal exploitation 157
optimally exploitative tax rate 169
Orthodox Christian millet 55
Ostrom, E. 91, 956
Ostrom, V. 3031, 96
Ottoman Empire 6
millet system 536, 201
social system 536
overexploitative tax rate 1656
and no secession 168
and secession 168
panarchism 4041, 43
from anarchism 41
anarchism distinction 42
classical foundations of 39
definition of 41
inventor of 40
non-territorial aspect of 42
philosophical underpinning for 47
political philosophy of 4, 16, 35, 3944, 47, 200201
theory of 44
panarchist political theory 41
panarchist theory 42
parallel experimentation 25
parallel governance 16, 27, 30, 33, 58
Parallel Polis 5
parallel states in Czechoslovakia 46
Pareto, V. 29, 37, 74
Parisi, F. 79
partial exit 190
partial internal exit 10, 147, 176, 203
partial secession 160
permissionless 149
personal jurisdictions 100
personal mobility 1889
personal secession 150, 18890
non-territorial 18991
notion of 189
Pigouvian taxation and subsidy 75
PJCT see political-jurisdictional Coase theorem (PJCT)
PJPF see political-jurisdictional possibilities frontier (PJPF)
policy modification relations 1012
political authority 8, 93, 116, 129, 138, 1923
allocation of 8, 71, 73, 78, 1089, 118, 125, 128, 13031, 1345, 193, 202
assemblage of 34
foundation of 1
misdirected application of 91
monopoly on 191
optimal allocation of 8, 73
positions of 90
political bargains 79
political choice 15, 17
features of 16, 18
political Coase theorem 7884
political commons 59, 72, 956, 201
boundaries of 114
management 94
via production of public goods 114
political consultants 31
political decentralisation 1619
political decision-making 122, 143
political discrimination 96
political-economic activity 10, 11415
political economy 195
political enterprises, inefficiency of 96
political entrepreneurship 13, 27, 30, 186, 1923
political exchange, Coasean 7, 71
political geography 12, 1978
political innovations 133
political-institutional system 80
political-jurisdictional change 177, 19091
political-jurisdictional Coase theorem (PJCT) 78, 7490, 99, 105, 108, 115, 117, 119, 1267, 146, 201
analogy 10813
component of 114
elaborating 11318
levels of jurisdiction 73
markets, politics and jurisdictions 7073, 97108
polities as commons 9097
political-jurisdictional competition 18
political-jurisdictional entrepreneurs 194
political-jurisdictional exchange 73
political-jurisdictional institutions 121
political-jurisdictional order 145, 199, 203
political-jurisdictional outcomes 142
political-jurisdictional possibilities frontier (PJPF) 8, 119, 121, 124, 13741, 2012
curves 124, 126, 128, 131
graphical illustration of 129
location of 127
non-optimal portions of 134
surfaces 127, 132
political-jurisdictional possibility model 134
political-jurisdictional reallocations 97
political-jurisdictional re-equilibration, subsequent patterns of 11
political-jurisdictional system 78, 70, 193, 201
political-jurisdictional transaction costs 42, 11516
political-jurisdictional transformation frontier (PJTF) 9, 11920, 13242, 202
trajectory of 136
political-jurisdictional transitions 8
political jurisdictions 193
adjustment of 85, 114
decoupling of 20, 61
political offerings 42
political order 42
political organisation 6
modes of 28
territorial form of 200
political preferences 19, 223
heterogeneity of 33
plurality of 47
political property rights 133
political quasi-market 21
political reality 93
political reallocations, property rights
and beneficiaries of 134
political science, traditional problems of 143
political sorting 20, 109
political territoriality 20
political theory 2
political transaction costs (PTCs) 117, 119, 121, 124, 130, 142
political transformation frontier 134
politics-as-markets metaphors 78
polity-economies 129
polycentric democracy 182, 185, 188, 19091
polycentric governance 34, 185
polycentric systems 356, 956
polycentrism 78, 93
population transfers 185, 1878, 1956, 203
positive transaction costs 735, 84, 115, 117, 124
post-tax income 1524, 1567
Potts, Jason 183
power
boundaries and overlapping assemblages of 191
constitutional separation of 53
private property 85, 96, 133
product bundling 35
property-authority allocations 119, 131
property rights 70, 724, 80, 97, 114, 116, 138
actual structure of 80
allocation of 79, 73, 77, 1056, 10810, 11415, 11920, 1256, 128, 130, 1345, 202
assignment of 93
changes in 1389
claims 98
‘conventional’ 72
de jure allocation of 126
embodiment of 85
exchange of 75
initial allocation of 86
initial embodiment of 87
institutional embodiment of 856
institutional literature on 120
modified structure of 80
optimal reallocation of 121
political-jurisdictional allocations of 86
private exchanges of 11415
reallocations of 97
relations 1034
separate and transferable 92
structure of 8081
sub-optimal allocation of 122
transferring 74
prospective entitlement holders 134, 136
public enterprises 256
public goods 61, 88, 147, 1512, 157
public–private partnerships 61
public pronouncement 52
public services, preferred bundles of 18
QANGOs see Quasi-autonomous non-government organisations (QANGOs)
Quasi-autonomous non-government organisations (QANGOs) 49
quasi-market competition, innovative benefits of 212
quasi-market mechanism 18
The Question of Nationalities and Social Democracy (Bauer) 56
racism 142
radical decentralisation of power 47
rational constructivism 183, 1912
‘rational ignorance’ of voters 31
rebundling 4, 22, 28, 200
re-equilibration 179
regional-community government 58
reintegration 179
religious identity 142
Renner, Karl 5, 567
resistance, technologies of 159
resources, allocation of 28, 77
Robinson, J. 136
robust political economy 28
Rodrik, D. 1334, 136, 138, 200
Roland, G. 88
Rome 512
roving bandits 53
Rubinfeld, D. L. 87
scale economies, diversity of 23
Schleicher, D. 34
Schlick, Moritz 4, 446
Schlick states 201
secession-proof tax rate 153, 157, 160, 1625, 1712, 174
secession/secessionism 73, 111
costs of 148
group 150
partial 160
personal 150
polities after 156
proof condition 152, 162
theory of 1478
threat of 149, 151, 156
self-determination, demands for 59
self-governing community 5
self-governing privileges 55
self-sufficient cryptoeconomies 63
shared sovereignty 2
Sheeran, K. A. 76
social capital 129
social contracts 425
social costs, source of 121
social losses in markets 123
social preferences 3, 1718
social surplus 912
social welfare, levels of 912
‘sorting’ efficiencies 34
sorting failure 122
sovereign entities 2
sovereignty 2
unbundling 12
Sparta 512
‘special commune’ public jurisdictions 6
spillovers
diversity of 23
externalities 267
inter-jurisdictional 27
Spolaore, E. 88
spontaneous jurisdictional order 1878
spontaneous order 188, 1913
in jurisdictions 1869, 198
and knowledge problems 1913
in politics 1845
theory of 193
spontaneous political order 186
spontaneous secession, dynamic of 189
state intervention 78
state reach relations 100
states, defined 45
stationary bandits 53
Stigler, G. J. 7071
strategic bargaining 76
Swiss Confederation 58
taxes/taxation 91
evasion, form of 148
functions of 159
preferred bundles of 18
rates 165
technology 190
and non-territorial governance 62
telecommunications 60
territorial bundling 1
territorial decentralisation 3, 1619, 25, 29
territorial disputes 59
territorial federalism 57
territorial governance 6, 20, 196
territorialised transactions costs 73
territorial jurisdictions 19, 33
territorial monopolism 44
territorial monopoly 4950
territorial nation-state 1
territorial political organisation 2
territorial political sorting, limits of 1920
territorial political units 37
territorial polycentric democracy 197
‘territorial’ property 97
territorial sovereignty 41
‘Things’ 5
think tanks 31
Tiebout, Charles 19, 87, 109, 181, 185
analysis 21
construct 87
model, limitations to 182
sorting and internal rebordering 191
sorting model 147, 181
total tax revenue 1512
trade-offs 3, 123, 1567
traditional contractarian political
theories 423
traditional federalism 59
transaction cost 9, 73, 109, 11215, 11718, 120, 122, 124, 129
augmentations of 76
comparative impositions of 108, 120
exit-related 1889
inevitability of 76
jurisdictional 123, 129
reduction in 125
size and imposition of 77
unprohibitive 80
transactions 1289
transformation frontier, location and
shape of 136
transform governance 143
trustless mixing 66
Tullock, Gordon 31, 413, 789, 94
tyranny of majority 334
unbundling 200
form of 17
functions 4
governance 3, 16, 22, 25, 36
non-territorial 200201
sovereignty 12
state 245
system 28
unitary majoritarian system 17
United Nations 49
UnSystem 66
‘utopian’ political communities 45, 46
Vanberg, Viktor 30
Velvet Revolution 5
virtual cantons 5, 478
virtual communities 62
virtual digital communities 2
virtual states 148, 157
von Mises, Ludwig 289, 192
voters/voting 18, 80
limitation of 19
logic of 21
‘rational ignorance’ of 31
territorial expressions of 16
Wagner, R. E. 184, 186
Warren, R. 185
Weber, M. 1
Weingast, B. 84
Westphalian sovereignty, concept and practice of 1
Wicksell, K. 94
zero private income 157
zero transaction cost 746, 80, 117, 124
benchmark 124
Zube, John 4042