Leveraging Institutional Change

Patri Friedman’s critique of “libertarian folk activism” is basically right. Free-market ideas have enjoyed near-dominance in academic economics for roughly thirty years at least. Libertarian think tanks are well funded and influential. Despite these encouraging developments, the overall size of government continues to grow. Both national parties in the United States are, in deed if not in word, manifestly committed to expanding government and shrinking freedom. Having the right ideas and communicating them effectively have not substantially changed politics for the better. We need the ideas and the proper communication of those ideas, but these strategies alone are not enough.

It would be wrong to claim that ideas do not matter, or that democratic politics always fails to advance liberty. One remarkable historical example is Britain’s repeal of the Corn Laws in 1846, a monumental event that heralded the first era of globalization. Even though his own party opposed him and he was immediately deposed from leadership for his decision, Prime Minister Robert Peel led the unilateral repeal of Britain’s grain tariffs with support from the opposition. In this case, Peel’s persuasion of the merits of free trade discomfited the predictions of standard trade models, which held that that import-competing producers will organize better than exporters and consumers, and therefore that unilateral trade liberalization should rarely occur. To be sure, liberalization would not have been on the agenda without the support that Britain’s burgeoning textile industry, concentrated in Manchester, had given to the Anti-Corn Law League, or without the approval of the greater part of the Whig Party.[1] Nevertheless, ideas mattered in the final result.

On most issues in contemporary politics, interests trump policy ideas. Persuading policy makers that freedom enhances prosperity and welfare matters little when those policy makers are beholden to organized interests that want special favors. The “collective action problem” helps to explain why only narrow interests will successfully organize and achieve policy victories, and why these will come at the expense of the citizenry.[2] Interest groups can achieve these victories only because voters are deeply, irremediably ignorant of philosophy, politics, economics, and public policy. Trying to educate voters is hopeless because they lack the proper incentives to learn and employ political knowledge.

Libertarianism can be defined as the political philosophy of the general interest. Hence, we should expect that libertarianism, whatever its other virtues, will always be politically disadvantaged relative to special interests. Friedman is therefore correct that changing policy makers’ incentives requires fundamentally changing institutions. To change institutions, we need debates — like this one — about strategic ideas.

One idea is to amend constitutions to increase veto players in government. Veronique de Rugy finds that in periods of divided government in the United States, government spending has grown more slowly. Of course, veto players make it more difficult to contract the size of government as well, particularly its regulatory and punitive apparatus. The only institutional form that appears consistently to reduce government’s economic footprint is fiscal federalism with decentralized taxation.[3] The United States is already the archetypal case of fiscal federalism among high-income countries, and its federalism has been gradually eroded over time. Besides, amending constitutions is even more difficult than changing policies.

The more ambitious the outcome we seek, the riskier our strategies must be. Friedman describes the Free State Project (FSP) as a low-risk, low-reward strategy. The FSP proposes to move thousands of libertarian activists to low-population New Hampshire to influence its future political development.[4] The logic behind this strategy is to use the collective action problem in freedom’s favor. For whatever reason — genetic mutations, environmental fluctuations, or random chance — there is in almost every society a tiny minority of people who come to view the political, coercive means of expropriating wealth from those who use the economic, voluntary means of creating wealth[5] as inherently unjust, and who furthermore become sufficiently motivated to do something about it. As long as they are a tiny minority, they will be out-lobbied, out-spent, and out-voted. By physically transplanting themselves into a single society they can at least have a fighting chance of battling the organized special interests there to a draw, or even of winning important triumphs.

Some evidence suggests that the FSP strategy is working to mobilize votes and change policy in New Hampshire. Many libertarians supported Ron Paul’s presidential candidacy last year, which makes Ron Paul’s vote shares a decent proxy for grassroots libertarian activism. Controlling for type of election (primary vs. caucus), turnout, and number of candidates, I found that New Hampshire gave Ron Paul his highest vote share in any state in the 2008 Republican primaries (PDF). I also found that New Hampshire towns with more Free Staters had higher percentages of non-Free Staters cast their ballots for Ron Paul
, implying that some Free Staters are persuading their neighbors. Free Staters and their local allies in New Hampshire have been important, perhaps decisive, in defeating red-light camera authorization, in liberalizing home schools, and in devising medical marijuana legislation now expected to pass the legislature.[6]

Friedman argues that the potential payoff from the Seasteading enterprise is greater, and that may be so. The idea is to effect a qualitative shift in the “ecosystem” in which governments survive, by forcing them to compete with bottom-up, citizen-launched governments. Clearly, system-level changes in the incentives facing governments the world over are necessary for any fully free society to survive.

Evidence suggests that system-level determinants of government size are quite powerful. In the 19th century, governments were generally small, and in the West, capitalist institutions swept away the guild practices and mercantilism of the absolutist era. In the 20th century, some capitalist societies fell victim to totalitarianism and others to welfare-regulatory statism. The economic footprint of governments consistently increased in the West, although the abolition of racial segregation and the emancipation of women must be viewed as immensely important 20th-century advances in freedom. By the late 20th century, government growth had slowed and changed somewhat in form, as price controls and public ownership of business fell out of favor, while regulation of health care and labor markets and spending on favored interests continued to rise. In the 1990s, it was a common belief that Internet privacy and financial globalization would force governments at least to rein in their economic depredations, but that view has been refuted by the facts. Big governments are more resilient than many believed. Government growth will not reverse without a qualitative, system-level change in the technology of government.

Of course, there are obstacles. Oversized governments will defend their turf, more likely by sanctions than by overt violence. Witness the new G20 crusade against tax havens, threatening economic sanctions against all jurisdictions that maintain banking privacy against government tax snoops. Privacy jurisdictions are already capitulating. Both Free States and Seasteads are likely to deal with similar political obstacles. Free States can try to obstruct unjust federal interventions using a panoply of tactics adapted from the Baltic republics’ and Slovenia’s stratagems during the decline of the U.S.S.R. and Yugoslavia. The federal government is more likely to respond with political and economic pressure than with violence, but there needs to be political will in place to withstand such pressure — and that will doesn’t exist yet.

Seasteads will need to find a way to take advantage of economies of scale and scope on ocean-borne facilities. Capital-intensive projects such as power plants are currently expensive to build and maintain on floating platforms. Agglomeration economies that drive much economic growth today tend to accrue to metropolitan areas with a million or more residents, an ambitious goal for a Seastead. Like everyone else, libertarians are generally unwilling to trade off the prosperity of a modern welfare-regulatory state for the freedom from coercion that anyone could probably find in a remote location today, such as the Alaskan interior.[7] This is one area where the Free State strategy has an advantage.

These problems are not insuperable. They simply mean that all institutionalist libertarian strategies will take time to work. We need more creative thinking on how to transmute ideas that work into politics that work.

Jason Sorens is the founder of the Free State Project.



1. Cheryl Schonhardt-Bailey (1991), “Lessons in Lobbying for Free Trade in 19th-Century Britain: To Concentrate or Not,” American Political Science Review 85 (1): 37-58.

2. Mancur Olson (1965), The Logic of Collective Action (Cambridge, MA: Harvard UP).

3. Jonathan Rodden (2003), “Reviving Leviathan: Fiscal Federalism and the Growth of Government,” International Organization 57: 695-729.

4. There is also a Free State Wyoming movement.

5. This distinction is drawn from Franz Oppenheimer (1908), The State.

6. The New Hampshire Liberty Alliance was founded by both Free Staters and “natives” and is the

foremost font of non-partisan, libertarian political activism in New Hampshire.

7. Libertarians are libertarians not because we place infinite disutility on every conceivable constraint on our freedom, which is an absurdity, but because we find all constraints on those freedoms that are exercised consistently with the freedom of others to be unjust.

Also from this issue

Lead Essay

  • In this month’s lead essay, Patri Friedman charges libertarian activists with falling victim to bias: Specifically, they seem to suffer from the belief that advocacy and education are enough to change public policy. Friedman suggests otherwise, and he recommends that much more effort be put into demonstration projects that will show how a libertarian world might work. Not only will these projects do more than mere persuasion toward winning the war of ideas, but they will also allow individual libertarians to live in a much freer society, and they will exert competitive pressure on existing governments to reform themselves. Friedman discusses several such projects, including his own, the Seasteading Institute.

Response Essays

  • Brian Doherty argues that Patri Friedman is both right in some ways and wrong in others. He’s right when he argues that incentives and technologies largely determine the shape of government today, and create the problems that libertarians tirelessly point out. He’s wrong, however, to dismiss “folk activism” entirely: Not only has it achieved some clear though incremental good, but it also helps create more libertarians, and at some point, this effort seems likely to bear fruit. Not only that, but seasteading relies on some folk activism itself, in convincing a large number of people that it would be a good idea to try. On the whole, Doherty welcomes seasteading as one of many possible paths to a more libertarian world.

  • Jason Sorens reviews several important historical developments, including the rise of free trade in the nineteenth century and the growth of the welfare state in the twentieth. He concludes that structural change matters, and that incentives play a larger role than ideology in determining the type of government we get. He then considers several of the key challenges of both Seasteading and the Free State Project, as well as a few encouraging developments in recent politics that appear tied to the rise of the Free State movement. He counsels patience, but also proposes several strategies for moving forward.

  • Peter Thiel shares the belief that politics is mostly futile, a conclusion he reached after years of activism. In particular, he believes that democratic politics is unlikely to bring about libertarian outcomes. Fortunately, politics is just one sphere of human life, and it’s possible, he argues, to create technologies that minimize its reach. Thiel describes a “deadly race” between politics and technology, in which human freedom is the prize. The goal of libertarian activism should not be to win in politics, he argues, but to escape it.

Letters to the Editor