Arnold Kling  

Virtual Federalism

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Tyler Cowen quotes from an idea that would allow Israelis and Palestinians to live in overlapping neighborhoods, with choice of political allegiance. This is proposed as a way of solving the problem that there are no natural, mutually agreeable boundaries between Israel and a Palestinian state.

I want to take this out of the context of the Israeli-Palestinian dispute and suggest that it is a great idea in general. I live in teachers-occupied territory. That is, the teachers' union governs Montgomery County, Maryland. I would like to have a different sovereign, but without having to move. Under virtual federalism (as proposed in the widely-unread Unchecked and Unbalanced), we would unbundle the services that the County provides. I could then contract with another provider for trash collection, snow removal, fire protection, or other services.

Land-use regulation could primarily be handled at a neighborhood level. Roads could be privately owned and maintained, with electronic toll collection. (Not every trip need involve a toll. I might be able to buy a monthly pass at a flat rate that covers any trip other than during congested times.)

Concerning Tyler's point about dispute resolution, I think there would have to be courts that would resolve jurisdictional issues. Thus, there would have to be a court or similar body to handle land-use issues that cut across neighborhoods. Taxes would only be used to support such courts. Otherwise, public goods and services would be supported by user fees, membership fees, and donations.

The key, I think, is to transfer people's emotional attachment from their government to something else, like a religious sect, ethnic identity, or a sports team. You can have Yankee fans and Red Sox fans living next door to one another without infringing on each others' rights. It's when people give their emotional loyalty to government that you get friction.

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CATEGORIES: Political Economy

COMMENTS (11 to date)
SydB writes:

Emotional attachment to religion has been the motivation for rights infringement for thousands of years. And I remember quite a few riots and fights that resulted from sports affiliation.

Sam Schulman writes:

This solution has worked wonderfully in contemporary Lebanon, and in twentieth century experiments in Yugoslavia, Czechoslovakia, Romania (with Hungarians), Hungary (with Romanians), and in the Ottoman Empire and Turkey with Armenians and Greeks. And it's working well with the Palestinians living happily in Jordan, Syria, and Kuwait. Why has no one thought of this before?

Hunter writes:

My question is who gets to be the "Arbiter with the Golden Scepter" to handle those land-use issues that cut across neighborhoods? And how do you prevent that arbiter from aquiring more power?
I guess I just see government as a form of natural monoploly and don't see this as ending well.

Yancey Ward writes:

Emotional attachment to authority was the motivation, Syd.

Lori writes:

What your correspondent is describing is reminiscent of an invention called 'panarchy.'

Brian Clendinen writes:

This is already is happening, think close to 20% of the citizens of Israel are Arab which are mostly Palestinians. They have their conflicts, but it is just normal minority group politics any other western nation has for the most part. There a quite a few Arab parliamentary members. The problem is religion on the Palestinian side and a little on the Israelis.

UN should push for this on Palestinians living in other nations. It has decided the only refuge group who are still considered and treated as refuges in the second and third generation are Palestinians. If the Bordering nations would actual make Palestinians in refuge communities full citizens that would have a long term effect of reducing the friction. It would be nice if the UN and boarding Arab states would actual take measure they have control over to bring about something closer to peace instead of always blaming it on the Israel’s.

Charles A. Smith writes:

Like Arnold Kling I also live in Montgomery County, Maryland, under the current reign of the Teachers Union. Aside from the political issue vis-a-vie Isreal/Palestinians, and admitting that I might be misinterpreting the whole debate, but a problem seems to be the underlying issue of how to deal with "public goods" (which is why we evolved government as a cultural phenomenon).

Public goods (e.g., roads, police, schools, courts, garbage collection) are inherently difficult to administer in a fee based system because of the "free rider" problem and the distinction between direct and indirect beneficiaries. If we only have direct beneficiaries (e.g., drivers paying tolls, parents with school age children paying for schools) paying for services we confront the problems that: 1) it becomes horrifically regressive as a tax structure and 2) ignores the fact that almost everyone benefits indirectly from public goods (i.e, even people without kids benefit from public education by virtue of having an educated populace that provides an educated workforce, etc). It also raises the spector of who would pay for public goods for those that are at the low end of the socio-economic scale ... would we expect TANF recipients to pay for TANF since they are the primary recipients; ignoring the fact that they have no income?

Virtual Federalism is certainly an intriguing concept, but how does it deal with the free rider problem, and other jurisdictional issues where interests and goods are not distributed equally?

Gary Chartier writes:

Arnold: I guess I don't see why you need a separate court system to deal with jurisdictional issues. We seem to manage these between US states and internationally using choice-of-law rules, etc.

Charles: as I understand it, a public good is characterized primarily by non-excludability: people can get a service. Neither roads, police services, schools, courts, nor garbage collection seems to be excludable. None of these items is a public good. Of course there are positive externalities generated by many of these goods, but it's not clear why that justifies making them monopolistic; as monopolies, they're delivered in quantities relatively unrelated to those people actually want--as demonstrated by their actual willingness to pay. If your concern is lack of access to these services by people with little money, then it seems as if providing people with direct cash grants (basic income grants, negative income tax payments, etc.) and then allowing them to decide what to do with those grants would be more efficient and less paternalistic than subsidizing the various services you've mentioned, and would allow poor people, like everyone else, to determine just how much of each service they actually want.

Gary Chartier writes:

Sorry—I should have written:

Neither roads, police services, schools, courts, nor garbage collection seems to be non-excludable: none of these items is a public good.

Marco Costa writes:

Who'd have guessed?

Arnold Kling, anarcho-capitalist.


Wesley Bruce writes:

Sam Schulman said

Why has no one thought of this before?

I has been. Its called Panarchy and its about 150 years old.
There are three catches, these have blocked it world wide:
1. Some obligations are difficult to fund and have nimby problems. In a panarchy context the communities all claim its the other communities job. Similar to states passing the buck to the federal level which declares it a state responsibility. Nothing gets done. Judges historically have not had the power to split cost and responsibilities in these cases.
2. Some communities offer short term gratification at the expense of the long term. When the long term catches up with them the costs. generally medical or elder care are not covered. The citizen can't then change community because the other communities are built on the bases of savings for these services. This creates a situation where only religious communities remain to take up these starving refugees from the spendthrift virtual community. They quickly become overwhelmed and lobby for a non panarchic system.
3. This raises the possibility of transfer costs into and out of such communities to balance the books.
Panarchy has been tries in many places. In most cases they are called freemen (feudal) estates, Monastic estates, communes, mutual factory towns, or incorporated towns and they have simply evolved into normal municipalities with all the citizens joining the most viable community.

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