Theory of unbundled and non-territorial governance

MacDonald, T 2015, Theory of unbundled and non-territorial governance, Doctor of Philosophy (PhD), Economics, Finance and Marketing, RMIT University.

Document type: Thesis
Collection: Theses

Title Theory of unbundled and non-territorial governance
Author(s) MacDonald, T
Year 2015
Abstract This thesis is theoretical in nature, falling into the field of political economy. It provides a theoretical analysis of two hitherto underappreciated principles of political organisation: unbundling the functions of government and devolving responsibilities to non-territorial jurisdictions. This is motivated by inherent limitations of bundled, territorially monopolistic governance. Political economists are well aware of how majoritarian democratic decision-making necessitates various conflicts and compromises. Territorial decentralisation also bears efficiency limitations because its sorting mechanism requires citizens sacrifice economic and social preferences to satisfy political preferences. Political bundling generates trade-offs that impede preference satisfaction when the bundles offered do not conform to preferences over the fully suite of policies.

The theory of unbundled and non-territorial governance is analysed as a means to overcoming these problems. Economic theory from multiple schools (i.e., new institutional, public choice, Austrian) are used to find that greater efficiency and citizen welfare follows from non-territorial unbundling, and clarify the conditions under which it might ever eventuate. The history of these ideas in political-economic thought are traced, and past and contemporary cases of non-territorial unbundling are uncovered. The ‘pure’ version of the theory has yet to fully arise in practice, but emerging examples of cryptographic ‘virtual states’ come close to realising non-territorial unbundled forms of political organisation.

Next the ‘political-jurisdictional Coase theorem’ is used to describe how political systems and jurisdictions change. It is the relative imposition of transaction cost over different modes of jurisdictional change as well as wealth effects that enable or prevent non-territorial unbundling. In addition the ‘political-jurisdictional possibilities frontier’ describes the space of possible allocations of property rights and political authority, given the prevalence of market, political, and jurisdictional transaction costs; and the ‘political-jurisdictional transformation frontier’ shows the compact trajectory of actual allocations that obtain, given the prevalence of ideas, interests, and wealth effects. Together these explain the conditions of possible emergence or implementation of non-territorial unbundling.

A model of partial internal exit captures the competitive dynamic between incumbent and potential governments in a non-territorial unbundled system. This model particularly applies to ‘cryptosecession’ which appears the most likely avenue for non-territorial unbundling. Fiscal exploitation is reduced and eventually eliminated as the capability of citizens to move to non-territorial and unbundled jurisdictions increases. As a model of cryptosecession, the balance of citizen opacity and government legibility determines the balance of fiscal exploitation versus equivalence.

Follwing Austro-evolutionary theory, the 'knowledge problem of the nation-state’ is the task of designing a political-jurisdictional order given that requisite knowledge is dispersed throughout a polity. Redrawing borders or executing population transfers have proven failures in rational constructivist planning. Conversely, spontaneously ordered political jurisdictions is the general solution to the knowledge problem of the nation-state, which is termed a ‘constellaxy.’ The pure theory of non-territorial unbundling resembles to a constellaxy, and in the absence of a constitutional mechanism, a solution can be found in technologies of cryptosecession. While speculative in nature, such discussions are necessary to advance the quality of governance and meet with the challenges of an increasingly complex future.

Degree Doctor of Philosophy (PhD)
Institution RMIT University
School, Department or Centre Economics, Finance and Marketing
Keyword(s) non-territorial
Coase theorem
knowledge problem
spontaneous order
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Created: Wed, 23 Dec 2015, 08:49:21 EST by Denise Paciocco
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