Once private corporations had the organizational wherewithal to get large in the late 19th century, governments got big too. There is an important lesson there. Technology, and to a lesser extent slavery, are why earlier American governments were often so small. The influence of classical liberal ideology is often overrated here. Somehow recapturing this past ideology won't do the trick and it does not stand as an option.
This is so terse that you have to guess at what he is saying. Here is my guess:
1. Institutions are affected by technology perhaps even more than by ideology.
2. In 1800, the United States was a large country relative to the transportation and communication technologies that were available at that time. Further, it was very divided, both politically and economically, over slavery. Thus, one does not see major national institutions of any sort, private or public.
3. The rise of powerful industrial corporations and the rise of a large public sector in democracies over the past 150 years are results of changes in technology. Economies of scale have increased, because transportation costs have fallen and communication is faster and cheaper.
I agree with (1) - (3), whether or not that is what Tyler meant. I would add that the Internet permits enterprises with relatively little capital to achieve large scale (it also permits them to thrive in small niches). One does not need a large factory in order to have an important business on the Internet. Nor does one need to own a printing press in order to be able to reach a lot of people.
I think that some of the libertarianism of the 21st century is a reflection of the computer/communications revolution. I think, and I believe Tyler would agree, that libertarians who want to argue that Social Security and Medicare are the yoke of tyranny are not going to persuade very many people.
Instead, I would argue that government is too slow-footed for the Internet age. My guess is that in twenty years we will see less government because the public's expectations and interest in government will have shrunk. For now, I think that we are in a transition phase, during which politics is about exaggeration and theater. The theatrics are a desperate attempt by legacy political parties to hold onto mindshare.