Seasteading: Striking at the Root of Bad Government
FEBRUARY 24, 2011 by PATRI FRIEDMAN, BRAD TAYLOR
Filed Under : Competition, Monopoly
Libertarians have done a wonderful job of pointing out the inefficiency and cruelty of government and identifying some of the causes. We know that current policies are bad; we know that such policies are the inevitable outcome of unrestrained democracy; and we even have some ideas about what would work better. The most fundamental problem with government and the most promising form of activism have been largely ignored, though. If we want liberty in our lifetimes, we need to think more carefully about why we have bad government and how best to improve things.
To think about this question, we need to avoid being either too romantic or too cynical about governance. While readers of this publication are at no risk of being romantic about government, there is a chance of excessive cynicism. Government currently works very poorly, but this doesn’t need to be so. Competition would force providers of governance to offer high-quality rules and public services at a reasonable price, unleashing institutional innovation and making the world a much better place.
So far, most libertarians have been hacking at branches, while a few come tantalizingly close to striking at the root. We’re going to try to convince you that the root at which we should be striking is a tangled mess of barriers to entry and costs of switching in the governance market. The ax we should be using is the technology to settle the ocean.
Rules governing interaction and resolving disputes are an essential part of free and prosperous human life. It’s difficult to stress strongly enough the importance of good rules. There are enormous differences in living standards around the world, and affluence is largely determined by the geographical lottery of birth. The average American earns about $47,000 a year, while the average Zimbabwean gets by on a little more than $300. This doesn’t mean that Americans simply have more stuff, but also more health, security, and peace.
The difference between the United States and Zimbabwe is that the former has relatively good institutions that allow trade and specialization, while the latter does not. An even starker demonstration of the power of rules comes from the Korean peninsula. Before World War II, North and South Koreans shared a common culture, history, and set of rules. With the arbitrary division of the country based on the strategic maneuvering by the United States and the Soviet Union, this all changed. The South became more free; the North less. The result of this natural experiment is those in the South are now almost 15 times richer than those in the North.
Of course, even relatively rich countries have their problems, and libertarian policy activists have spent countless hours and pages describing areas for improvement. Patri’s grandfather Milton Friedman, for example, painstakingly laid out the problems caused by many government programs and argued that giving people greater freedom would lead to dramatic improvements. While such reforms would certainly be desirable, simply insisting that we need particular reforms ignores the incentives of the political system.
This neglect is rather odd: Libertarians are well aware of systemic incentives and unintended consequences at the policy level, but most ignore similar problems in the higher-level political system. They will chide statists for assuming they can bring about a particular social or economic outcome through top-down planning, and then go on to specify how they’ll change the rules from the top down to allow bottom-up interaction.
Policy activists are forgetting that the same problems that prevent statist policies from working as advertised also block desirable reforms. The political system is itself a spontaneous order in which the interaction of many individuals operating under various constraints and incentives determines the policy decisions that will eventually be reached. This is where Public Choice theory is helpful: It allows us to analyze the incentives of political actors and suggests a more fundamental level of intervention.
Public Choice begins with a simple, indisputable, but somehow widely rejected idea: Politicians, voters, and bureaucrats are not angels. Political actors do not selflessly strive to pursue the common good but respond to incentives. James M. Buchanan describes Public Choice, a field he jointly founded, as “politics without romance.”
The theory makes a distinction between two levels of politics. At the first is the to-and-fro of everyday politics in which rules are created, amended, and repealed. This is the level at which policy activists concentrate their efforts. The behavior at this level, though, is determined by the incentives created at the constitutional level. Public Choice theorists argue that if we want to improve policy, we need to do so indirectly by changing the constitutional meta-rules (rules about rulemaking) through which ordinary rules are established.
This has led many to advocate constitutional limits on the power of government. While this approach is better than lobbying for particular policy changes, since the results are likely to be more robust, Public Choice-influenced constitutionalists have not entirely rid their analysis and approach to activism of romance.
The familiar problems of unintended consequences also arise at the constitutional level. Even if we could design the perfect constitution, we’d need to find a way of implementing and enforcing it. Given that this would need to happen through existing political channels, we’re unlikely to end up with anything good. Constitutional politics is still politics, and those drafting the new constitution have the same foibles as anyone else.
The problem of crafting better meta-rules is the same as that of crafting better rules: We know what the problems are and might even have some good ideas about how things can be improved. What we don’t have is a mechanism for improving things. The interests and passions of people do not disappear when they start drafting constitutions, and political behavior, whether at the policy or constitutional level, emerges from the interaction of various agents. We need to think about the incentives that structure all political behavior, including that of the constitutional level.
The Governance Industry Matters
An extremely useful way to think about the incentives that structure the political game is to consider the market for governance. Rules have economic value, and people would be willing to pay for them. We can think of the bundle of rules and public goods provided by government as a product, governments as producers, citizens as consumers, and taxes as prices.
This seems counterintuitive, especially to libertarians—who realize that markets provide choice whereas governments as we know them do not. There are, however, a number of benefits to this view. It allows us to analyze the industry structure for government and learn why governance quality is currently so low. The current market for governance is dominated by a series of large geographic monopolies not subject to competition. In a competitive market those organizational forms that are not conducive to producing high levels of customer satisfaction are weeded out by natural selection. Without competition, this selection mechanism is absent and we end up with what we have today: bad firms producing bad products.
This is why we have bad constitutional structures.
A number of scholars have already recognized this. The idea of market anarchism is to have governance services such as rulemaking, adjudication, and protection provided on the open market. This would force providers to compete and the incompetent would go out of business. Patri’s father, David Friedman, provided what is, in our unbiased opinion, the best description of how such a polycentric system would work in his book The Machinery of Freedom. Market anarchism is not simply a system of good rules or even a system for producing good rules. It is a system for producing good rule-making organizations.
Similarly, though less radically, some have argued that we need to geographically decentralize political power. With smaller units of governance among which citizens could move based on quality and their idiosyncratic preferences, we’d see governors constrained by the threat of exit and the quality of governance would improve. This was an important argument underlying the federalism of the U.S. Constitution: There would be competition among the several states, and Americans would enjoy better governance.
While market anarchists and decentralists are correct that we need more competition if we are to improve government, they have generally failed to address the reasons we have such an uncompetitive market for governance and therefore provide no route for getting from here to there.
The Technological Environment Matters
When we think of governance as an industry, the problem with policy and constitutional activism becomes clear: Policy advocates are demanding better products without providing a mechanism for products to improve, while constitutionalists are demanding better firms without providing a mechanism for firms to improve. The problem with the arguments of anarcho-capitalists and decentralists is less obvious but simple enough: They demand a better industry structure but have provided no mechanism for the industry structure to improve.
Think about the operating-system (OS) industry. This is one of the least competitive industries around (though it’s still orders of magnitude more competitive than the governance industry). We all know it’s uncompetitive, but simply insisting that we need to increase competition is not useful. It is uncompetitive for a reason. Creating an operating system is an expensive undertaking, and network effects and switching costs mean that consumers are reluctant to change.
If someone genuinely wanted to make the OS industry more competitive, she wouldn’t go about it by simply insisting that we need more competitors. Rather, she would attempt to change the underlying technological factors that cause the OS industry to have high barriers to entry and switching costs. We can see this happening with the open-source software movement, which does not simply create a new competitor to Microsoft, but rather opens a range of possibilities for improvement by making it easier for hackers to build custom OSes. Over time this has produced new versions of Linux that are more user-friendly and compatible with Windows, lowering the cost of switching.
This is the sort of technological activism libertarians need to engage in if they really want to change things. Some are doing this already. Crypto-anarchists aim to help people escape State control by developing more secure communication technologies; agorists aim to develop non-State institutions that would allow people similarly to avoid dealing with the State; and Julian Assange’s Wiki-Leaks project uses technology to make government more transparent. While we applaud these efforts, we don’t think they are going to get us to a radically freer world. The State is a powerful and resilient institution, and it will fight back against these internal threats to its existence. Fortunately, there is another way that has the potential to fundamentally change things.
Developing the technology to create permanent, autonomous communities on the ocean seems like a strange way to solve the problem of bad governance, but we’re convinced it’s the best chance we have for liberty in our lifetimes. This is why Patri established The Seasteading Institute with the mission of developing the technological, political, and economic knowledge we need to revolutionize the governance industry.
If the ultimate problem with that industry is high barriers to entry and switching costs, we need to find a way to dismantle these obstructions to competition. In the past, frontiers have provided the means for disenfranchised groups to start their own country. Unfortunately, we’ve run out of frontier on land. Every square inch of land on the planet is claimed by some existing State, and none is going to give up its claim.
The ocean is a vast frontier unclaimed by States. While they claim some jurisdiction over resources in large areas of ocean, there is much space for political experimentation within these zones and plenty of space outside any State’s practical reach. Starting your own country on the ocean will be difficult and expensive, but at least it’s possible.
The ocean is not yet ready for settlement by most people. It is harsh and unforgiving, and long-term life on the sea is currently limited to only a few pioneers in the fishing, offshore oil, and cruise industries, as well as a handful of dedicated live-aboard sailors.
Technology, though, has the potential to make the ocean a feasible alternative for more people. Early pioneers will learn lessons that will make life on the ocean easier, thus prompting previously unwilling pioneers to make the move. Over time the costs in comfort, safety, and access to civilization will fall and the ocean will be just another place to live. This is the path we see on any frontier. Living in the harsh environment of North America would not have seemed like an attractive proposition to most Europeans a few centuries ago. Eventually, the wilderness was tamed, and North Americans now enjoy higher standards of life than many in the old world.
As it happens, the ocean has another important benefit. Water makes it easy to shift large objects around cheaply. This is what allowed the global shipping industry to prosper, and it could also help make government more competitive. We normally think of buildings as being tied to land, and this has serious implications for competition. Government can do a lot of harm before it becomes worthwhile for someone to move away. The fluidity of the ocean, in contrast, allows people to vote with their house by sailing to a neighboring jurisdiction. If a seasteading government announces an unpopular policy, it could find that it rules over nothing but empty waves. This would allow bad governments to die without bloodshed and force governors to think about what people really want.
While the challenges and uncertainties in settling the ocean are large, there are only a few core problems and none are insurmountable. To make seasteading a reality we need to take a pragmatic, incremental, and business-focused approach. Rather than creating a multibillion-dollar vessel straight away without any clear way to finance it, we encourage seasteading entrepreneurs to think carefully about the business case for particular industries for which seasteading has a comparative advantage. Many industries are overregulated, and a seastead off the coast of a major U.S. city offering medical treatments not yet approved by the FDA, for example, would be a very lucrative proposition.
We know it is possible to live on the ocean; we know there are ways to make money there, and our mission is to drive down the costs of seasteading to transform the ocean from potential frontier into real frontier and eventually into just another option with some serious advantages. This will lead to experimentation and innovation in governance and force existing States to improve or wither away for a lack of residents. The challenges are large but the potential payoffs are much, much larger. By transforming the political problem of bad governance into a hard but achievable technological problem, which humans have a knack for solving, we make success possible.