Abstract

Panarchy suggests that an optimal framework for the emergence of the best states is that of free competition between states. In Panarchy, people and states negotiate the relationships between them, as sellers and buyers and formalize them in explicit social contracts. Different states may offer varying levels of services in areas such as health, education, and social security for different prices. Low costs for consumer mobility from state to state are necessary for competition. These can be optimized by non-territorial states that offer services to citizens instead of rule a territory and compete over customers in a political market. The right of such states to coerce their clients differentiates them from mere protective associations, and is founded on explicit social contracts (law codes) rather than on monopoly over territory-- sovereignty. First, I explicate the unique properties of Panarchy, non-territorial states and explicit social contracts. Then, following the theories of Douglass North (1986) and Albert Hirschman (1970) I explain why Panarchy appears to be an appropriate framework for avoiding political monopolies and increasing political competitiveness and efficiency through cheap exit mechanisms. Then, I consider possible challenges to Panarchy: Panarchy may be utopian if the state is a natural monopoly; Panarchy does not advocate any political utopia but it may reify the utopian element to the meta-political level, to the preconditions for the emergence of the best states. If non-territorial states are inconsistent with human nature, they may be utopian. I also consider possible ethical objections to Panarchy. I argue that: The territorial sovereign state is not a natural monopoly. A free market in non-territorial states does not have to assume a coercive monopoly regulatory “super-state.” The territoriality of the state is not natural. Though there are valid ethical criticisms of Panarchy, from a utilitarian perspective, they are outweighed by ethical arguments that support it. Finally, I argue that several recent technological innovations have rendered the sovereign nation-state increasingly obsolete, while facilitating and reducing the costs of establishing Panarchy and running non-territorial states.