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September 03, 2009


This system of shopping for a government, though in good spirit, would only favor the rich. For instance you and I are both well-educated people who are poised to live successful lives. I've worked exceedingly hard and sacrificed in the name of furthering my education. In a few short years, I'll be rewarded for my work by a healthy income. And this may surprise you... I don't want to share.

I don't want my money taxed and given to high-school dropouts on Welfare. I don't want to pay for other people's health care, I want to pay for mine. I don't want to support people who don't have the economic sense to not have 15 children. I want to keep what I earn.

As an example, suppose New Mexico believes in income sharing and Iowa believes in the "to each his own" philosophy. The poor are going to move to New Mexico in hopes of getting help. I'm moving to Iowa to keep what is mine, Go Jayhawks! So we have a state full of people who all have the same money (none) and a state full of people who really enjoy talking about the American Dream.

Alert me if I'm simply being overly cynical, but I cannot see how, if given the choice, the minority 'haves' would ever choose to support the majority 'have-nots'. However, I do see a system of great economic polarization. Though our current system isn't what everyone wants, it forces greedy bastards like me to help out the rest.

and for the sake of saving the stupid college football joke above, let us assume that Iowa annexed Kansas in this reality.

Chusko, thanks for the comment dude!

I think that you're correct to say, as both of us pointed out, that it's harder to distribute wealth in a highly federalized system with few switching costs. With that said the issue of the system hurting the poor is far from resolved.

First, any good policy tries to prevent large swings in the rules and to slowly phase in new laws. I don't think the poor would suddenly become come into a worse position in this case. Second, we live in a world on the margin, rarely is anything happening in the extremes - let's look deeper.

Look at the effect happening in the US/EU model above. Some areas with a lot of economic production also believe in helping the poor. If we look at NYC and California, both are very prosperous and also have above average welfare systems - which are based on state level taxation. They also have similar switching costs to a fully federalized system.

Another issue, which you acknowledge quite freely, is that this distribution requires government coercion. Even though it's in the name of something good, I'm very much against a society with this inescapable coercion - vis-a-vis high switching cost of citizenship. If my fellow citizens want to enact policies that don't help the poor - then they're exercising their right to determine how to live. The federalized system is great for this.

If somehow the welfare systems in NYC and CA help them become prosperous, than other states will adopt them too. If they're more of a rich-guilt issue, than the rich states may adopt them for this reason. Sure, there are people like me who want a state close to an Ayn Rand utopia, but that doesn't mean every state would trend that way.

Nick ... great blog! I have a question though. Why are you framing your proposed system of federalsim at the national level (i.e., people switching from country to country)? Don't you think that if true federalism were enacted in the United States that states and local governments would reflect the belief system of its peoples? Don't you think such a system would be sufficient?

Thanks for the comment dude.

I'm proposing federalism at every level. I want power to be as close to the citizens as possible - to minimize coercion and maximize relevance.

As far as national federalism being sufficient, the rub lies in switching costs. Over time, as we've seen, all systems pollute themselves from cities to states to countries. I'd like to lower the switching costs for each area of governance. If your city goes wrong - you move to another, if your state is pursuing the wrong ends - you can drive across the border. Currently, you can't easily switch countries though. This lowers the efficiency of the market for governance.

So, to answer your question: I think federations should only exist at the national level - I don't want sovereignty ceded to the UN. However, I'm very in favor of easing the ability to change countries, and the ability to make new countries - a la seasteading. I'd like to see all protectionist policies eradicated and all entrance issues brought down to a bare minimum.

I would love to see citizenship become obsolete, and just have countries govern those who happen to live there - like how the constitution covers people in the US on vacation.

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