Wednesday, May 23, 2007 28 Comments

Limited government as antipropertarian idealism

Nick Szabo, with his usual panache and aplomb, appears in the comments (why doesn't Blogger have permalinks on individual comments? Is there any conceivable justification for this bizarre lacuna? Or is the Googlocracy already succumbing to its great doom of Actonization? Or perhaps a corollary, in which wealth enervates, and absolute wealth enervates absolutely?), and elucidates the turbulent history of state and sovereignty in England.

Nick, again like all philosophers who are not actually SS officers, is a fan of limited government. This may have something to do with the fact that he's a scholar in the Anglo-American legal tradition, which (except for one man, Hobbes) has always stressed the rights of the many against the few. This is a noble tradition, both figuratively and literally, and when we point the rifles of reason in its direction we must experience some Burkean tremors.

Nonetheless, I have sworn the gran rifiuto and I am not about to repent. So it's worth asking: does limited government actually work? Does it aim at a desirable purpose? If so, should we expect it to achieve this purpose? As usual, I'll work praxeologically and consider any so-called "evidence" only after I've reached my conclusion.

Fortunately, these questions are easy to answer. The answers are "no," "yes," and "no."

By limited government I mean juridically self-limited government. A juridically self-limited government defines its own powers, which may in practice approach those of Fnargl, with a legal constitution interpreted by a judicial branch.

There are two classes of limitation to consider: positive (enumerated powers, unenumerated rights - every power not explicitly granted to the state is proscribed) or negative (unenumerated powers, enumerated rights - every power not explicitly proscribed is granted).

Like Nick, I prefer the former. I am a stubborn and independent person. I have no interest in allowing the State to manage the contents of my intestines. The fact that it insists on doing so is a horrendous perversion and a source of continuing amazement. The fact that, though many have remarked on the great weirdness of the whole trend, the growth continues, is a source of some concern. It suggests that many people who oppose this trend may have chosen to resist it with remedies that either do not work, or in fact exacerbate the condition. I think it's at least worth wondering whether juridically self-limited government is such a remedy.

Both positive and negative limited government have the same problem. The problem is that they rest on a magical ideal which does not in fact exist. First, there is no such thing as an independent judiciary. Second, if any such unicorn could be found, it itself would be the sovereign power.

Therefore, any system of limited government makes the state a judge in its own case.

The result is predictable. Limited government is a recipe for corrupting the judiciary. In adaptive terms, a political context of delimitationism will select against limitationist judges.

Worse, the judicial behavior most favorable to the health of the state is to remove limitations in fact, while maintaining them in theory. This deception may be wafer-thin, but however thin it is, it's more useful than no deception at all. Any pretense of legal continuity makes life harder for political forces whose goal it is to maintain or restore limited government. The result is an environment that selects for pseudo-judges who operate a deceptive system of pseudo-law.

If the resulting pseudoformalist state respects any limits, it is probably in its interest to do so. As we saw in our discussion of Fnargl, the most absolute and amoral of powers can have good reasons to restrict its own actions and obey its own restrictions. To the extent that there still is such a thing as "constitutional law," it is probably best explained by such interests.

For example, Fourth Republic (1933-) constitutional law maintains a negative theory of limited government. It enumerates rights such as freedom of the press, and guards them jealously. So jealously, in fact, that actions which would be criminal if undertaken by non-press actors are in practice legal for the press.

One could take this as a sign of the Fourth Republic's profound commitment to freedom. Or one could take it as a sign that the modern press is in practice a branch of government - effectively the "intelligence bureau" Walter Lippmann proposed in Public Opinion.

Of course, free speech in the Fourth Republic is not (at least at present) restricted to the Press. Anyone can say whatever the heck he wants, as I am doing now. However, this is not at all inconsistent with the interests of the state. It makes it harder for us to notice how much the combination of mainstream media, public education, and accredited universities resembles a comprehensive official information system. Or how little the whole system would have to change if it was in fact reorganized as a single Department of Knowledge.

In fact, what's so striking about the Fourth Republic is how much it resembles the kingdom of Fnargl. The enumerated freedoms it upholds, like freedom of speech, are conducive to its health. Those it has discarded, like freedom of contract or freedom of arms, are distinctly unsalutary. And like Fnargl, the Fourth Republic is a revenue maximizer, recently converted (under the flag of "neoliberalism") to the merits of shearing, not butchering, its sheep. Such fresh worthies as the Cato Institute now stand ready to assist it in the important and delicate task of distinguishing between wool and mutton. Presumably in the future we will all, like Markos Moulitsas, be "libertarian Democrats."

I have no objection at all to this trend. Like Deng Xiaoping, I don't care if the cat is black or white. My view is that any proposed revision of the Fourth Republic is unlikely to succeed if it implies any substantial reduction, or even reallocation, of that entity's revenue stream. This is why I favor converting the Fourth Republic into a formal company whose tenants and serfs are its present taxpayers, and whose shareholders and creditors are its present beneficiaries.

What I do object to are the lies. Fnargl ruled by the power of death. The Fourth Republic has the power of death, as well, but this is not the principal force by which it rules. Principally, it rules by tricking its subjects into believing that it exists to serve their interests. No serious person can defend this absurd proposition, but many accept it as an unconsidered assumption.

Reformalization - converting taxpayers into tenants, and beneficiaries into noteholders - is best seen as a kind of "truth and reconciliation" response to the series of coups against the law that saddled us with the Fourth Republic. It is in the Fourth Republic's interest because the Fourth Republic's information monopoly, which is the root of its power, is not sustainable in a world of peer-to-peer networks. It is in our interest because most of the Fourth Republic's abuses are the result not of its unlimited powers, but of the inefficiencies and conflicts that are inevitable attributes of an organization of unprecedented size and wealth which cannot identify or distinguish between its owners, its customers and its employees.

As we've seen, it is not difficult at all to refute the idea of limited government. There is no deductive reason to think that this design should work. There are no historical cases in which it has worked. The idea simply makes no sense at all. Yet all believe in it.

Where have we seen this phenomenon before? Hm.

What I suggest is that limited government is a form of idealism, rooted like all Western idealisms in Christianity. Specifically, it is a member of the antipropertarian family of idealisms.

Antipropertarianism is a very natural idealism that has been reinvented probably more times than anyone can count. Once you admit that all humans are spiritually equal, and a duke is no better than a beggar, it's pretty hard not to ask yourself why the duke is a duke and the beggar is a beggar. If the answer is that the duke was born a duke, whereas the beggar was a farmer until his crop failed last year, anyone who has even the slightest shred of interest in building God's kingdom on earth can see that there's a small problem here.

If you are disposed to any species of antipropertarianism, almost the first abuse you'll think of is the idea that one man, or one family, can own an entire country. (Or even the people in it - as, for example, the US alone among nations claims the right to tax its expatriate serfs.) Therefore, you will try to come up with some design in which the country is owned or controlled in some sense by its residents. You will make it not a kingdom but a community.

It is impossible to argue with the ethics of antipropertarianism. Clearly the estate of the newborn duke is arbitrary and not, in any conceivable moral sense, deserved. The reason I believe in property is simply that property prevents violence, and I hate violence. In my world, the estate goes to the duke because it is the only way to keep everyone from fighting over it.

Since the ideal of limited government - that is, the idea that sovereignty cannot be the rightful property of anyone, individual, family or corporation - has become general, we have seen an extraordinary level of violence, which appears to be connected to the question of who should control and receive the revenues of sovereignty. Law has declined and sovereignty has become much more absolute. And its behavior is often pointlessly burdensome in ways which do not seem related to maximizing revenue, and do seem related to the struggle for power.

I do not regard this as a good outcome. And I note that this result is very similar to what we get whenever any antipropertarian idealism gains currency. Property does not actually disappear. It becomes murky. It is the source of constant tension. It is informalized. It seeps deep into committees whose workings are obscured even to their members. When we ask who controls the United States, the only possible answer is that it's very complicated. The same answer applies to, say, the Gambino family.

Nick's short overview of English legal history is actually, I think, good evidence for the problems that result from poorly-formalized power structures.

By right of conquest, William I claimed allodial rights to all England - total ownership. As the commander of the conquering army, he personally approached the powers of Fnargl. It might be an overstatement to say there was no one in England who lived if William wanted him dead, but it was presumably not too much of an overstatement.

But William did not have the Finger-Snap of Death. His power was political, not physical. It was based on mastery of an organization, a mastery that was inherently informal. It certainly was not automatically inherited by his descendants.

The result was that, over time, the (informal) political powers and (formal) legal rights of the Crown diminished in a rather interesting fashion. Both political powers and legal rights decreased, broadly if not monotonically, to at least the Tudor era. As Nick points out, the Crown granted many formal attributes of sovereignty - such as franchises for private law enforcement - to various barons and other subcontractors. Ultimately such delegations are the (formal) source of our rights to, for example, defend our property against trespassers.

The problem with this process, and I would say the general reason for the demise of the whole intricate structure of medieval law, is that it became unclear whether these grants were mere delegations of power - existing so long as they served the sovereign's desires - or whether they were irrecoverable alienations, as if the Crown had, say, sold Wales to France.

In other words, a disparity arose between political and formal reality. Did the King continue to respect the rights he had granted because he wanted to, or because the grantees had become powerful enough to protect themselves against him? This went back and forth quite a few times. It was frequently submitted to the test of arms. In the end, of course, the Crown preserved its symbolic status in exchange for de facto abdication and expropriation.

The situation now is of course different. As both Nick and Kuehnelt-Leddihn note, today's "democratic" governments are far more absolute than any monarchy in history, and they brook no hint of physical opposition. This is in large part the result of changes in military reality.

I am a decentralist. I would prefer not to live in a global Fnargocracy. I would much prefer a world of tens or hundreds of thousands of absolutely-sovereign states, each competing avidly for my business.

But the facts of life is that if, in this world, all these states decide to merge into a Fnargocracy, there is nothing to stop them. No popular rebellion can succeed against a determined modern military force (colonial wars may seem to refute this proposition, but they don't - I will discuss this at great length later). The era of cobblestones and brickbats is over.

Therefore, it strikes me that the era of expropriating governments is also over. And I blame the failure of the various libertarian movements on their failure to realize this, and their insistence on trying instead for some kind of repeat of the American Revolution. The reality is that if the American colonies had somehow made it to the age of the telegraph and the machine-gun, we would be ruled by Tony Blair and his Eurocrat henchmen, now and forever.

If this is true, revenue-maximizing government is not a medieval atrocity from the past, but a permanent feature of human history whose rare exceptions are unstable and undesirable. This does not mean we have to live with the mindless, appalling institutions that rule us at present - quite the contrary. What it means is that any plan for rationalizing these institutions should avoid the fatal mistake of trying to create a vacuum of power, an error into which all systems of juridically self-limited government inevitably fall.


Anonymous nick said...

I agree that it's quite fun to explore the alien, to be Fnargl's advocate, as it were, but I observe that totalitarianism is, alas, not very alien at all. It takes only a bit of reading in 20th century history to encounter plenty of near-Fnargls. Indeed, we have mostly forgotten what a non-Fnargl world is like. We have mostly forgotten what it is like to live in a world where law and politics are based on property relationships rather than on master-servant relationships -- in other words a world where civilians don't call anybody "our Commander-in-Chief". It is the profoundly antitotalitarian world of law and politics based on property relationships that has become truly alien.

We both recognize the important problem cause by governments being judges in their own case, and I agree that this was one of the big problems that ended privately owned jurisdictions (the other was the rise of Parliament under the Tudors, but that's a long story).

Your solution is to give up trying at all, give up all property rights in anything whatsover, including one's self, to a master hierarchy of bureacrats who hold and may arbitrarily exercise all property rights. That, certainly, is profoundly anti-propertarian, regardless of whether it is formalized in nominally property terms. It is also profoundly pro-violence and anti-predictability to allow arbitrary powers that can be delegated in arbitrary ways.

The modern solution to the judge-in-own-case problem is not all that bad -- a court system that gains some degree of independence from other parts of the government by its judges having life tenure. Separation of duties and powers is an important design pattern for corporations.

The monarcho-franchise system, in the days before Parliament became dominant, also solved this problem reasonably well. The reason was an alignment of interests in following property law itself. As Shakespeare has the Duke of York speak in Richard II, when Richard is threatening to (under somewhat dubious legal arguments) confiscate the exiled Duke of Hereford's estates and franchises:

"Take Hereford's rights away, and take from Time
His charters and his customary rights;
Let not to-morrow then ensue to-day;
Be not thyself; for how art thou a king
But by fair sequence and succession?"

The king's own rights to his realm are, in other words, based on the same property law as the jurisdictions of the dukes, burghers, and other franchise owners. Abrogate the law for others and it could easily be abrogated for the king. Parliament does not share this coincidence of interests; only the dawn of an independent court saved (some kinds of) property rights in England and America.

A lifetime tenured court combined with a property-centric monarchy (where franchise rights and the Crown itself are based on the same property laws) has not, AFAIK, been tried and might be very effective. However even more effective would be to realign political property rights with substantial decentralization and unbundling to minimize instances of courts being judges of their own property.

Property rights, done correctly, are profoundly anti-totalitarian.
The keys to enforcing property rights in police powers correctly are (a) defining them in a fine-grained way to make them unbundlable, (b) making alienable the major positive procedural rights and inalienable certain minor positive procedural rights and of negative rights, and (c) avoiding property owners being judges in their own cases. Medieval English franchise law mastered unbundling of jurisdictions in a way practically unknown and unimaginable now. It was a brilliant piece of anti-totalitarian political structure that we have almost completely lost today, although it is still latent in our legal system.

You are insightful to raise the distinction between alienation and delegation. Property relations and principle-agent (or worse master-servant, a.k.a. employer/employee) relationships are profoundly different things. Your proposal is profoundly anti-propertarian because, like Justinian's Code, you propose that all property relations in legal process and politics be replaced by master-servant relations.

Moderns find it quite hard to think about granting a property right in political power rather than delegating it, especially in minor unbundled political powers that fall far short of sovereignty. In my paper I discuss the debate between the Romanist scholars and the English common lawyers over this issue. The Romanist totalitarian view was that a franchise was delegation, because under the Justinian Codes they studied they, like we, usually find it impossible to imagine government structured any other ways than employer/employee (a.k.a. master/servant) relationships. But the view -- alien to Romanists and moderns alike -- the view followed by the English common lawyers and judges was that a franchise grant was a property grant -- it was heritable, devisable, alienable (unless restricted by deed), protected by trespass writs, and so on in the same basic ways as rights in real property and indeed as rights in the Crown itself.

May 23, 2007 at 4:03 PM  
Blogger Victor said...

We would be ruled by Britain if the colonial regime made it to the age of machine gun and telegraph? You seem to have forgotten about India, Mencius.

More generally, I think there is another fundamental flaw in your thinking: you are thinking of the sovereign as an ultimately rational actor, like Fnargl. Many actions of those in power make no sense if you try analyzing them in this regard, though: people are not uniformly revenue-maximizing. For a vivid example of that, think of Droit de Seigneur.

The more I read what you write, the more I think that formalism can only possibly work in a formal world, and our world is not one of those. We are condemned, if you will, to muddle through informally, and I think formalism itself becomes a form of Idealism, where you constantly seek that which doesn't exist and probably cannot exist.

In this regard, IMO, you are just putting a new hat on Libertarianism. It's a pretty hat, granted, but still just a hat. What it sits on, hasn't changed -- under the hat, it's still an Idealistic position which deals with how one wishes the world were, rather than with how it is, a position where one ascribes reality to flights of fancy.

May 23, 2007 at 6:44 PM  
Blogger Mencius Moldbug said...


Thanks for the link to your franchise paper - I think I had seen this a long time ago, but only skimmed it.

I think one book you might greatly enjoy is Bertrand de Jouvenel's On Power. Also James Burnham's The Machiavellians: Defenders of Freedom. Both these books were influential in steering me away from the Rothbardian perspective - not that I don't consider Rothbard the leading philosopher of the last century, if not the last two. But perfection is not for any of us.

Jouvenel, in his brilliant introduction (written while on the run from the Nazis) points out that the power of European central governments has been expanding for about the last millennium. He asks: why? Why do people fail to notice and combat this obviously pernicious trend?

His answer is that people are constantly attempting to do so, but they tend to do so in specific ways that in fact exacerbate the trend. In other words - he does not use these terms, of course - byzantism is a kind of autoimmune reaction. It succeeds, quite unconsciously of course, by getting people to side with it against the lesser evil.

So it is especially interesting to see your discussion of the "Romanists" - Bracton, etc - in the various attempts by centralizing English kings to crack down on franchises.

What these conflicts show is that, as we both agree, the English kings never held anything like imperium. They were not absolute monarchs at all, they were subject to the law - otherwise, they would not have employed these slippery fellows to help them reason their way out of it.

What we call "absolutism" in the sense of the monarchical period is in fact an aggressive doctrine. It only purported to be a recognition of reality. It was not a defense of sovereignty, but an expansion of it.

The entire concept of absolutist monarchy was a fiction. It was a legal formality completely at variance with reality. This makes it no different from, say, Germany claiming to own Poland.

As Kuehnelt-Leddihn puts it, Louis XIV never could have dreamed of conscripting his subjects or regulating their diets. He simply did not have these powers. If he did have them, he certainly would have exercised at least the first.

I greatly dislike the word "totalitarian," because it's an anti-ideal, an imprecise term of abuse. The PRC of Hu Jintao has exactly the same powers as that of Mao Zedong. Either has all the powers of Fnargl. By your definition of "totalitarian," the two are identical.

But, while the PRC is certainly not my example of ideal government today, today's PRC is far closer to the US (or especially to the equally unaccountable EU) than it is to the China of Mao Zedong. Indeed, there are nontrivial ways in which today's PRC is freer and better governed than either the EU or US. No such claim can be made for the murderous regime of Mao. The word "totalitarian" trivializes this difference in ways I dislike.

I am really not sure how you can define life-tenured judges as a success. Life-tenured judges have ratified every coup in US history. The growth of the US from the Constitution as it was ratified to its present state as a de facto world government is perhaps the greatest achievement of cancerous organizational expansion ever, saving only the Roman-Byzantine experience. If this is success, what's failure?

So it is easy for these historical examples to lead us astray, because when we look at claims of allodial government in the past - even the mad absolutism of the Dominate - we are generally looking at aggressive fictions, not formalizations of reality. Of course the emperors of Late Antiquity claimed absolute legal authority - their actual authority was challenged at every step. Not that the late Roman or early Byzantine government was not bizarrely overgrown, but its various parts also had a tendency - as in the "totalitarian" states of recent history - to launch coups at the drop of a hat.

Totalitarianism in the sense you use the word is not the result of evil. It is the result of a very strange and unstable condition, which is only present in a state in which legitimacy is undefined and the war of all against all is on 24-7. In such a state evil flourishes. Mold will also grow in your refrigerator if you turn the power off. But you don't blame this on the mold, or on the refrigerator.

If there is one thing I would drop from the Western intellectual heritage, it is this constant search for evil and evildoers. I'm sure some of the emperors of late antiquity were not the nicest people, but in general they were caught in a system of government that was utterly out of control. They faced a choice between two options: anarchy and tyranny. Restoring the Roman Republic, or even the Antonine system, was not an option.

(Have you read Rostovtzeff? People criticize him now - I am not a historian, I'm not up on these academic spats. But he paints a picture of the Roman Empire and its decline that simply makes sense, a feeling I've gotten from no other historian.)

In any case, what the "democratic" states have created is something very new in history, which is a stable system of allodial property on a national scale. The absolute and arbitrary powers held by the US and other postwar government-corporations are real. They are not some fictitious claim of absolutism based on holy books or bogus Byzantine law.

Now, one can make a claim - and I think a pretty good one - that the US still has reserved some powers "to the people." Ie, these powers are not part of US sovereignty because there is no seisin - whether the US has the physical power to seize and use them is unclear, and some would certainly take this as aggression.

For example, the Fourth Republic does not have the power to execute Americans without due process of law, imprison its political opponents, etc, etc. Perhaps if it tried to assume these powers, it would be physically overthrown. It would certainly be challenged. This makes a good case that it doesn't own these properties - any more than it owns, say, Argentina.

So why have I not emphasized this? Perhaps because, as you say, it's fun to explore the alien. But also because I think it is just the wrong angle for people to be pursuing, in a practical sense.

It is not a new observation that the US is exercising powers which were not granted to it. The US has been exercising powers which were not granted to it since the First Bank of the United States. The problem is that when you complain about this, you are implicitly appealing to the political system, and the political system is ratcheted to increase powers rather than decrease them. Or at least it has been since the counterbalance of state sovereignty was removed.

So what we have here is a case where Jones and his heirs have been farming Smith's farm for the last 200 years. The formal powers of the US and its actual powers are completely disconnected, and all sorts of rationalizations have bridged the two with pure nonsense. The legions march under the banner of SPQR, while horses are appointed to the Senate.

Everyone with a sense of history who looks at this horrific situation is tempted to scream. The question is, however, in practice - how do you solve it?

Most writers have taken the path of trying to give Smith's farm back to Smith, to roll back the cancer, to restore the status quo ante. Again, I think this represents the triumph of hope over experience.

My observation, which I don't think you've refuted yet, is that the problems with the US are not the result of the fact that its powers are more extensive than they should be. They are the result of the fact that it abuses its powers. And this is the result of the fact that the US is, by corporate standards, profoundly malstructured and mismanaged.

In other words, I argue that if the US, with the present powers it holds in seisin, including totally heinous practices such as forfeiture, was managed for the purpose of maximizing revenue, it would immediately lose all interest in the contents of my intestines. And in yours. And in a whole host of other crap that it screws around with for the purpose of making work for itself, in other words as a surreptitious way to redirect revenue to its supporters.

So I am not advocating Fnarglocracy. I do not support Fnargl. If I am ever standing there with some kind of a sharp instrument and I see his shield flicker, there will be green goo all over the place.

But my point is that even if you granted the powers of Fnargl to the present US government, if you then operated that institution for the purpose of revenue maximization rather than self-aggrandizement, the result would be a much improved and much more libertarian place to live in.

I particularly disagree with the equation of the landlord-tenant relationship with the master-servant relationship. It was only for lack of a working monetary system that Late Antiquity fell back on command economics in its most literal sense. For both master and servant, in anything like a modern society, it always pays to convert a command relationship into a tax relationship, ie, one in which the master owns a share of the servant's enterprise. (For example, we see this in late Russian serfdom, when the serf would move to a city and effectively pay income tax to his owner.) This is the usual advantage of formalization.

If I am a Western expat in, say, Dubai, recognizing that Sheik Whoever owns allodial rights to all of Dubai and can imprison me, etc, at any time and for any reason, does not mean that some guy in a white robe is telling me to sweep here and dust there. Again, freedom - in the sense of independence - is in the interests of all concerned. And this goes double when there are competing jurisdictions, which will hopefully always be the case.

May 23, 2007 at 6:52 PM  
Blogger Mencius Moldbug said...

victor -

You definitely want the leader of any organization to be responsible. The people who have to enforce this are those who benefit from his work, ie, the shareholders.

Monarchies had no shareholders, which turned out to be a bit of a problem - as you note.

I was assuming that American MPs would have been seated in Parliament, etc - that, in general, the alternative to rebellion would have been integration. For obvious reasons this was never a realistic possibility with India.

May 23, 2007 at 6:55 PM  
Blogger Mencius Moldbug said...


Another way to look at my view of the medieval franchise situation is to ask the question: why did the Crown, ultimately, win? Why did this incredible, elegant system of hierarchical jurisdiction disappear?

The answer, in my book, is that the system disappeared for the same reason it came into existence. It came into existence because the real power of the Crown was very limited, and recognizing local franchises was recognizing reality.

This is why there are all these cases involving franchises that were exercised in practice but never properly granted. The custom would have existed even without the formality. Since it did exist, it made sense to formalize it.

The franchise tradition disappeared because the Crown became strong, and local powers could not resist it. This, too, was a matter of political reality.

The idea of jurisdiction as property is wonderful, and I think it is a very instructive gedankenexperiment to imagine what would happen if you suddenly introduced the technology of 2007 to the England of 1307. There is a case to be made that the legal technology of 1307 is as far ahead of ours as our transportation technology is of theirs. (And I love the Anglo-Norman words - like "leet.") Anglo-Norman law is to ours as V7 Unix is to Windows XP, perhaps.

But overall, I take the lesson of franchise experience as not a lesson that sovereignty is evil, but that formal power and real power need to be as closely matched as possible, because the law cannot resist too many disparities.

Franchises were delegated/alienated because local governments had to be able to, for example, hang thieves, and if the King told them not to they would find a way to get around it. Possibly if history had gone a different way, the alienation of sovereignty would have been secured and maintained. But in the end it could not resist centralization.

If franchises had been true delegations, rather than de facto alienations, they would have been the kind of innovative legal experiment both of us would probably like to see tried today. I am a huge decentralist - I would love to see, say, the Bay Area, run as its own country. But if anything like this happens, unless it is a consequence of anarchy, it will be done by and for Washington. And I am very uninterested in true (Hobbesian) anarchy.

In fact the closest modern equivalent of a delegated franchise is a very common feature of 2007 - the "special economic zone." These are certainly delegated, not alienated. And Asia is full of them right now (India is getting into the game). Even Hong Kong can be thought of as an SEZ.

And Hong Kong's relationship to China is exactly the relationship it would have to Fnargl. HK, to China, is a profit center. Every time it mucks with the golden goose there is a financial tremor. So China leaves it more or less alone, as Fnargl would - though maybe not quite as much, because China, unlike Fnargl, has politics of its own.

May 23, 2007 at 7:29 PM  
Blogger Daniel A. Nagy said...

Mencius Moldbug,

I think, you have a propensity for not taking transaction costs and imperfect information into account.

Should I decide that taxation is illegal extortion (due process or no due process) I still won't buy a Kalashnikov to shoot the taxman; I will simply try to conduct as many transactions as possible out of his sight. And since I am not alone in doing so (and no amount of formalism can force me and other tax-evaders to abandon this practice), it potentially brings just the right amount of uncertainty and chaos into the equation to cause random violence here and there. (Of course, this is all hypothetical; I pay all my taxes, honest.)

I have an even better, non-hypothetical example: RIAA and MPAA henchmen in Hungary report my file-sharing hub to the police, which decides to raid my ISP. What do I do? Meekly submit and settle the dispute with paying up or stage armed resistance to the police? No, I do neither: I encrypt my hard drive well in advance and demand my server back as soon as possible (and just to frustrate my opponents, run the hub from a backup server meanwhile). In case of conflict (attempts at resolving zero-sum or negative-sum situations with violence or the threat thereof), denying your adversaries crucial information (or, contrarily, obtaining information that they do not want you to have) can easily prove to be more important than raw firepower and/or political support.

Actually, this is the principal problem with command-economies: those in command have no chance at outsmarting their subjects and will therefore necessarily base their planning on bogus data. Even if planner-commanders have all the computing power they want, they are still subject to "garbage in -- garbage out". Employers, taxing sovereigns and Fnargls face similar problems, which you seem not to take into account.

May 24, 2007 at 4:28 AM  
Anonymous George Weinberg said...

But there's an enormous difference between "you've been doing this for centuries, there's no realistic possibility of stopping you from doing this we wanted to, so we might as well formalize reality and declare that you have a right to do this" and "you've been doing this for the for the past ten minutes, surreptitiously, we suspected you for eight but only just now can we prove it".

I hope my exaggerated language doesn't distract too much from the point. The current government HAS to continue paying lip service to the Constitution, because its entire claim to legitimacy rests on the proposition that the Constitution is the supreme law of the land. In particular, the Supreme Court has to maintain the stance the Constitution means something and that they are doing their best to honestly interpret it in order to maintain their authority. If a majority opinion were actually say in so many words that the Constitution means nothing more nor less than what a majority of Justices feels it ought to say on any particular day, the President, echoing Jackson, would point out that the Court has no power to enforce its rulings. Even if the President happened to approve of that particular ruling, any future President would then have justification for ignoring any court ruling.

Similarly for anyone else in the government. Anyone bold enough to flatly declare "the Constitution is outmoded, we can do as we please" would be undermining his own authority.

May 24, 2007 at 1:46 PM  
Anonymous nick said...

Mencius Moldbug, maybe your moniker should be Preposterous Pessimist. You see only the dirty bathwater and overlook the babies. :-)

"I am really not sure how you can define life-tenured judges as a success. Life-tenured judges have ratified every coup in US history."

Not so. They have in most cases either delayed them or rolled them back. Many of the coups by Abraham Lincoln during the Civil War, e.g. the suspension of habeus corpus, were rolled back. Some of G.W. Bush's similar depradations have been limited. Same for many of the wartime usurpations of Roosevelt and Truman -- see the Steel Seizure Case for a good example. The worst pathologies of the New Deal (e.g. NIRA and AAA) were delayed for long enough for the other branches to recover some of their senses, allowing the U.S. to mostly escape Mussolini-esque legally enforced corporate cartels. Many of the Prohibition- and war-era depradations against criminal procedure and free speech were rolled back by the Warren Court. Indeed, governmental powers having been increasingly limited in some important areas, primarily due to the courts.

Where courts have given up rights, such as the depradations on property rights, it has practically always been an acquiesence to strong pressure from the other branches rather than at its own initiative.
So while hardly ideal, this record is far better than if the other branches and civil service had just be let free to run wild. To improve things we could prevent court-packing schemes and the like by making the courts even more independent of the legislative and executive branches.

One way to do this would be to have courts elect their own replacements, as with the College of Cardinals, rather than having them chosen by other branches. We could also give the courts alternative means to enforce their edicts when an executive proves recalcitrant and make the Attorney General even more independent of the President.

"The growth of the US from the Constitution as it was ratified to its present state as a de facto world government is perhaps the greatest achievement of cancerous organizational expansion ever, saving only the Roman-Byzantine experience."

While it would certainly not be ideal to have the U.S. as a de facto world government (which of course it is not -- you again see the water as dirtier than it is), it would be far better than having the Axis or the Soviet Union or even the U.N. or E.U. or the One World Joint-Stock Government running things.

"I argue that if the US, with the present powers it holds in seisin, including totally heinous practices such as forfeiture, was managed for the purpose of maximizing revenue, it would immediately lose all interest in the contents of my intestines."

You certainly have not demonstrated this, and quite the opposite is more likely to be true. Far more likely is that we would lose our freedoms, such as your freedom to post. And you would get government-monitored microchips in your intestines so that the revenue-maximizing tax collector could minimize your consumption of work-ethic-damaging booze as well as your wasteful consumption of luxury foods. It would be the Congo "Free State", the Heart of Darkness, and this time we'd be at the heart.

It's premature to idealize the stability of our modern social welfare states. Many civil wars and many dictators have arisen out of modern democracies, and the wars involving them have tended to be the most brutal in all of history. Increasing taxes result in stronger incentives to tax evasion and the resulting unpredictability and violence, as Daniel Nagy cogently pointed out. And do you really want to argue that Bush's foreign policy is one of the best ways to minimize unpredictability and violence in the world?

You must be imagining that, soon after the U.S. government issue shares, it transmogrifies into one of those wonderfully efficient and friendly market-embedded corporations like Wal-Mart or McDonald's. I certainly share your wish that governments could be made so efficient and friendly. But the efficacy of private corporations doesn't come from the ritual of issuing stock shares any more than effective government comes from the ritual of voting. Papering the world with government stock would be no more a harbinger of stability and nonviolence than ink-stained fingers were on the hands of Iraqis.

In a voluntary economy, competition is generally a very good thing. In the coercive world of politics and legal procedure, competition can be good in some circumstances and pathological in many others. Competition among jurisdictions is generally good when there are low exit costs and ex ante choice. For example when corporations can choose where to incorporate and reinsurance companies can freely agree on their choice-of-forum and choice-of-law clauses, we get competition that has produced the remarkably good corporate law of Delaware and insurance law of Bermuda. But more often legal and political competition is pathological and owners of political power win by using legal coercion and the immobility of many important kinds of property (including real estate, minerals, and agriculture) to trap their "customers", making exit costs prohibitively high. All corporations desire to "lock in" their customers, but only entities with coercive police powers can actually do so with their real or virtual Berlin Walls. The voluntary corporation has to make do with Safeway Club cards. When tax collectors compete to wring revenue out of their effectively imprisoned "customers" we get ruinous spirals of extortion and wars. When courts compete for ex post plaintiffs we get the pathological tort laws we have in some states. The worst excesses of American tort law are due to this process.

"Of course the emperors of Late Antiquity claimed absolute legal authority - their actual authority was challenged at every step."

One who questioned their authority was put in jeopardy of torture or death. There were plenty of coups and civil wars, but that follows directly from the attractiveness of such concentrations power, and that the main way to achieve that power was extralegally. Quite the opposite of your "power vacuum" theory is true -- in fact it is concentrations of power that create arbitrariness in the execution of law and that attract violence. The Dominate, which was legally and economically rather similar to Stalinism, quite demonstrates my point that large-scale superbundles of political power make for unpredictable policy, death, torture, economic decline and general tyrrany.

Let's look at the history of the Roman imperial procecural law, which has come down to us in the form of Justinian's Code. The procedural law of this Code and its descendants have produced the Caeasers, the Csars, the Kaisers, Napoleon (whose Code is very close to Justinian's), Lenin and the many communist dictators who emulated him, Mussolini, and Hitler. If you are wrong, Mencius, and there is such a thing as pure evil in this world, then the procedural law of the Justinian Code is surely at its center.

"Another way to look at my view of the medieval franchise situation is to ask the question: why did the Crown, ultimately, win?"

But the Crown did not win. Monarchy went down the tubes soon after the franchises, for the same basic reason Richard II went down the tubes soon after he confiscated Hereford's franchises: "...take from Time / His charters and his customary rights; / Let not to-morrow then ensue to-day; / Be not thyself; for how art thou a king / But by fair sequence and succession?"

The monarcho-franchise system was domestically quite stable and non-violent for about 500 years. The few dynastic struggles were far less bloody than those on the Continent, much less those in the Dominate. In the form of the merchant courts monarcho-franchisism (alas, what any ugly word for such a beautiful system) gave rise to the commercial law that gave us the Industrial Revolution.

BTW, I think you didn't understand what I meant by "delegation." Delegation occurs in a principle-agent or master-servant relationship -- it generally means the principal maintains ultimate control and can revoke the delegation. A "delegate" is supposed to express or execute his master's opinion rather than his own. Freedom from such restraint comes from having an irrevocable property right. The Justinian Code and modern political ideologies see politics as a matter of delegation. Law and politics as practiced in monarcho-franchise England saw political and legal powers as matters of property rights. These two viewpoints are diametrically opposed. The delegation view is the one we mostly take for granted, whereas the monarcho-franhise view is quite alien to us -- it is not taught in our schools and it is difficult for most of us to grasp.

May 24, 2007 at 2:47 PM  
Anonymous Michael said...

You point out that "it is a very instructive gedankenexperiment to imagine what would happen if you suddenly introduced the technology of 2007 to the England of 1307."

Yet in the same post you wrote "Why did the Crown ultimately win? Why did this incredible, elegant system of hierarchical jurisdiction disappear...[it] disappeared because the Crown became strong, and local powers could not resist it."

Why, in turn, did this become political reality? The answer is technology. Gunpowder appeared in Europe in the thirteenth century and was described by Roger Bacon in his Opus tertium as a novelty, used in children's toys:

"Exemplum est puerile de sono et igne qui fiunt in mundi partibus diversis per pulverem salis petræ et sulphuris et carbonum salicis. Cum enim instrumentum de pergameno in quo involvitur hic pulveris, factum ad quantitatem unius digiti, tantum sonum facit quod gravat multum aures hominis..."

By the middle of the 14th century these boyish contrivances of parchment had metamorphosed into huge siege guns that could batter a fortification to rubble in short order. The days when a local baron could be secure behind the walls of his castle were numbered. Handheld firearms spelt the end of the armored knight on his destrier. Field artillery gradually developed from the heavier siege cannons over the next two centuries, and put an end to the feudal peasant army, the dernier cri of which was probably the Jacobite rising of 1745.

These technological innovations favored the strengthening of monarchical authority and the centralization of government. Rebellious English nobles had been able to curb the absolutist appetites of king John in 1215, but when the frondeurs, drawn from the flower of French aristocracy, tried to knock Louis XIV down a few pegs in the mid-seventeenth century, they were ignominiously defeated. Technology had augmented the strength of the central power at the expense of the minor powers. Louis's grandfather, Henry IV, was still selling franchise jurisdictions, including the highest offices of state, at the start of the seventeenth century; but by the time Louis reached his majority he was able to replace such unreliable agents with a disciplined corps of middle-class clerks loyal to him. He had invented that species we still know by a name derived from French: the bureaucrat.

What effect the technology of 2007 would have had on a decentralized, hierarchical system of government like that of 1307 is a question of whether that technology on balance favors centralization or decentralization. Probably many bloggers and internet users would argue that it favored decentralization, but I fear the wish is father to the thought. China has shown that rigidly centralized and authoritarian government can coexist happily with modern high technology, and even make it serve to augment its control.

Government inefficiency has hitherto been the best hope of ordinary folk in the face of oppressive rule. To the extent technology makes government more efficient, it is an enemy to liberty.

May 24, 2007 at 3:38 PM  
Anonymous nick said...


Mencius' deliciously outrageous proposal to IPO the entire federal government and list it on the NYSE does serve to shed light on the reality Mencius has (with some exaggerated pessimism) described, namely that our federal government already is a revenue-maximizing creature. Even the Laffer Curve conservatives agree that its goal should be to maximize revenues. The feds won't go for an IPO precisely because it would decrease their revenues -- mainly due to the lowered legitimacy you cite. The magic of democracy would be gone.

The shareholders would also demand some cut in dividends lest their shares be worthless.

The federal government thus has even less incentive cooperate in such a venture than corporate managers have to cooperate in a hostile takeover. The feds have a cozy setup that automatically generates massive revenues, and need pay no dividends, and Mencius is proposing a corporate takeover. But no organization has more poison pills to thwart a takeover.

Albeit if you want to buy shares and can't wait for Mencius' IPO, you can approximate the investment today with a portfolio of Bechtel, Lockheed-Martin, and the Carlyle Group.


Thanks for the great review of security tech and French history. Another factor in the decline of franchises was probably the rise of the printing press and mass monolinguistic literacy, which made civil bureaucracies more efficient relative to the property relations that characterized monarcho-franchise polities.

Since we are considering radical proposals, perhaps what we need is what might be called digital formalism.

May 24, 2007 at 5:05 PM  
Blogger Mencius Moldbug said...


The College of Cardinals! Now we get to the root of the problem.

In fact, the 21st-century system of government we seem to be developing - what I call the Polygon - is reminiscent of nothing so much as the College of Cardinals. A self-selecting civil service is a self-selecting civil service, no matter whether its members are Jesuits or legal scholars. (Two sets by no means exclusive.)

You're probably familiar with the concept of Critical Legal Studies. Of course, as always, the proponents of CLS are entirely sincere and do not view their movement as some kind of sinister plot. Nonetheless, if fifty years elapse between when you establish your College, and when it's taken over by CLS-heads, I'd be dreadfully surprised.

Think adaptively. Again, CLS is not a plot. It is in fact something much worse - exactly the kind of organism that a self-selecting hierarchy selects for. If it didn't exist, someone would almost instantly invent it.

CLS, like all leftist idealisms, is the product of the universal human drive for power and control. Both of us might like to get rid of this drive, but we can't. It's an engineering reality. It has to be designed around.

In fact the closest thing to your Cardinals, today, is the law school professoriate. Again a self-selecting hierarchy. Again, what is its intellectual trajectory over the last 100 years? Or 50? Or even, despite the presence of a few token dissidents, 20?

Or even take the courts as they are. Of course I'm aware of the many cases in which courts have intervened to halt or even reverse the growth of the state.

And of course a good libertarian legal education will hold these cases up as exemplars. They are exemplars. They should be exemplars. I am not, at all, saying this struggle is useless.

But we are talking about a trend that is a millennium old, that has been nearly monotonic for the last two centuries: the growth of the centralized state. (For example, monarchy lost - the Crown won.)

If you step back and look at the big picture, can you really say that the prestige of judges, however appointed, has been generally effective in stopping this trend?

What I see is a pattern of short periods of resistance, like the Four Horsemen or the Lochner Court. When these dams give way the mechanism goes into double speed to compensate.

Sure, the Four Horsemen stopped the NRA. And to what result? The reason we don't have an NRA today is not that it violates any current doctrine of constitutional law. The reason we don't have it is that Fnargl had one of his periodic attacks of good sense and realized that Mussolini-style corporatism wasn't profitable.

I would love to think your College of Lawyer-Cardinals could succeed where so many have failed, in stopping the growth of this cancer.

But instead, what I see is the solution so many have offered. We'll get a bunch of good men and put them in charge. But who watches the watchmen? The guardians become corrupt and join the oligarchy. It is madness to try again and expect a different result.

Today's Federalist Society world of the libertarian law scholar is a perfect example of this trend. True, on a small scale, it looks like a burgeoning revolution. It barely existed twenty years ago. Now legal formalism breaks out all over. One more judge and victory, it seems, is ours.

But the Reagan Revolution looked exactly the same way in its prime. From nothing to Goldwater to the White House, blam. And then reality intruded. The US turned out to be run by the press, civil service, etc. The White House has more power over the government of Malaysia than over these entities. The whole effort to take over the political system, into which so many people put so much work, was effectively a trap. And this is how the state keeps growing.

I expect exactly the same result with the Federalist Society. Either this revolution in legal scholarship succeeds, or it fails. If it fails it fails. If it succeeds it is frustrated and eventually conquered from within by its enemies. They will call themselves Federalists. In fact their goal will be power, just as with today's CLS.

I am not a pessimist. I am actually ridiculously optimistic. What I see around me is not optimism - it is the voice of the Ring, telling all of us would-be Boromirs to put it on and stop Sauron. The result: your college of cardinals, yet another batch of Ringwraiths-in-training.

You are right that the US is not a world government in the sense most commonly heard on the left. I would say the US is actually several competing world governments. These have names like "DoD" and "State." (Full disclosure: my father was a Foreign Service officer).

At present, largely due to Iraq (I don't think it has quite assimilated the fact that the Iraqi mujahedeen are acting as its proxy army, for obvious reasons) State is on a major roll, and its world government - the one of transnational institutions - is advancing at a rapid clip. It seeks to replicate the Polygon system - that self-selecting civil service you are so fond of - on a global scale. It's certainly on a good track to succeed.

You are right that I was using the word "delegation" in the wrong way. I was using the word in sort of a software sense, whereas you were using the correct legal definition. The result was confusion.

What I meant was precisely the relationship that exists between the PRC and its special economic zones.

A special economic zone is a level of indirection in the law. It is certainly not an alienation of sovereignty (unlike its predecessor, the extraterritorial "international zones." The PRC did not establish an SEZ in Shenzhen because the Baron of Shenzhen wanted to hang his own thieves. It did so because it wanted foreign currency. And such has certainly been forthcoming.

A similar hierarchical relationship exists between the US government, Linden Labs, and the people who run virtual businesses in Second Life. Linden is subject to US law. Second Lifers are subject to Linden law. Hopefully, this level of indirection will actually last (I think it's imprudent to run an MMORPG that serves US customers on US soil).

There is no alienation of sovereignty here at all. There is a multilevel legal system which is quite profitable for all concerned, although I suppose the US will probably find a way to kill the goose. As is its wont.

And note that no part of this hierarchy involves a command relationship. The US does not tell Linden what to do. Linden does not tell its users what to do. Either could, quite legally. Neither does, because it is not in its own interest. Sovereignty is not - at least in this case - tyranny.

The thing I think you're continuing to miss is the vast diversity of state abuses that make zero (0) sense in terms of maximizing the profit to the state's beneficiaries, and are very easy to explain as strategies for conflict over that revenue stream.

The US is acting exactly like a dysfunctional Soviet corporation. It is treating its capital - its citizens - like crap. It is doing this because its government works for itself, not for its beneficiaries.

The tragedy is how close the monarchical system came to creating a legal structure that was stable and functional. Read Stefan Zweig's The World of Yesterday - an elegy for the lost world of the Habsburgs. I don't think there were any franchises around in Zweig's day, and the Dual Monarchy had long since adopted many of Napoleon's innovations, such as a secret police. But compared to Austria today it was a libertarian utopia.

You are thinking of the wrong examples when you compare corporate sovereignty to the chartered colonial companies. The latter were always political dependencies of their home governments, and their incentive structures were often quite strange as a result.

Instead, imagine the Dual Monarchy had an IPO. The Hapsburg state, an absolute monarchy, was a serious bunch of people who knew a thing or two about profiting from their subjects' prosperity. Why would the new board screw it up?

Maybe I'll try and come up with a thought-experiment that will make this a little clearer...

May 24, 2007 at 5:45 PM  
Blogger Mencius Moldbug said...


I'm not sure I've detailed my US-IPO proposal in full. In fact, I'm sure I haven't! So try this on for size.

The purpose of a traditional IPO is to set an offering price and allocate a floating pool of shares, typically much smaller than the quantity held by the private investors. With a unique and historic property such as the United States, neither of these is necessary, although I suppose a small Dutch auction never hurts.

Instead, we face the much more important task of figuring out who owns how many shares to begin with. This problem has already been solved by normal private companies, but not in this unique and historic, etc.

Ownership is two things: benefit and control. Obviously, in a well-formalized organization, these are identically divided. In the case of the US we have very little information about each.

But we know who the US pays. We have the budget. Of course, some of these payments are for actual useful services, but we can disregard this. Set aside half the US's shares and give them to the recipients of its disbursements - civil service, contractors, etc. Just assume they're all parasitic and will have to be fired - that their jobs and contracts are disguised profits. (Entitlements are probably best measured actuarially, and treated as debt rather than equity.)

So half the shares are for benefit, half for control. Naturally the latter half can be parcelled out freely among the Polygon, such as reporters, NGOs, etc. If they don't want the loot, which they have earned in pretty much the same way as William the Conqueror, they can give it to charity.

So this is not a hostile takeover at all. It's actually more like a management LBO - the opposite of hostile. In fact, because it will make the US much more efficient and profitable, if properly designed it will have a very positive outcome for anyone involved with the Fourth Republic.

With the US, we also don't even have a clear sense of what the property is. So let's say that the US has all the powers it exercises regularly (ie, in seisin) - taxation at current rates, regulation, etc.

Presumably if you are any kind of libertarian at all, you believe that the US can maximize its profits by decreasing, rather than increasing, its regulatory apparatus (is it really more profitable to ban marijuana, or to tax it?) - so the main concern is the tax rates, which should be capped at present levels. Again, the new US may find it profitable to decrease, rather than increasing, these - Laffer wasn't all wrong.

May 24, 2007 at 6:02 PM  
Blogger Mencius Moldbug said...

michael - I agree with all your history (I am all for the Fronde!) but I think there is a slight error in logic at the end.

I think that, actually, the urge to make government more inefficient tends to make it larger. It is the logic of the cancer cell. Its solution for inefficiency is always to get larger. The result is a kind of red-giant state, the world of Brezhnev, all-encompassing and completely ineffective.

Certainly, you don't cure cancer by sanding it down every day.

I think goverment should be more like a normal cell: tightly optimized and extremely effective.

I realize that I have no evidence for this, just these vague analogies :-)

May 24, 2007 at 6:06 PM  
Blogger Mencius Moldbug said...

Daniel - I continue to admire your crafty anti-statist strategies! You have clearly put a lot of thought into this.

George - I agree. I think any "deal" which reboots the Republic, so to speak, has to be done with all the trappings of constitutional legality. Or at least, ideally, it should be so done.

May 24, 2007 at 6:09 PM  
Anonymous nick said...


I'd love to see a more detailed account of how you think the Dual Monarchy or the Federal Government would work after an IPO. In particular for you to address my argument that it would work radically differently from a normal corporation due to its ability to coercively impose high exit costs on its customers. Safeway can't kidnap me and make me purchase $200 of groceries with my Club Card before they let me leave the store.

In particular, if I am the CEO of USA, Inc. and want to maximize profits, why shouldn't the first thing I do be to erect a virtual Berlin Wall to prevent any skilled workers from leaving the U.S., followed by raising the tax rate to the Laffer optimum (made much higher by the Berlin Wall)? And the next thing I do be to shut down smart-ass blogs like this one? :-)

You still seem to be assuming it would work just like McDonald's or Wal-Mart just because it has issued shares. This is entirely unconvincing.

May 24, 2007 at 6:12 PM  
Anonymous nick said...


Your IPO proposal just crossed with my request for your IPO propsoal, so I'll now read it and respond.

May 24, 2007 at 6:14 PM  
Blogger Mencius Moldbug said...


My proposal could use a lot more flesh on its bones! And it doesn't answer the question you just asked, so let me do so briefly.

Basically, the answer is that imposing exit costs is not a revenue-maximizer, although it superficially appears to be one.

There is a very telling case in the autobiography of the great Japanese modernizer, Yukichi Fukuzawa, founder of Keio University, in which he travels to the Netherlands, and struggles with the idea that anyone in Amsterdam could just build any building he wanted. Fukuzawa asks: what if some wealthy lord decides to build a private fortress? The poor Dutchman struggles to explain why no one would bother, and if anyone bothered no one would care.

Imposing exit costs is the kind of thing that is done by desperate, failing states - typically Communist. It is the factory equivalent of saving money by not buying lubricant, or selling off the robots and welding by hand.

You can see a tiny equivalent of this in its little-brother policy, imposing exit costs on capital. Any hint of capital controls, of course, will generate a vast wave of capital flight. Of course it can be done by surprise. But it takes a long, long time to regain the lost trust.

Basically, it wouldn't be done because it's not good for business. And in an efficiently-run private country, the business of business is, in fact, business.

As the owner of a private country you profit from your subjects' prosperity. You are, effectively, part owner of every enterprise. It is very much in your interest to treat them like prize racehorses, not pigs for the slaughter.

Of course this works a lot better in a decentralized world of multiple competing states, not a single global Fnargocracy. The latter is definitely a worst-case scenario - my only assertion is that it's not as bad as it sounds.

May 24, 2007 at 6:29 PM  
Blogger Mencius Moldbug said...

And BTW, not only am I down with digital formalism, I have an idea or two in that line myself...

May 24, 2007 at 6:30 PM  
Anonymous Michael said...

The mention of the College of Cardinals reminds me that franchise jurisdiction existed in the mediæval church as well as in the civil law. Consider lay rights of presentation to ecclesiastical benefices (advowsons). The typical church in the middle ages was built by a local laird on land he granted to it in feu, reserving the right to present a priest to the living.

At the level of the kingdom, the holder of a bishopric was nominally elected by the cathedral chapter, but in practice the chapter was presented the name of one candidate and given "congé d'élire" (leave to elect him) by the monarch. In essence, kings enjoyed the same right of presentation to bishoprics that those who held from him in liberam baroniam or in liberam regalitatem did to the parishes in their demesnes. This was the practice in England and Scotland before the Reformation, and in France until the Revolution. In Germany, where small independent jurisdictions were more common, there were independent prince-bishoprics that were de facto properties of a noble family - e.g., Salzburg was for more than a century ruled by archbishops of the family of counts v. Khuenberg; the comital and princely family v. Liechtenstein held Kremsier, etc. And because of their political importance, the holders of these princely dioceses had an almost automatic claim to a red hat.

I am not a canonist and do not know how long lay rights of presentation persisted in the Roman church. Certainly it was extant into the nineteenth century, for Rosmini complained that lay rights of presentation constituted one of the Five Wounds of the Holy Church in his book of that title (placed on the Index in 1849).

Advowsons were abolished in the Church of England within living memory; they had been severed from land-ownership and traded independently since at least the 19th century. Trollope's novels make mention of this phenomenon. Likewise commendatory abbacies were held by laymen in France until the end of the ancient regime, and persisted in Scotland 150 years after the reformation.

Under several concordats between the church of Rome and European states, the heads of state enjoyed the effective right of presentation to bishoprics; the last of these was probably that obtaining between the Church and Francisco Franco as regent of the kingdom of Spain. Finally, the Holy Roman Emperor and his successor the Austro-Hungarian emperor enjoyed a veto over the election of popes. It was last exercised in 1904 to prevent Cardinal Rampolla's election. Cardinal Sarto (St. Pius X) was elected and subsequently abolished the imperial veto.

Thus, the self-perpetuating character of the College of Cardinals is at best a twentieth-century phenomenon; it is part and parcel of the ultramontanization of the Roman church, which reflects the same centralizing phenomenon observed in the secular state. It's worthy of note that the ultramontane party really only gained traction in the church after the Risorgimento, which led to the loss of the papal states. Pio Nono's First Vatican Council of 1870 followed, affirming papal infallibility, and drove Döllinger and the Old Catholics out of the Roman fold.

Is extreme centralization a sign of incipient weakness? Consider that a century and a half after Louis XIV put down the Fronde, the ancient regime was one with Nineveh and Tyre. Similarly, in less than two decades it will be 150 years from Vatican I, and there will probably be more observant Muslims in Europe than there are observant Roman Catholics.

May 24, 2007 at 7:47 PM  
Anonymous nick said...

OK, I've read your IPO proposal and your answer to my question. It's fun to take this seriously. You may have convinced me that this can be done as an LBO rather than a hostile takeover. Still, George's legitimacy point remains, and you can't do this proposal without some radical constitutional amendments, including one capping taxes at their current rates and forbidding new kinds of taxes, and retaining independent federal courts to enforce said Constitution as well as the payment of dividends. Unless you want to move all that judiciary to the Hague. And you aren't going to get very many people to vote away their Social Security, Medicare, etc. knowing that their taxes will never be lowered proportionately. It's a massive wealth transfer from old and ill pensioners to a subset of the population selected by a fuzzy political process -- oh my won't that be popular!

BTW, by just what process are we to decide which millions of people have how much "benefit" and "control"? Any of the many vast uncertainties involved here are fodder for wasteful lobbyihg and rent-seeking. As a blogger do I get to be considered part of the "Press", and if so how many shares do I get compared to Tom Friedman?

If we could pass a tax-capping amendment we would already be a long way towards improving the country, but I'm not convinced that the IPO adds any benefit on top of that, as intriguing as the idea is.

You give some anecdotes that may show why it's often bad for tax revenue for governments to impose various kinds of controls. But this hardly demonstrates that an IPOd IRS would be any less restrictive than the current IRS in this regard. And you've eliminated whatever remote democratic influence there is reigning in the ability of the IRS to abuse its "customers".

You had to add an artificial (if quite welcome) restriction preventing the for-profit government from raising taxes. This does make the government less flexible in wartime and thus more likely to lose an extended war with, say, China.

Capping taxes only partially addresses my specific revenue-raising proposal -- prevent skilled workers from emigrating. To which I'd add banning all goods and services which would tend to distract them from working and any substances which might demoralize their work ethic or otherwise reduce their productivity. It's not like they can either leave the country for a more fun place to be or vote me out of office.

Of course, Owners would be issued special Owner Scrip (as part of their dividends) with which they can purchase all the goods and services forbidden to mere Non-Owners.

BTW, since we can't raise taxes, instead we'll pass a law requiring the Federal Reserve to purchase a trillion dollars of Treasury bonds each year with money that they issue for the purpose. The bonds simply accumulate at the Fed and law will require they always be turned over for new bonds when they expire, so it won't actually be part of any federal debt that is actually owed to anybody. You might have a very big challenge closing this inflation tax loophole, and there are probably far more other loopholes our intrepid coercion profiteers can think of than our intrepid IPO Amendment planners can think to close ahead of time.

There would be a high degree of uncertainty in the civil service over who would be fired in the coming efficiency purge, and thus a high degree of uncertainty about how many shares they should demand to offset this loss, as well as uncertainty about the overall degree of efficiency improvement and thus uncertainty about the overall value of the shares. Even without this real uncertainty there would be great suspicion about the whole process among the bureacratic set.

There are also two other general effects that are also quite important. The first is that people have general preferences for power beyond just making money -- the Droit de Seigneur victor mentioned is one of many examples of this. People often have a strong preference to control people's lives if they can, and here you've just empowered a group of owners of control to do so directly by force rather than indirectly by persuasion.

The second effect is that at a certain degree of wealth, most further wealth is perceived in relative way -- my boat is bigger than yours, etc. Shareholders in USA, Inc. could maximally satisfy such preferences by passing laws that lower the size of other people's boats rather than increasing theirs, even if they can't raise taxes to increase the size of their own boats. So the owners have an active incentive to use the force of law to pauperize non-owners.

BTW, there seems to be a tendency to dismiss the historical significance of close analogs of your proposal, such as the hundreds of colonial corporations that were formed from the late Middle Ages to early 20th century. It reminds me of communists who claim that communism has never really been tried -- none of the many dozens of communist governments in the last century that butchered and starved their people was "real" communism. Many of these corporations were at least as independent of their nominal sovereign as the U.S. is of the WTO and the like. They did some things better and some things worse than current governments, and I think it would be well worth your while to study them in more detail.

BTW2 I'd love to hear your ideas for digital law! Feel free to post them at my blog.

May 24, 2007 at 7:49 PM  
Blogger Mencius Moldbug said...

michael -

Thanks, this is very interesting history! On reflection it's pretty amazing that Church history, even stuff like this which really ought to be European History 101, is so shrouded in obscurity. It reflects the anticlerical roots of our tradition.

Ideally, of course, future historians will apply the same willful ignorance to the doings of Washington, DC...

You don't by any chance have a blog I can link to?

May 24, 2007 at 9:32 PM  
Blogger Mencius Moldbug said...


An interesting set of objections! Some of these I had anticipated, some I hadn't.

First, one thing that needs to happen either before or along with anything like this is a total reboot of the US's broken monetary/financial system. Obviously no company can pay dividends in its own scrip.

However, no one is voting away their Social Security, Medicare, etc. The value of entitlements should be actuarially computed and replaced with bonds. (This could be done at any time - and should be.)

Especially for the power side, the equity distribution issue is interesting indeed. In order to imagine anything like this happening you need to imagine a very different political situation than the one we live in now - one that involves a general recognition that the Fourth Republic is not savable.

Who would have how much power in such a situation is hard to define in advance. For example, it might well be the military rather than the press that needed to gain its reward. The general principle of exchanging informal power for formal equity in a reformalization is that the shares should be allocated in whatever way maximizes the chance of the plan succeeding.

Civil servants are easier to deal with, because they receive dividend-generating shares equal to their current salaries anyway. If they are rehired, they get their new salary plus their old one.

There is no reason at all for a formalized state to give shareholders any preference over other customers. If I own SBUX or whatever, I don't get a discount on my lattes. This would be a very irregular way of distributing the benefits of ownership.

One of the many benefits of the public (joint-stock) ownership structure is that it dilutes that hominid feeling of power basically to extinction. Ordinary shareholders have no real power. Holders of large blocks might, but they are much more likely to be motivated by rational incentives.

The issue of how a private country deals with law is quite interesting, and obviously very much in your department. Tax capping is part of this (though obviously a private country would have a much simpler tax system - I actually suspect the ideal may be some sort of Georgist model).

I like your idea of outsourcing the judiciary. Essentially, it is very much in the interests of a private country to submit disputes between itself and its customers to an external arbitrator - it builds confidence, which reflects itself financially in all kinds of ways.

Once the government wilfully violates its own laws as judged by the arbitrator, it becomes quite a different class of state, and it should expect a lot of flight both capital and physical. This is simply a downward spiral and the shareholders should step in.

Of course there has to be some kind of "out" for martial law. The Roman Republic recognized this with the institution of the dictator (rhyme with "lick that boar.") I'm afraid this word needs more than a pronunciation makeover, but the basic model of temporary military powers is sound.

Your warning on the "tendency to dismiss" is very sound, and well taken. I'm afraid my generally praxeological approach may be ineffective on many people who are used to more inductive reasoning. It would be very interesting to investigate these various chartered colonial corporations and look at how they treated their capital, and why. One problem is that the whole field is rather fraught with presentism, but that is no excuse.

As for my ideas on digital formalism, they are more in the form of code than words. My other interests are not too different from those of your friend MarkM... except, of course, in detail. I promise to keep you up to date - possibly even ahead of date. As always, it's a pleasure!

May 24, 2007 at 10:35 PM  
Blogger Daniel A. Nagy said...


Your admiration is very flattering, but I think I should give credit were it is due. Most of it was not thought (and definitely not mine) but experience and research. Most of these ideas are not originally mine.
Nick's essays on early monetary history have a lot of material on the measurement game going on between tax payers and tax collectors (and their respective predecessors).
Another very illuminating source is the work of economist John Kornai on planned economies and emergent shortages.
And last but not least, I have been extremely fortunate to live through the collapse of the USSR, being able to observe the process from within, albeit as a teenager. It was quite an experience, I must say.

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