David Friedman on Consensual Government
Speaking at the Cato Institute, David Friedman breezed through a number of deep issues concerning the nature of government. The talk itself is only 30 minutes, but you might have to listen multiple times. I was planning to attend, but I wimped out because of the nasty weather.
The question is whether it is possible for people to choose governmental rules by consent, from a range of competing providers. At one point, Friedman does a sort of Modigliani-Miller, and takes the providers out of the picture as a thought experiment. That leaves a need for every individual to come up with bilateral bargains with every other individual. That in turn raises the issue of externalities. My preferred bargain with you may depend on the way bargaining works out between you and someone else or on how it works out among completely different people.
Another point is that the outcome of such bargains is likely to be path dependent. Two different sets of initial conditions can lead to two different bargains.
I find it difficult to think about political theory in terms of, “Starting from no government, do you need to add coercive government, and, if so, how much?” The conceptual problems make my head hurt.
I find it easier to think about the problem in terms of, “Starting from where we are today, how much could we benefit from mechanisms that increase people’s ability to use exit, so that they do not have to rely on voice?”
So I think in terms of unbundling, secession, self-directed tax contributions, etc. See the widely-unread Unchecked and Unbalanced.