My friend Zach Caceres, a recent NYU grad, has a guest post over at the fantastic 'Let a Thousand Nations Bloom' blog.
Political scientists have shown the costs of status quo bias in simple acts of political reform. Even mutually beneficial reforms like free-trade, which also has broad support by economists, will fail a popular vote in the presence of uncertainty as to the gains and losses to individual voters themselves. In the words of two game theorists, “uncertainty regarding the identities of gainers and losers can prevent an efficiency-enhancing reform from being adopted, even in cases in which reform would prove quite popular after the fact.” People opt instead for the seeming certainty of the status quo.Thus we end with the disheartening spectacle that democracies contain both the economic incentives to stagnate and the psychological effects to reinforce allegiance to these same declining regimes. The Public Choice logic of Mancur Olson meets the biases of the behavioralists.... A Free City within the bounds of a society captured by Olsonian interests massively lowers the cognitive costs of imagining and calculating the cost and benefits of alternative institutions. The alternative is not far away: it’s inhabited by people much like the onlooking citizen of the host nation. Likewise, a Free City or a Seastead offer the spectacle of an ‘uncaptured’ society, where members are rationally opting-in to the arrangement based on the clear benefits to themselves. They are psychological laboratories to escape the ‘churn’ and to imagine a better life outside the bounds of demosclerosis.....People thus become wedded to the ‘status quo’: addicted to often self-defeating redistribution and ‘risk averse’ to challenging the structure itself. But to break this vicious cycle, we need not wait for tragedies like bombs and earthquakes: we need only to tip the world towards letting a thousand nations bloom. A few good seeds can swing the behavioral scales in our favor.
I truly enjoyed the piece and it reinforced my sympathies for charter cities and seasteads. It certainly appeals more to me than hoping that the people who grasp the depth of our fiscal problems will make a difference in the legislature. Did anyone else find the argument for competitive government compelling?--------------------------------------------
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