“Polycentric Democracy and Its Enemies”
Studies in Emergent Order, Vol. 5 (2012)
Public choice theory implies that economic life stagnates as interest groups become increasingly intertwined with political organizations. But there is a check on these tendencies, which occurs when people “vote with their feet,” exiting from jurisdictions with substandard public-policy bundles. In an environment where people and resources are able to relocate, the resulting relocation flows constitute systemic feedback that signals the attractiveness of jurisdictions. As policy-makers seek the accumulation of taxable resources and people seek attractive jurisdictions, “polycentric liberal democracy” will emerge. In markets for goods and services, the system constraint is tight, forcing underperforming firms to exit the market. The system constraint that governments confront is looser, as inherited agglomeration economies may enable them to postpone institutional reforms. Indeed, agglomeration economies also constitute a way by which elected officials can extend their reach beyond policies with possible social benefits to rent-extracting policies that cater to distributional coalitions.