More material has been added to Cato Unbound since I first posted.
Michael Munger writes,

The danger to limited government, the threat to the Montesquieuan system of checks and balances, comes from an unexpected source. “Good government” types, people who want to improve the “efficiency” of government, are termites eating away at the walls that protect us from tyranny. And enormous damage has been done, in just the ways that de Jasay points out. But I am more hopeful than Anthony, perhaps because I see the first light of recognition in a lot of citizens’ eyes. The last thing you want is an efficient government. Our only choices are a truly weak, but efficient, limited government, or else a powerful government prevented by strong ties from using most of its powers, most of the time.

Randy Barnett writes,

Some libertarians prefer a different legal structure, one that promises to work better than the structure provided by the Constitution. Such a structure would take the principles or strategies embodied in the Constitution farther than did the Framers. These principles are (1) reciprocity of power between the ruler and the ruled that is supposed to be accomplished by voting, (2) checks and balances on power that are supposed to result from federalism and separation of powers, and (3) the power of exit that is provided by free emigration and, formerly, the power of secession. These libertarians merely propose two itsy-bitsy, teeny-weenie changes to the status quo: First, end the government’s power to put its competitors out of business by force (which violates the freedom to contract of those who wish to provide and obtain such services); second, end the government’s power to confiscate its income by force (which violates the freedom from contract of those whose property is taken without their consent). Not much really.

What these libertarians hope and expect would result from these two changes is the evolution of a polycentric constitutional order in which one would subscribe to a legal system of one’s choice as today one subscribes to cell phone service, health and auto insurance, or private security providers.

I think that even if you created polycentric constitutional order, or what I call Virtual Federalism, it could easily break down. There could be jurisdictional disputes–I say resolve our disagreement in Court X and you say you signed up for Court Y. To resolve these disputes, we need an ultimate arbiter. And there is a potential for the ultimate arbiter to take on more and more power, just as the Federal government has in the United States.

I hate to see people get all caught up in national elections. The Presidential election is, as CNN puts it so well, a Ballot Bowl, analogous to the Super Bowl. It is a marketing extravanganza for centralized government.

Ultimately, the reason that we do not have something closer to virtual Federalism now is that the two parties have very effective marketing operations. In the battle of ideas, at the level of folk beliefs, we are losing to The People’s Romance.