Seasteading, Tiebout, and Federalism

One of the most interesting things about state and local policy research is that localities are engaged in (admittedly imperfect) competition with one another. The Tiebout hypothesis, proffered by Charles Tiebout in his famous article “A Pure Theory of Local Expenditures,” suggests that in federal systems state and local governments compete with one another: if you don’t like the public services provided by your town or state, you can move to another one that provides a basket of public goods and services (and tax structures) more to your liking. People vote not only with ballots but with their feet.

It raises interesting questions for the future of the Tiebout model that sovereign nations may be forced at some point in the not-too-distant future to compete more for their citizens’ fealty.

The Seasteading Institute has been getting some significant attention recently, with a write-up in Wired magazine and an event next week at the Cato Institute. (The executive director of the Institute, Patri Friedman, will be speaking; Patri is the son of libertarian thinker David Friedman and grandson of Nobel laureate Milton Friedman, thus I suspect making the Friedmans the first family to have three generations speak at Cato.) The Institute proposes, in short, that in the near future it will be possible to create communities on the seas that are not the province of any (currently existing) sovereign country. (More on seasteading from Tim Lee at ArsTechnica.)

This has radical implications for governance and federalism. In our future life aquatic, to what extent will the Tiebout model begin to apply to nation-states? Will seasteading force countries to relax their own immigration standards? Will this increase the quality of national governments as competition increases?

Of course it’s impossible to predict, but it has interesting ramifications for the future of research on federalism and public policy.