Federalism

Beware Decentralization Without Mobility

Economist Bryan Caplan reminds us that political decentralization has little value unless it is accompanied by mobility.

|The Volokh Conspiracy |

Many conservatives, libertarians, federalism scholars, and others, are fans of political decentralization—myself included. But libertarian economist Bryan Caplan quite properly reminds us to "hold the the applause" in cases where decentralization is not accompanied by mobility:

[D]oes decentralization alone really promote liberty or prosperity? The mechanism is elusive at best. Imagine a world with a thousand sovereign countries of equal size. This is far more decentralized than the status quo, right? Suppose further, however, that there is zero mobility between these countries. Labor can't move; capital can't move. In this scenario, each country seems perfectly able to pursue its policies free of competitive pressure. Why should we expect such policies to promote liberty, prosperity, or anything else?

The story would change, of course, if you combine decentralization with resource mobility. In that case, each country's government has to compete to retain labor and capital at home. If you don't make the customer happy, somebody else proverbially will. But without this "universalist" mobility rule, decentralization leaves everyone under the rule of a preordained local monopolist.

But wouldn't decentralized governments voluntarily embrace mobility? It's complicated.

A profit-maximizing dictator might try to get rich by welcoming the world's talent to a glorious land of (apolitical) freedom. But then again, he might try to hold on to the riches he already has by isolating himself from the rest of the world and crushing his real, potential, and imagined enemies. See North Korea.

Bryan is absolutely right to question the merits of decentralization without mobility. I have emphasized the importance of mobility in my own work on decentralization and its relationship to liberty. When combined with freedom of movement, decentralization empowers people to "vote with their feet," which in turn increases political freedom, enables better-informed decision-making than conventional ballot-box voting, and can massively increase economic growth and productivity. In the absence of mobility, decentralization turns most people into hostages of their local rulers.

Consider, for example, the case of medieval Europe. It had a great deal of decentralization. Local lords had broad autonomy from central governments, which tended to be weak. But much of the population consisted of serfs who derived little if any benefit from that autonomy, because they were forbidden to leave their lords in search of greener pastures. The case of North Korea, noted by Bryan, is an even more extreme example of the same sort of problem. Being trapped in a small jurisdiction might well be even worse than being trapped in a larger one. Other things equal, smaller polities, on average, offer fewer and less diverse opportunities than bigger ones.

Democracy partially mitigates the perils of decentralization without mobility, by disincentivizing policies that harm the majority of the population in clear and obvious ways. But, as Bryan points out, it falls far short of eliminating those dangers. Democratic governments often perpetrate injustices against unpopular minorities. And even the majority often suffers from harmful and dysfunctional policies incentivized by widespread voter ignorance and bias. Moreover, much of the world lives in societies that are not democratic, and are unlikely to become so for some time to come. For them, interjurisdictional mobility may be the only viable way to escape oppressive government policies.

It is easy to see how restrictions on exit rights undermine the benefits of decentralization. Slavery, serfdom, the Berlin Wall, and other similar cases, vividly convey the danger. But it is also important to recognize that restrictions on entry often have much the same effect. Even if your own government does not forbid you to leave, the right to exit has little value if jurisdictions with better policies bar you from entering.

Some draw a sharp distinction between exit rights and entry on the ground that governments have property rights that entitle them to exclude newcomers, much like homeowners or members of private clubs. I criticized such claims in some detail here. In this post, I will only emphasize that giving governments powers akin to those of homeowners and clubs would further exacerbate the dangers of decentralization, since it would entitle them to sweeping control over the lives and liberties of natives, as well as potential immigrants. For example, homeowners, on their own property, can ban expression of political and religious views they disagree with, and clubs are similarly entitled to limit membership to those with a given set of political and religious views.

The importance of mobility has many implications for our evaluation of decentralization and various political institutions. I discuss some of special interest to libertarians here.

Among other things, the significance of mobility leads me to take a much more favorable view of the European Union than many other libertarians have. Despite some very real flaws, the EU has successfully established free trade and free mobility of both labor and capital over a vast territory encompassing over 600 million people. This has enabled many Eastern Europeans to seek out greater freedom and opportunity in the west. Even relatively affluent Western Europeans have greatly benefited from such foot-voting opportunities. For example, hundreds of thousands of Frenchmen and women have moved to Britain to escape the high taxes and severely restricted labor markets of their native country (though, sadly, their status—like that of the 1.2 million British citizens living in other EU countries—may be at risk as a result of Brexit).

And the EU provides these vast benefits at the relatively modest cost of a budget that consumes only about 1% of European GDP—less than one-twentieth of the percentage of US GDP that goes to federal government spending. The EU does impose some ill-advised and sometimes truly ridiculous regulations. But as libertarian scholars Johan Norberg and Jacob Levy explain, it probably precludes more harmful national-level regulation than it imposes through its own regulatory bodies.

The benefits of the European Union's promotion of mobility certainly do not prove that all multilateral organizations are necessarily good. Elsewhere, I have explained how the importance of foot-voting opportunities actually strengthens the case against world government and some forms of "global governance." But the EU example does suggest that multilateral institutions can be beneficial when they promote mobility, while allowing extensive member-state autonomy in other respects.

Decentralization has a variety important advantages. And, obviously, even seriously flawed decentralization might be less bad than forms of centralized power that are even more severely dysfunctional. Opportunities for foot voting are not the only factor to consider in determining how centralized a political system should be. But when it comes to promoting liberty and prosperity, the virtues of decentralization are heavily dependent on mobility. Without it, decentralized political power can easily promote oppression and stagnation.

UPDATE: I have made some minor changes to the wording of this post.

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  1. Many conservatives, libertarians, federalism scholars, and others, are fans of political decentralization

    That list is interesting. Mostly because conservatives tend to be fans of decentralization when they are losing the culture war and hope to cling to influence in some backwater precincts. Otherwise, not so much.

    You really need to find better political playmates, Prof. Somin. A libertarian has no place in a group of conservatives (movement conservatives, social conservatives, etc.). Faux libertarians, on the other hand . . .

    1. Tend to troll law blogs?

    2. So the Rev, who’s a Leftist, looks at his own side, which preached the virtues of tolerance right up to the point where they got the power to shut down opposing points of view, and now preaches the “virtue” of “stopping hate” by silencing everyone they disagree with, and decides that the Right must be a bunch of hypocrites.

      The power of projection is strong in this one

  2. “And the EU provides these vast benefits at the relatively modest cost of a budget that consumes only about 1% of European GDP – less than one-twentieth of the percentage of US GDP that goes to federal government spending. ”

    I think you have to take into account that EU directives don’t just spend the EU’s own nominal budget, they also obligate member states to spend their own budgets.

    Also, uniformity of regulation caused by the EU reduces the value of foot voting. Sure, you can say, ” it probably precludes more harmful national-level regulation than it imposes through its own regulatory bodies.” but it’s still reducing the diversity foot voting exploits on both fronts. People aren’t allowed to foot vote in favor of that harmful national-level regulation, it’s just precluded.

  3. The United States is more comparable to the EU, than the United States is comparable to any given country. Stop pretending the US is like Britain and needs to treat the rest of the world as Germany/Spain/France. People can move as freely from Florida to California as from Greece to Spain.

  4. The ultimate political decentralization is globalism and multi-culturalism (or maybe a better way to put that is a new global-culturalism).

    Borders are simply administrative burdens and really serve no purpose anymore.

  5. After listening to Caplan on a Youtube video, I’d say that he’s better described as an anarchist than a libertarian (I think he used the term anarcho-capitalist). When you want police departments replaced by private security companies, you’ve gone far beyond what I call libertarian.

  6. Some draw a sharp distinction between exit rights and entry on the ground that governments have property rights that entitle them to exclude newcomers, much like homeowners or members of private clubs. I criticized such claims in some detail here. In this post, I will only emphasize that giving governments powers akin to those of homeowners and clubs would further exacerbate the dangers of decentralization, since it would entitle them to sweeping control over the lives and liberties of natives, as well as potential immigrants

    I’m sorry, but this is pig-headedly, stupidly, insane

    1: It is not “the government” that has ownership rights, it’s the people currently living here who have the right to decide who else should be allowed to live here

    2: When the legal right to live here bring with it financial benefits that are paid for by the people who currently live here (and it does), then some “claimed right to invade” like what you fantasize about is effectively a “right” for random people to demand my money.

    Not “my fellow countrymen”, not “people I’ve chosen to associate with”, but “any random person” gets the right to demand that I give them my money, just because they want it

    No

    1. Continuing due to comment character limits:

      3: “Voting with your feet” is about leaving places that do not meet your standards. When moving to someplace else, the people there have just as much right to decide whether or not you meet their standards.

      Rights are reciprocal. I can’t force you to associate with me. You can’t force me to associate with you. Since I’m here, and you’re wanting to come here, that means I get the right to decide if you can come.

      4: As others have pointed out, holding up the EU in a paean to “decentralization” is utterly delusional. The point and purpose of the EU is to force every government to follow the same rules, and to prevent them from competing based on a superior political system / legal code.

      In short, you are completely and utterly wrong:

      Every non-criminal should have the absolute right to emigrate from a country

      No person ever has the right to immigrate to a country.
      The people of a country have an absolute right to decide who they will let in, and who they will keep out, and every sane country does execute that power

      Your obsession with destroying borders is leading you to embrace autocracy, and reject democracy. It’s a very bad look. If you immigrated here, it was because we gave you a gift. Stop spitting on it

      1. 1: It is not “the government” that has ownership rights, it’s the people currently living here who have the right to decide who else should be allowed to live here

        The premise that the residents of the U.S. “own” the territory of the U.S. as some kind of collective whole, and that therefore they* have rights of exclusion, is questionable. One who has ownership rights over a specific property tract, a.k.a. private property rights, has rights of exclusion for that tract. Abstracting from that to a country as a whole is problematic.

        The Constitution gives Congress the power “To establish an uniform Rule of Naturalization,” to give citizenship rights to foreign-born persons. It does not provide rights of exclusion. The latter rights have been assumed to be an aspect of national “sovereignty,” a concept related to royalty, that long predated the U.S.A.

        *Not “the government”? I’m not sure what the scare quotes denote. Who in practice is going to be implementing these collective decisions about “who else should be allowed to live here”?

  7. Side note: “voting with my feet” does me no good, if, every time we get a place set up the way we like it, others can move in and screw it up, changing our rules to the ones we fled in the first place. See Californians moving to NV and screwing up its politics.

    You were born in a miserable sh!thole? I’m sorry for you.

    But the misfortune of your birth does not create a moral obligation on me, any more than the misfortune of my birth compared to Paris Hilton’s creates a moral burden on her to give me her wealth.

    I can not demand that you stay in my country if you don’t want to.

    But neither can you demand that I let you in to my country, if I don’t want you.

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