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Free Cities and Seasteads: The Ultimate Low-Hanging Fruit?

October 17, 2011
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Tyler Cowen recently issued his widely-read e-book “The Great Stagnation” as a hardback. Economist Peter Boettke calls it “the most subversive libertarian argument of our age.” Why? Because it outlines the limits and, indeed, the hard realities of government’s expansion over the 20th century. Without Cowen’s ‘low-hanging fruit’ of technological progress, we face a world of declining growth rates, burgeoning debts and unemployment.

Fans of the Thousand Nations approach to innovating governance might have been disappointed in Cowen’s static, almost fatalistic, resolve to accept an indefinite future of economic stagnation.

Cowen claims that advances in modern technology have failed to generate the massive revenues, job creation, and structural change that the railroad or the lightbulb brought to America in earlier eras. We must recognize, Cowen claims, that Facebook is no Ford Motors.

Economist David Henderson charges Cowen with ignoring cutting back government spending and deregulation as tools which, at least potentially, could jump start areas of innovation. However Cowen’s indictment of the decaying West remains: indeed, our malaise can be viewed as the inevitable, destructive churn of democratic political incentives.

But we need not think of ourselves as doomed; by limiting himself to a vision of technology as gears and smokestacks, Cowen misses one of the biggest, lowest-hanging fruit of all: rules.

Paul Romer, illustrious proponent of ‘Charter Cities’ as a solution to global poverty, argues – quite rightly – that rule systems are analogous to technology. Networks of political and economic institutions can be innovated and rendered obsolete just like motherboards or vacuum tubes.

In a sense, Cowen’s argument is that, over the last century, we have seen a steadily growing gap between America’s institutional backdrop and America’s rapid technological evolution in key sectors. The winds of creative destruction have shocked the worlds of communication, banking, publishing, music, even dating; but our political rule set remains, in a fundamental way, unchanged. The options for innovation around this rule set are limited, since many of Cowen’s game-changing industries like automobiles or the telegraph have already been invented.

Radical innovation in ‘rule technology’ is the logical solution to the institutional stagnation burdening the world economy. Past change in governance systems has typically been slow and required the costly (and sometimes bloody) toolkit of revolution or exodus to the frontier. But the Thousand Nations vision – a global industry in rules, arbitration, and entrepreneurial communities – need not be either.

Experiments in new forms of living and governing ourselves bring with them boundless possibilities for new gains in education, culture, and science: all areas that Cowen believes are crucial to rescue us from the slow-growth mire.

Instead of fretting over decline in the 20th century, we should look forward to seizing the ultimate low-hanging fruit of the 21st: innovating our rules to build a better world.

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7 Comments
  1. October 17, 2011 1:59 pm

    Great post, Zach!

    In addition to ending global poverty, I see Free Cities as a way to develop innovative models of education, health care, community formation, and governance that can then re-energize the U.S. economy – especially if we can create such Free Cities within the U.S. with the help of 564 Native American tribes.

  2. October 17, 2011 3:48 pm

    This is a great response to Cowen, Zach. When I heard Cowen on the EconTalk podcast discuss his ebook earlier in the year, I felt that he was just making assumptions without feeling the need to be bothered with defending them. In this ways, he seems to make the same sort of error made by coercive statists, who make assumptions based on what they can understand and then extrapolate from their (arrogant) assumptions. Cowen did something similar by taking a reasonable hypothesis and assuming it MUST be true. Your argument shows the danger in assuming you know all the variables that go into creating the economic or political reality around us. I’m reminded (again) of the Hayek quote in which he says, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

  3. Stuki Moi permalink
    October 17, 2011 6:58 pm

    Don’t underestimate the extent to which “communication, banking, publishing, music, even dating” has changed simply due to increased leverage. Things have changed, but not in a direction that necessarily would be efficient sans debt accumulation. And furthermore, this debt accumulation is exactly what has allowed our “political rule set” to remain, “in a fundamental way, unchanged.”

    Once debt carrying ability is reached (now/soon), much of the chimera will vanish. Building a society around the notion that someone in the future will pay for it all, is more than a little unrealistic.

    I’m all for “free cities”, as they, at least for the average American middle class schlub, seem like a more comfortable way of evolving away from our dysfunctional current state, than the Mogadishu/McVeigh alternative. But either way works, and as of current, the Somalis have at least launched, while “we’re” still in the planning stage.

  4. Mike1200874 permalink
    October 25, 2011 9:54 am

    FYI: Seasteading was discussed at The Angel Clark Show yesterday:

    • Z. Caceres permalink
      October 25, 2011 8:16 pm

      Thanks Mike! Are you from Sussex County? I’m curious because my hometown is on Delmarva, where Angel Clark’s show is broadcast.

      • Mike1200874 permalink
        October 26, 2011 7:27 am

        You’re welcome. No, unfortunately I’m not from Delaware, and the only Sussex that I know of is in the UK 🙂

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