The End of Nation-States?

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Ever since Francis Bacon’s The New Atlantis, men have dreamed of using science to advance empirical knowledge and bring relief to the human condition. But in the area of law and governance in particular, some countries have tried to apply rational principles (i.e., Marx’s supposedly scientific laws of history) with disastrous consequences. The common law tradition — with its protections of private property and individual liberty, plus stable rule of law — has proved the best system so far, despite being an emergent, system rather than the creation of an all-wise leader or bureaucracy.

Ironically, the countries that have tried the hardest to engineer social outcomes are now implementing special zones where more organically-evolved legal systems are the law of the land. China’s SEZs — free trade zones modeled on western governance — are credited with bringing close to a billion people out of poverty. This economic miracle has spawned copy-cat experiments around the world, but they are not necessarily the end-all-be-all of good governance. Newer concepts like charter cities, technological zones, and startup cities have been proposed to jumpstart growth in dysfunctional jurisdictions around the world.

A few years ago, before a series of high profile failures in places like Honduras and Madagascar, these ideas seemed to be gaining traction. There was cross-spectrum support, ranging from “crazy utopian techno-libertarians” (like the “seasteaders”) to establishment-types like former World Bank Chief Economist Paul Romer.

Mark Lutter straddles these two worlds. He knows what drives libertarian aspirations for free cities, having recently received his PhD from George Mason University (under Don Boudreaux, no less). But Lutter also knows what it takes for radical ideas to get a hearing with the people with the authority to implement it. He recently founded the Center for Innovative Governance, a new think tank, to fill the vacuum in credible academic literature and guide pragmatic policy-makers who see the potential for more innovative governance.

Although it has become a cliche in some circles, governance matters — more than many realize. Writing for Jacobite Magazine, Lutter notes that a practical approach must convince the ruling elites. Our empirical knowledge of what works (rule of law, property rights, etc.) needs to be transmitted to the parts of the world where darkness, superstition, and authoritarianism still reign.

Why City States?

Nation-states have been the default configuration for governance for 400 years. Static in their geographic boundaries, and sclerotic in their administration, nation-states are like lumbering giants that frequently start wars against other countries and shackle their own citizens with one-size-fits-all laws. When it comes to economic activity, however, cities are by far the more dynamic relevant unit. They are also where most of the problems requiring government need to be solved. As Richard Florida, founder of CityLabs, recently wrote:

“Local governments tend to be less ideological and more focused on problem-solving, and they know intimately which problems actually need to be solved. They are more accountable to the people they represent, because they interact with them every day. And because people pick where they live by “voting with their feet,” constituents tend to share the same values as their leaders.”

The push for more innovative governance builds on the on-going devolution of power from dysfunctional nation-states to cities and neighborhoods. Where this devolution is stalled, we see widespread human misery: Honduras, Venezuela, and much of Africa.

This brings up the possibility of cities wresting even more autonomy from their Federal counterparts, and implementing best practices or trying out new ones in the competition for tax-paying constituents. Florida and Lutter suspect that cities that are most attractive to knowledge workers — and those that innovate — are most likely to win.

Lutter is also working on a narrative that will make it easier for policy-makers to implement the changes that will help cities evolve into hubs of next-generation governance. He returns to the show this Sunday to talk about his new organization’s work on this crucial dimension. As a think tank, the Center for Innovative Governance Research aims to provide a menu of policy options, and even more importantly, to cast these options in a compelling light that captures people’s imaginations. He and Bob discuss some of these options, and the surprising places where innovative governance is taking off.

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