About this Issue
Libertarians are great at making the moral case for liberty. Indeed, we’re great at making a lot of different moral cases for liberty. But then what? All the moral conviction in the world won’t necessarily build institutions or practices that respect individual rights. Doing so necessarily takes engineering work, and it’s high time that we give that work more thought.
We libertarians believe these institutions will be voluntary in character, so there should be little reason not to build them today. Or so argues this month’s lead essay by Jason Kuznicki. Replying to him will be Alex Tabarrok of George Mason University, Tom W. Bell of Chapman University School of Law, Edward Peter Stringham of Trinity College, Hartford; and Vitalik Buterin, the creator of the Etherium cryptocurrency. What they share in common might not be so obvious at first, but each has studied and in some cases perhaps created the kind of voluntary institutions that sidestep the state.
We welcome you to join the dicussion in the comments, which will be open through the end of the month.
Two Kinds of Activism
To my mind there are two ways to do libertarian activism.
One approach is easy, deeply satisfying, and - at least on our current margin - it’s basically ineffective. The other approach is difficult, usually thankless, and - I dare say it - revolutionary when it works.
Let’s call the first way libertarian moralizing. We know it by what it aims to produce: The intended product is more libertarians. Eventually we’ll persuade everyone, or at least enough of everyone, and then we’ll change the world.
In this approach, activists often urge non-libertarians to read some classic book; we are a bookish people. Perhaps it’s Atlas Shrugged or The Road to Serfdom. Activists trade and pass along memes that reinforce the message. They are apt to mention, often at the least opportune moments imaginable, that taxation is theft.
And who knows? Perhaps the listener has never heard those three words in exactly that order before. Maybe the listener will agree.
The point in this type of activism is to disseminate a particular moral message, and to bring people to agree with libertarian conclusions simply because their moral sense tells them so. Practical difficulties tend to be dismissed with an appeal to the moral sense alone: Win the moral high ground, the claim goes, and you will win the war. Ayn Rand certainly thought this way, and she has John Galt proclaim:
I have called out on strike the kind of martyrs who had never deserted you before. I have given them the weapon they had lacked: the knowledge of their own moral value. I have taught them that the world is ours, whenever we choose to claim it, by virtue and grace of the fact that ours is the Morality of Life… the industrialists, the conquerors of matter, had not discovered the nature of their right.
To this way of thinking, the task of activism is to develop and disseminate moral truths that have so far been elusive, evaded, or obscured. Rand certainly believed that capitalism was a moral system, and a good one, and importantly she added a further claim: Such a system requires a public defense that is offered in moral terms as well, one that is accessible to all those who are inclined to accept it.
We can argue about the merits of Rand’s particular moral defense of capitalism elsewhere. For now I will say that I agree with her that the moral high ground is crucial. That high ground is worth winning, and the war itself cannot be won without it.
But there’s a big problem here, and it’s very simply stated: Moral messages alone don’t seem to produce stable beliefs. They’re all fire and no fuel. The typical person who’s made it through Atlas Shrugged without immediately despising it usually falls in love: The world is changed, and for a time at least it seems that nothing will ever be the same again. Comparisons to a religious conversion are quite apt.
But there’s a reason it’s called the Ayn Rand phase. Like it or not, an infatuation with Ayn Rand rarely lasts longer than a year or two. And then it fades. For years thereafter, the person who has undergone an Ayn Rand phase may have the sense that a sort of low intellectual trick has been played on them. We’ve all seen the “proofs” that 2+2 = 5, or that perpetual motion really is possible under certain conditions. I’ve heard it suggested that maybe Ayn Rand is something like that.
I would not agree. I think there’s something there. But merely getting more people to read Ayn Rand seems likely only to leave more people perplexed, annoyed, and slouching back to statism, vaguely but grimly convinced that they’ve been conned. That’s absolutely not where we want to leave them.
What’s Missing from Libertarian Moralism
The intense but fleeting quality of Ayn Rand’s appeal may have to do with genuine shortcomings in her philosophy - a giant can of worms that I’m not going to touch - but it may also have to do with the second kind of libertarian activism, the kind I’d like to talk about now.
To pick a completely incendiary name, I will call this second type of activism libertarian social engineering. By this I mean the deliberate attempt to create, on an incremental, case-by-case basis, the new, voluntary institutions and practices that a society would need if it were to become significantly more private, more decentralized, and more free. I mean here institutions like cryptocurrency, which is already well known; private institutions of assurance and trust in consumer satisfaction and safety; and Alexander Tabarrok’s idea of the Dominant Assurance Contract, which is exceptionally obscure, but which stands to my mind a fair chance of making almost all state action obsolete.
As editor of Cato Unbound, it’s my job to look for new, interesting questions, ideas, and thinkers, and to present some of them every month for our audience. For quite some time now I’ve wanted to do something with the idea of the Dominant Assurance Contract, because even among fairly hardcore libertarians, I’ve found almost no one who knows about it - and yet to my mind this is exactly the type of work that we should be doing.
The Dominant Assurance Contract works like this. A wealthy philanthropist provides seed money for a project that he hopes will eventually be pursued. We’ll say that it’s building a school. The philanthropist’s money is only a small fraction of the total, but he advertises that others may subscribe to the project as well, with an announced deadline sometime in the future, and a total sum of money that he hopes is to be collected before then. (The total is sufficient to fund the project.)
If the total is collected by the deadline, the project goes forward, and the school is built and funded. If the total is not collected by the deadline, the other subscribers will have their money refunded, along with a bonus that comes from the philanthropist’s contribution. The project doesn’t go forward, but - unlike a Kickstarter campaign - no one ever walks away feeling scammed. Everyone always gets something that they wanted at the outset, either a school or - in the worst case scenario - something like a savings bond.
Dominant Assurance Contracts have the potential to do all kinds of good work in the provision of what economists call public goods. And intriguingly, public goods are by far the solidest justification for the existence of the state itself. If all public goods could be provided this way - and yes, that’s a big if - then we probably wouldn’t need a state at all.
Absolutely none of this is certain. It’s all a wild speculation. That said, at least trying to provide some public goods this way seems harmless enough. Why don’t we try it more often? This is a sort of tinkering that seems likely to do no harm, that might do enormous good, and that would allow libertarians to experiment with building the institutions of a voluntary society even as we enjoy the relative comfort of the present-day world. Retreating to Galt’s Gulch may be completely unnecessary.
Why this, why now? Keep in mind that we already have all kinds of different moral arguments for capitalism and voluntarism. Some are in my estimation far stronger than Ayn Rand’s, including John Tomasi’s Free Market Fairness and Jason Brennan’s Why Not Capitalism? But we have lacked even a vague idea of how crucial types of voluntary social interaction might be carried out in the absence of a state, or with little to nothing in the way of state participation.
We do have activism, of course, that aims to remove state action from areas of life where it is completely unjustified, and where no substitutes would ever be appropriate. Libertarians do fine work on keeping the press free, and on keeping the state out of religion, and on abolishing licensure for professions. None of these should stop, certainly.
Libertarian social engineering, though, is much rarer, and yet I have come to believe that it’s absolutely necessary. The end product will not be more libertarian true believers - not at first, anyway - but rather more ways of doing voluntarily all of the things that need to be done to enjoy a high standard of living in a more or less just society that is full of diverse aims and values.
It’s libertarian, because it operates in the private sphere, and no one is ever required to use it. If you don’t like what’s being done, you are free to ignore it. And it’s social engineering, because this type of activism straightforwardly tries to build the institutions that a free people would use instead of the state.
On our current margin, I think we need a lot more of exactly this type of tinkering. And I’m not alone in my belief: The sense is growing, I think, that we’ve built an enormous moral edifice, some parts much more solid than others, but that the foundations of free institutional practice are still almost entirely lacking. As libertarian philosopher Jason Brennan writes,
In my view, the principal problem that the capitalist ideal faces is that we do not know how to design that machinery that would make it run. The problem is … our lack of a suitable organizational technology: our problem is a problem of design. It may turn out to be an insoluble design problem, and it is a design problem no doubt exacerbated by our selfish, predatory, and malicious propensities, but a design problem, I think, is what we’ve got.
If Brennan’s phrase has a familiar ring to it, that’s because it’s a close (and acknowledged) parody of a passage from G. A. Cohen’s Why Not Socialism?, in which Cohen suggests that perhaps socialism has the very same design problem.
If that doesn’t make my fellow libertarians at least a little bit uncomfortable, I’m not sure what will. But that doesn’t make the observation untrue. Perhaps our moral reach really does exceed our engineering grasp. And perhaps most political philosophies will wind up somewhere similar when they begin from abstract moral ideas and then attempt to build a real-world polity. Conservatism may be exempt here, but most other views will not be. Proponents of any given view - socialism, libertarianism, or nearly anything else - will of course think that their view is both moral and practical, but reality needs to be the judge of practicality. And for the libertarian case to get a fair hearing, we have much design work to do.
The fact is that we’ve barely begun to think about how to create the institutions that would give people the freedom to ignore the state. As I wrote in my own book, Technology and the End of Authority,
It may prove that many or perhaps even all of the problems that we now characterize as… problems to be given to the state to solve, may in fact be designproblems - that is, problems that could be solved in a far more morally satisfying way, if we only knew how. Proper solutions would leave behind only voluntary interactions, and possibly nothing that we might identify as a state. We just don’t know how to get there yet.
The conspicuous lack of libertarian social engineering may also explain why few outside the libertarian movement can possibly take seasteading seriously. Thus the ordinary, reasonably intelligent non-libertarian looks at seasteading and immediately begins to ask questions: What happens if there’s a murder? How will property title disputes be adjudicated? What if someone doesn’t agree with the judgment? How will banking work? When pollution or other externalities occur, who deals with them, and how? In short, who provides the public goods? With what resources? And by what authority?
We libertarians have posed these questions, often and tellingly, whenever it’s a matter of someone else’s utopian and comprehensive social system. We’ve used these questions to pick apart many collectivist and interventionist projects, and it is good that we have done so. These questions, though, can apply equally to us. We libertarians pride ourselves on being skeptical of utopianism, but we are oddly blind to that menace whenever it happens to be wearing our own colors.
We ought not to give ourselves a pass. Something roughly like seasteading might answer well to our moral intuitions, but there’s a lot of work that needs to be done between here and there, and insisting on the greatness of the end goal, while neglecting that work, is apt to make us look like perpetual-motion charlatans.
This work is hard, and it isn’t for everyone. I’m not sure that I’ve ever performed it myself. There will of course be many failures along the way as well. But if we want to capture the minds as well as the hearts of all those people we’ve won through libertarian moralizing, then we’ll have to build the institutions for them to use, or at least to point to, in the meantime. We will have to make the move toward a more voluntary society not look like a sudden leap into the dark. By making it appear more reasonable, we will keep those whom we’ve won by moral persuasion. We will also make any future libertarian world that we might build more attractive to those who aren’t so persuaded by ideological messages: At least it works, they may be able to tell themselves, and perhaps it works better than the way that things used to be.
As editor, I rarely participate in the discussions at Cato Unbound, and to date I have never written the lead essay. This month I’ve done so primarily to draw attention to the work of others - individuals who, in my judgment, have been doing and thinking about the libertarian social engineering that we will need if we’re ever going to change the world. I look forward to turning the floor over to them, and to discussing their work - and not mine - in the coming days.
Much activism for a freer world has centered so far on trying to convince people that having a freer world would be morally preferable. That’s well and good. But little work has been done on designing the institutions that that world will need. This should be strange to us, because if these institutions can be built voluntarily, then presumably they can also be built today. And eventually, in the freer world that we imagine, we will need them.
 Ayn Rand, Atlas Shrugged, Signet, 1992 (1957) p. 967.
 Jason Brennan, Why Not Capitalism? Routledge Press, 2014, p. 40.
 Jason Kuznicki, Technology and the End of Authority: What Is Government For? Palgrave MacMillan, 2017, p 227.
Making Markets Work Better: Dominant Assurance Contracts and Some Other Helpful Ideas
I agree with Jason Kuznicki that “libertarian social engineering” is underdeveloped and promising. The better markets work, the less the demand for the state. By improving markets and other voluntary organizations, libertarians can make their political vision more attractive while at the same time making people better off.
Modern libertarianism began after many of the market institutions that we take for granted had already been developed. Fee simple property, for example, dates to 1290. Could we have a libertarian society without fee simple property? In theory, yes. In practice, the free society is attractive because it generates wealth. Without fee simple property it is, at the very least, more difficult to create a rich, industrialized society. The limited liability company dates much later than fee simple property, to the 19th century. Without the limited liability company, it would probably have been much more difficult to raise large amounts of capital. As a result, without limited liability, markets would be at a great disadvantage compared to the state in conducting economic activity on a large scale. Thus fee simple property and the limited liability company are among the technological/legal institutions that have made a free society possible, not because they are constitutive of a free society, but because they make a free society work better and compete better against statist alternatives.
Public goods are one of the big challenges to markets. Indeed, it was long thought that the free rider problem prevented public goods from being provided voluntarily. David Hume (1739), for example, wrote that such provision was impossible, which is why we need the state:
Two neighbours may agree to drain a meadow, which they possess in common: because it is easy for them to know each other’s mind; and each must perceive, that the immediate consequence of his failing in his part, is the abandoning of the whole project. But it is very difficult, and indeed impossible, that a thousand persons should agree in any such action; it being difficult for them to concert so complicated a design, and still more difficult for them to execute it; while each seeks a pretext to free himself of the trouble and expense, and would lay the whole burden on others. Political society easily remedies both these inconveniences…Thus, bridges are built, harbours opened, ramparts raised, canals formed, fleets equipped, and armies disciplined, everywhere, by the care of government…
In Tabarrok (1998) I showed that such reasoning was wrong; a large class of public goods can be produced voluntarily using what I called a dominant assurance contract. My paper was written long before sites like Kickstarter made crowdfunding a common idea, but the dominant assurance contract is a modified crowdfunding contract. In a standard crowdfunding contract, entrepreneurs seek voluntary donations, but they commit to use those donations if and only if the total meets or exceeds a critical threshold. If total donations are less than the threshold, the donor’s funds are returned. Billions of dollars have been raised using crowdfunding contracts, but much more may be possible. The crowdfunding contract solves the assurance problem, because donors need not fear their contributions will be wasted, but it doesn’t fully solve the free riding problem.
The dominant assurance contract adds a simple twist to the crowdfunding contract. An entrepreneur commits to produce a valuable public good if and only if enough people donate, but if not enough donate, the entrepreneur commits not just to return the donor’s funds but to give each donor a refund bonus. To see how this solves the public good problem consider the simplest case. Suppose that there is a public good worth $100 to each of 10 people. The cost of the public good is $800. If each person paid $80, they all would be better off. Each person, however, may choose not to donate, perhaps because they think others will not donate, or perhaps because they think that they can free ride.
Now consider a dominant assurance contract. An entrepreneur agrees to produce the public good if and only if each of 10 people pay $80. If fewer than 10 people donate, the contract is said to fail and the entrepreneur agrees to give a refund bonus of $5 to each of the donors. Now imagine that potential donor A thinks that potential donor B will not donate. In that case, it makes sense for A to donate, because by doing so he will earn $5 at no cost. Thus any donor who thinks that the contract will fail has an incentive to donate. Doing so earns free money. As a result, it cannot be an equilibrium for more than one person to fail to donate. We have only one more point to consider. What if donor A thinks that every other donor will donate? In this case, A knows that if he donates he won’t get the refund bonus, since the contract will succeed. But he also knows that if he doesn’t donate he won’t get anything, but if does donate he will pay $80 and get a public good which is worth $100 to him, for a net gain of $20. Thus, A always has an incentive to donate. If others do not donate, he earns free money. If others do donate, he gets the value of the public good. Thus donating is a win-win, and the public good problem is solved.
Thus, contrary to Hume and many others, it may be possible to produce bridges, harbors, ramparts, and canals privately (“fleets equipped and armies disciplined” may require different institutions). In fact, Cason and Zubrickas (2017) recently tested dominant assurance contracts in an experiment and found that they do increase the provision of public goods. Moreover, there are advantages to the private method of provision over “political society.” Political society avoids the problem of free riders at the expense of creating forced riders, people who are forced to pay for a public good that they value at less than their cost. More generally, how do we know that a bridge is truly worth more than its cost? Hume takes the value of the bridge as given, but we need a discovery process for public goods just as for other goods.
Dominant assurance contracts open the provision of public goods to entrepreneurship, innovation, and the market discovery process. We may find that more and different public goods exist than have previously been imagined. An option to allow refund bonuses on crowdfunding websites such as Kickstarter could improve the efficiency of those sites and provide a wealth of useful test data.
Public goods are not the only challenge to markets. Markets are also challenged by externalities, asymmetric information, and the demand for redistribution. Redistribution is probably the greatest challenge. Markets don’t handle redistribution well, but they can handle the closely related issue of insurance, and insurance contracts can be improved. It’s long been thought, for example, that unemployment insurance can’t be provided privately because of the risk of adverse selection and moral hazard. But although it may be difficult to create an unemployment insurance contract that pays out when you are unemployed, what about one that pays out only when you are unemployed and there is unusually high national unemployment, or unusually high unemployment in your industry or city? Conditioning payouts at least partially on things that the worker does not control could alleviate problems of asymmetric information and still allow the market provision of unemployment insurance.
Health insurance markets are likewise ripe for improvement. Cochrane’s Time Consistent Insurance (1995, 2009) improves the market provision of health insurance (see also Tabarrok 1994, 2002b for “Gene Insurance”, an early precursor). Similarly, Robert Schiller’s (2003) macro markets in housing and GDP reduce the risk from housing bubbles and business cycles. The better the market can insure against risk, the less will be the demand for coercive solutions.
New technologies such as smart contracts and the rise of ubiquitous and massive computing power, including all manner of sensors and location technologies, may make these ideas implementable at lower cost and in better ways than ever before (Tabarrok and Cowen 2015).
In conclusion, it is time to reexamine market challenges in light of new ideas and new technologies and begin a research program in libertarian social engineering.
Beito, David, Peter Gordon and Alexander Tabarrok (eds). 2002. The Voluntary City: Choice, Community, and Civil Society. University of Michigan Press.
Cason, T. N. and Zubrickas, R., 2017. Enhancing fundraising with refund bonuses. Games and Economic Behavior, 101, pp. 218-233.
John H. Cochrane. 1995. Time-Consistent Health Insurance. Journal of Political Economy 103, no. 3:445-473. https://doi.org/10.1086/261991
Cochrane, John H. 2009. Health-Status Insurance: How Markets Can Provide Health Security. Cato Policty Analysis No. 633: https://www.cato.org/publications/policy-analysis/healthstatus-insuranc…
Hume, David. 1739. A Treatise on Human Nature. Available online at https://ebooks.adelaide.edu.au/h/hume/david/h92t/B3.2.7.html
Schiller, Robert. 2003. The New Financial Order. Princeton University Press.
Tabarrok, A. 1994. Genetic Testing: An Economic and Contractarian Analysis. Journal of Health Economics 13:75-91. http://www.sciencedirect.com/science/article/pii/0167629694900051
Tabarrok, A. 1998. The Private Provision of Public Goods Via Dominant Assurance Contracts. Public Choice 96:345-362.
Tabarrok, Alexander (ed.). 2002a. Entrepreneurial Economics: Bright Ideas from the Dismal Science. Oxford University Press.
Tabarrok, Alexander. 2002b. Gene Insurance. In Entrepreneurial Economics: Bright Ideas from the Dismal Science. Oxford University Press.
Tabarrok, A., & Cowen, T. 2015. The End of Asymmetric Information. CATO Unbound. Retrieved from https://www.cato-unbound.org/2015/04/06/alex-tabarrok-tyler-cowen/end-asymmetric-information
 I prefer the term market challenges to market failures because the latter prejudges the outcome. Not every market challenge leads to a market failure. See Introduction to Beito, Gordon, and Tabarrok (2002) and Tabarrok and Cowen (2015).
 For further details see Tabarrok (1998) and Cason and Zubrickas (2017).
 Papers on each of these issues can be found in Tabarrok (2002a).
Appreciating the Success of Voluntary Institutions
Should advocates of liberty focus on convincing others of the moral superiority of liberty over competing political values, or should they focus on attempting to build, in the words of Jason Kuznicki, “new, voluntary institutions and practices that a society would need if it were to become significantly more private, more decentralized, and more free”? Kuznicki believes that with the former approach, the battle for the “high ground is worth winning, and the war itself cannot be won without it,” but he also believes building voluntary institutions is crucial. Although I likely attach more weight than Kuznicki to the importance of convincing enough people to support property rights and markets (Stringham and Hummel, 2010), I generally support his call to create actual voluntary institutions.
Consider a problem as basic and crucial as contract enforcement, which most people think must be done by the state. I will refer to that standard, government-friendly point of view as legal centralism. Libertarians who want to argue against legal centralism can take two approaches. The first approach is to talk about how in theory protection agencies could form and create a court system that looks like our current courts but is private. When asked a specific question about how a particular problem would be solved, the libertarian theorizer outlines exactly how the problem should be addressed. The approach can address any problem, including those in science fiction.
The second approach is to look for real-world examples of how a specified problem or a similar problem was solved by voluntary associations. My recent book Private Governance gives numerous examples of private parties getting together to solve problems others assume must be solved by government. Consider a problem faced by payment processers, which have to deal with quasi-anonymous hackers and fraudsters from around the globe. To a legal centralist, the solution is easy: a payment processor simply needs to call the police, and their problems will be solved. It turns out, however, that law enforcement by American governments has little ability to track down quasi-anonymous fraudsters and even when they do, they lack jurisdiction over fraudsters such as those located in the former Soviet Union. To the libertarian theorizer, payment processors would simply need to call their protection agency, which would send agents to the doors of the fraudsters, apprehend them, hold a trial, and then recover the funds. Here we get into the realm of science fiction very quickly. When asked about a specific problem, the libertarian theorizer is apt to respond, “That would be illegal in my ideal world.”
Notice that legal centralism and libertarian theorizing are of little use to pioneers in online commerce such as PayPal. Instead, PayPal devised a real-world solution to deal with the problem of online fraud. Rather than viewing fraud as a legal problem, as a legal centralist and a libertarian theorizer would be prone to do, PayPal viewed fraud as a risk-management problem. At the time and to this day, brick-and-mortar merchants have had ways to attempt to verify whether someone in their store is a legitimate or fraudulent customer. They could check the ID of the customer before cashing a check or could simply only accept cash. Such steps are not an option for PayPal, but it was able to program a fraud-prevention system that attempted to predict whether transactions were fraudulent. If a transaction is suspicious the system might require extra verification, deny the transaction, or freeze the account. Today all banks and payment processors use similar technology. Almost everyone agrees the fraudster is not acting morally and that a legal system should not condone such behavior. But such a question becomes irrelevant in practice when the problem can be solved using the private mechanisms payment processors have introduced.
Or consider a problem banks and other financial institutions face. Imagine a circular chain of five financial institutions where each pays the next one $100 million and receives from another one $100 million so that the net change in balance is $0 for each. But if some transactions take longer to settle than others, one bank could find itself waiting for its $100 million from one counterparty and unable to pay its other counterparty $100 million. Such a problem can be avoided if settlement is delayed and netted a few days from now, but the longer the time to settlement the greater the odds such problem could arise for other transactions. To both the legal centralist and the libertarian theorizer, if one bank takes longer to get its $100 million and delays sending its $100 million the other banks can take that bank to court and recover damages. In reality, banks cannot have their assets and balance sheets tied up in court proceedings that can take ages. That would likewise be the case for courts run by even the best libertarian protection agencies. Like the payment processors, banks do not treat such a problem as a legalistic one. Instead they look to ways to make the settlement process more seamless. At present the above problem does not debilitate financial institutions, but it can expose certain counterparties to risk they don’t want to assume. As a potential solution, many mainstream financial institutions are experimenting with blockchain technology (independent of Bitcoin) to find ways to pre-reconcile and more quickly settle trades. Here too we see an example of a private solution to what otherwise could have been considered a legal problem. Statements reminiscent of science fiction, such as that delayed settlement would be illegal in an ideal libertarian world, become irrelevant in practice.
Kuznicki writes, “We already have all kinds of different moral arguments for capitalism and voluntarism.… But we have lacked even a vague idea of how crucial types of voluntary social interaction might be carried out in the absence of a state, or with little to nothing in the way of state participation.” Although I agree the area is understudied, many good examples have already been found that researchers should document further. For example, my research looks at how in the world’s first stock markets, government refused to enforce advanced contracts such as forward contracts and how providers of private governance such as the London Stock Exchange or the New York Stock Exchange emerged to create and enforce rules. Both started out as coffeehouses, and the first rulebook of the London Stock Exchange stated that its rules arose because the laws of the land were not sufficient to deal with the problems in the market. Although they had not read my book Private Governance, they are still, in my opinion, heroes of markets.
It theoretically could be the case that the lessons from the London or New York Stock Exchanges in no way apply to other markets, implying that because one studies certain examples does not mean all possible related questions or problems have been addressed. But many similarities between markets exist, and I would venture to say that the London Stock Exchange of two hundred years ago and eBay of today have a lot more in common than dreamt-up theories by legal centralists or libertarian theorizers. Instead of saying, “Here is how I believe the law could solve this,” we can say, “Here is how forward contracts were enforced independently of government law for hundreds of years.” It avoids the pitfalls of utopian thinking that Kuznicki rightly criticizes. Studying existing examples of private governance and observing newly emerging forms of private governance means that libertarians don’t need to come up with a blueprint of all possible solutions. It also sheds light on how many problems a libertarian theorizer might speculate about have already been solved.
Before I conclude, let me highlight one quibble with Kuznicki’s post: I think his term “libertarian social engineering” is suboptimal. He means, “It’s libertarian because it operates in the private sphere and no one is ever required to use it. If you don’t like what’s being done, you are free to ignore it.” But the term “social engineering” connotes much more than attempting to get people to go along with your new way of doing things. Instead, engineering is what I would call the actions of the founders of the London Stock Exchange in 1800, PayPal in 2000, or developers of blockchain technology today—pioneers of private governance.
Making Liberty Happen
Jason Kuznicki’s lead essay posits two kinds of libertarian activism: the usual sort of gratifying but ineffective moral suasion (with Ayn Rand’s work cited as an example) and “libertarian social engineering.” Framing it as a choice between futile theory or transformative practice, Kuznicki calls for less of the former and more of the latter.
Kuznicki offers the Dominant Assurance Contract (DAC) as exactly the sort of thing that the world needs more of. On that point, I wholeheartedly agree. Alex Tabarrok deserves a Nobel Memorial Prize in Economic Sciences for his pioneering work on the DAC, an idea that has already survived field testing and that, if scaled up, stands to revolutionize the provision of public goods. As Kuznicki notes, the DAC could render nation states obsolete.
Powerful stuff. Powerful good stuff, too, for friends of liberty. So Kuznicki wants more of the same, and pronto. But what about the moral theorizing he seems to dismiss? Does it play any role in the brave new world of practical libertarianism?
Kuznicki calls for a kind of “social engineering.” Though not the most politic name, it does reveal a profound regard for theory. What do engineers do, after all, but translate theory into practice? Bridges stand because civil engineers apply the Newtonian model of physics to real world facts; computer chips run well because electrical engineers apply the quantum model to semiconductors.
Kuznicki’s call for more libertarian engineering thus includes an invitation to libertarian theory. And not just any theory. A practical fellow like Kuznicki will want a theory that, like Newtonian or quantum physics, does a good job of describing its domain. Kuznicki evidently doubts that Objectivism will do the trick, but beyond that, his essay does not go. On it rushes, to the attractions of practical libertarianism.
And so, too, will this essay. But not before noting that Tabarrok’s DAC exemplifies the theory that consensual market exchanges maximize social welfare. This shows in the very motive for creating the DAC: to offer a purely voluntary and private mechanism as a better alternative to the political provision of public goods. Tabarrok’s description of the DAC offers more in the line of mathematical equations than philosophical theorizing, but the whole of his enterprise coheres with the theory that the more consent, the better.
Libertarian Coders of the World: You, Write!
Now, to Kuznicki’s main concern: mobilizing libertarians to design institutions that respect individual rights, promote economic growth, and cultivate social harmony. Who could disagree with that? So Kuznicki hits the gas. He concludes, “if these institutions can be built voluntarily, then presumably they can also be built today.”
That twee “if” marks a significant turn of argument, however. In terms of physics, seasteaders can (sort of, probably) build entirely autonomous floating islands on the high seas. In terms of finances or politics, though? Kuznicki’s libertarian engineers will never get a chance. That is one reason why The Seasteading Institute decided to work with French Polynesia to create a Floating Island Project in the shallow waters of one of that island nation’s sheltered lagoons.
Kuznicki calls for libertarians to code the software of liberty. Well and good. It will come to little, though, if they have no hardware to run it on. And applications that “run on top” of existing institutions, the way that Bitcoin operates above and beyond the reach of any particular government, can only get so far in the virtual world. Internet clouds eventually come to ground on sovereign territory.
Seasteads might soon offer suitable platforms for trying out new and better ways of providing consent-rich governing services. Or maybe Honduran ZEDES, or the fledgling Liberland, or another of the contemplated special jurisdictions will provide the hardware necessary for running the kind of software that Kuznicki wants libertarians to start writing. Here, it must suffice to say that hard working people have been trying to make it happen—and to offer the pragmatic reminder that these things take time.
Quick Answers to Hard Questions
Kuznicki warns friends of liberty that if they want to sell new and improved kinds of government, they will have to answer some tough questions:
What happens if there’s a murder? How will property title disputes be adjudicated? What if someone doesn’t agree with the judgment? How will banking work? When pollution or other externalities occur, who deals with them, and how? In short, who provides public goods? With what resources? And by what authority?
He is not the first to make such inquiries. Again: hard working people have been seeking answers for quite a while, in venues all over the world. Speaking solely as an individual academic and not for any client, here follows a sketch of one general approach to private governing services.
It combines three main elements:
- Shared ownership;
- Double democracy; and
- Open source law.
Shared Ownership. Because nobody owns traditional political institutions, nobody really cares for them. Resident-owned communities offer a better alternative. Private governments can learn from the commercial corporate world, where intense competition has driven the evolution of institutions capable of supporting large, complex, and consent-rich communities. Your next government might thus resemble a city-sized corporation, with you and other residents buying shares, electing the board of directors, and so forth. Think of it as residential co-op, upgraded for the big leagues.
Private governments cannot simply adopt the Model Business Corporation Act or Delaware Corporation Law, however. Commercial corporate codes aim at protecting shareholder rights—not residents’ liberties. How can private governments best protect individual rights?
Double Democracy. Political institutions typically offer to protect individual rights via official declarations. These proclaim various wonderful things, which ultimately mean nothing more than what paid agents of government decide. Ahem. Rather than offering yet another catalog of rights, therefore, private governments should simply offer a blanket “Most Free Person” guarantee—and leave its interpretation to truly independent, third party judges, chosen via methods commonplace in private arbitrations.
Better than even words, though? Structural protections of individual rights. Like democracy, but more so. Double democracy.
In double democracy, owners manage the community on a one share/vote basis while residents enjoy the power to veto select laws or officers on a one person/vote basis. Owners construct; residents correct. Double democracy provides a structural safeguard against offensive governments without opening the door to mob rule. Both shareholders’ property rights and residents’ individual rights get represented in double democracy.
Open Source Law. And where will the law of private governments come from? Not from any one flag, but entirely from private, non-governmental sources. Not owned by anyone, but free to all, like GNU/Linux open source computer operating software. Hence Ulex, the open source legal operating system.
Kuznicki’s essay voiced little patience for idle theorizing. He called for libertarians to get to work writing, in effect, social software. Kuznicki had lots of questions about how private governments will work, too. This essay defended theory, counseled patience to eager Kuznicki, and offered a quick sketch of what his next government might look like.
 Alexander Tabarrok, “The private provision of public goods via dominant assurance contracts,” I 96: 345–362, 1998, https://mason.gmu.edu/~atabarro/PrivateProvision.pdf.
 For a consent-based theory about the design and justification of social institutions, see Tom W. Bell, Your Next Government? From the Nation State to Stateless Nations (Cambridge University Press, forthcoming 2017).
 Tom W. Bell, “What Can Corporations Teach Governments About Democratic Equality?” 31 Social Philosophy & Policy 230 (2015), https://ssrn.com/abstract=2622627.
 Your Next Government?, cited at , offers more about Ulex; version 1.1 can be read here.
Change the Incentives, Change the World
Jason Kuznicki makes what is in my view an excellent observation about libertarian activism. Moral messages can indeed be effective, and indeed were arguably crucial to important victories like the end of institutionalized slavery, but moral messages alone can only go so far. Only ~10-25% of people in the United States self-identify as libertarian, and recent events have certainly shown that it is foolish to rely on some kind of grand historical trend of people caring more and more about freedom just because some of us expect them to. Rather, it is human nature to be attracted to ideas that are perceived as high-status, and that are adopted by people, cultures, or organizations that appear successful, and so arguably one of the best ways to get certain moral values to be widely adopted, whether libertarian, egalitarian, humanitarian, or otherwise, is precisely to build systems and institutions that operate with these values in mind and succeed because of it.
Social systems engineering as a form of activism has a long history that stretches across the political spectrum (and, for that matter, political compass), including projects that are libertarian, egalitarian, communitarian, and often a mix of all three. Along with the spectrum of politics, there is also the spectrum of implementation strategies, with the main divide being “broad versus deep” - building institutions that produce smaller and more incremental changes, but do so among a larger group, versus establishing communities that go straight into implementing their ideology in a very deep and pure form, though often at the cost of attracting fewer adherents and all but seceding from the mainstream society. Community currencies, kibbutzim, seasteading, the GNU General Public License, Tor, the original vision of PayPal, the PGP Web of Trust, and many other projects were all in their various different forms a part of this tradition.
So far, “broad” has proven itself to be a far more successful strategy than “deep.” Projects that attempt radical change all at once fail for many reasons, of which three particularly big ones stand out. First, making entirely new social institutions that are radically different from the status quo, and in a way that is better than the status quo, is hard. Second, deep projects often fail to scale, as systems that work in sizes smaller than Dunbar’s number often fail to retain cohesion once their size grows past it. Third, radical change in small groups often fails to show its virtues even if those virtues are present, due to the simple fact that such isolated communities give up many of the network effect advantages of living in a way that is strongly connected to the mainstream society.
So how do you do broad? The basic formula is simple. First, pick an area of life that you want to change. Or if you do want to change several things at once, make it possible for people to adopt your solutions piecemeal. Then, find some way of doing it that’s better than what we have today. Implement it. Wait until either (i) people realize that this approach works well and start adopting it, or (ii) you realize that you were wrong and you move on to the next thing. In many ways, this sounds exactly like entrepreneurship. The main difference, however, is that whereas entrepreneurship is usually about designing better user interfaces, or building tools that are more comfortable and convenient for their users than the tools that came before, what we are talking about here has more to do with reforming underlying patterns of behavior, and especially the incentives, monetary, social, and otherwise, that drive how we interact.
In my view, significant very successful examples of what I would call broad social systems engineering include the following:
- Online ratings
- Crowdfunding à la Kickstarter
- Various sharing economy projects, perhaps most notably Uber
- The open source software industry
All are examples of relatively more decentralized systems successfully replacing more centralized alternatives, usually due to a combination of idealists who see decentralized approaches as being intrinsically valuable and ordinary users realizing that, in those cases, they are simply the most efficient way to do what those applications set out to do.
Examples on the horizon include prediction markets, more holistic and comprehensive reputation systems, and, yes, the entire blockchain and cryptocurrency space. Dominant assurance contracts may perhaps emerge as another example. They represent a radical change from the way that public goods are funded today. The patterns of thinking involved in participating in a dominant assurance contract, and the ways that the incentives of all the participants interact, are very different from the kinds of systems that we are used to today. But with information technology becoming more and more powerful, and more and more accessible and widely adopted with each passing year, the space for experimentation in social systems design will only continue to grow.
Let us turn our attention to blockchains and cryptocurrencies. Technologically speaking, a blockchain is simply a decentralized network that has a common shared memory (“state”), and updates its state by processing inputs (“transactions”) coming in from the outside according to a set of prescribed rules (“the protocol,” or “the state transition function”). Particularly importantly, this is all done without any kind of central coordination or single point of potential failure.
This should be interesting to social systems engineering enthusiasts for several reasons:
- Blockchains can effectively run arbitrary computer programs “in the sky” in a way where anyone can verify their correctness, and where trusting the system does not require trusting any kind of central operator or developer. This makes blockchain-based applications very easy to bootstrap and greatly cuts down the barriers to entry in getting users to trust the application.
- Applications built on blockchains cannot be easily shut down.
- Blockchain applications can operate globally, cutting across jurisdictions, and are theoretically accessible to anyone in the world who has a computer and the internet.
- Access to a computer and the internet is also all it takes to build a blockchain application.
Global accessibility, cutting barriers to entry, censorship resistance - all values that libertarians should certainly approve of.
One of the main applications of blockchains is “cryptocurrency” - purely digital money that benefits from all of these properties. After simple cryptocurrency transactions, the next step is “smart contracts” - using digital money that can be directly controlled by programs that live on the blockchain. For example, one can use a smart contract to implement a dominant assurance contract. Users know that they will get refunded if the contract does not hit its goal, not because they trust the operator, but because there is no central operator they need to trust. If the participants do not fully trust the operator to actually use the money to implement the public good, one can use a smart contract to release a small amount of money at a time, where participants can vote at any time to turn off the tap.
Another great application is prediction markets; Gnosis and Augur are doing this on Ethereum already. A third is the private-good version of crowdfunding, where the participants get something in return, and the purpose of the contract is to overcome a coordination problem. One could even imagine this being used to solve coordination problems in the “deep” kind of social engineering: imagine crowdfunding a town in the mountains, or a seastead.
A fourth is financial services like exchanges; one can use cryptography together with blockchain-based systems to build financial systems that provably act according to the rules and cannot cheat their users. For two examples of this, consider “proof of solvency” and “exchange with decentralized custody,” which are new methods of distributed assurance and trust that cryptography has made possible. Social means of gaining trust, like filing forms and getting bureaucrats to confirm that none of the directors has a criminal record, can be at least partially replaced by technological means of gaining trust - building systems that reduce the need to trust individual humans in the first place. Finally, there is also the concept of “decentralized autonomous organizations” (DAOs) - entities, which can be for-profit or nonprofit, that exist purely on the internet with no real-world footprint, and whose rules of association exist only as smart contracts on the blockchain.
Aside from programmable money, blockchains are a great environment for building other kinds of decentralized social institutions, including reputation and rating systems, “self-sovereign” identity management, marketplaces, as well as various other applications like supply chain tracking, anti-counterfeiting, and authenticated data publishing.
So where do we start? One possibility is to take your favorite idea for a social systems innovation, find some specific problem in the world to apply it to, and go ahead and build it. Another is to take these ideas and apply them to a clientele that is already very interested in participating in this kind of experimentation - that is to say, use these techniques to solve problems in the blockchain and cryptocurrency space itself.
Here are a few examples:
- Build a rating agency that evaluates the quality of various digital assets and informs users about which ones are trustworthy and which ones are likely scams.
- Use proof of solvency and decentralized custody techniques to make a safer cryptocurrency exchange that will not blow up the way MtGox did.
- Build a smart contract auditing agency. Set up a repository of smart contract codebases, and give them ratings on security and efficiency.
- Build a decentralized reputation system and use it for peer-to-peer cryptocurrency trading.
Perhaps one reason why these types of applications have not yet been developed is precisely the fact that many of them are public goods, and public goods are themselves the sort of thing that is very difficult to provide without large centralized organizations. Well, maybe you can do it with a dominant assurance contract.
The space is still a young one, and the possibilities are many; if designing voluntary institutions that use the power of advanced information technology and cryptography to solve public goods, coordination and information asymmetry problems is your cup of tea, then I would strongly encourage you to take a look.
Libertarian Social Engineering: Why and How
I would like to thank the response authors this month for thoughtfully engaging with my lead essay: Alex Tabarrok, Edward Peter Stringham, Tom W. Bell, and Vitalik Buterin, it’s an honor to discuss with you all.
In my reply I’d like to start with terminology: Why did I use “libertarian social engineering” to describe the activism that I prefer?
First, I chose the term to echo Cass Sunstein and Richard Thaler’s provocative “libertarian paternalism.” Ideas in this vein have caused a sensation, and a clever word choice probably helped.
But I also mean to reference Karl Popper’s famous endorsement of “piecemeal social engineering” in The Open Society and Its Enemies. The engineering that I have in mind would likewise be piecemeal. Although my moral commitments look very much like radical libertarianism, I share Popper’s disdain for comprehensive social planning, and I recognize that any attempt to instantiate radical libertarianism would necessarily be an instance of the type. There are strong reasons for intellectual modesty here, because utopias usually end badly. Why should I expect my utopia to be any different?
Thus I am neither cheered nor inspired by seasteading. And beyond the knowledge problems inherent in all comprehensive social engineering, there are other reasons for caution. As Vitalik Buterin writes, isolated communities “give up many of the network effect advantages of living in a way that is strongly connected to the mainstream society.” In today’s industrialized world, those network effects are so vast that a group of people with entirely superior institutions but a smaller population baseand thus a much less extensive market—might struggle to demonstrate that their institutions were any better: They might be better, but how could that be proven when a lower living standard was baked in from the outset?
Given the otherwise unfavorable network effects, the only way to demonstrate the practical superiority of a set of institutions may be to build them in close contact with the mainstream, or perhaps within the mainstream itself. I therefore offer two challenges.
My first challenge is to statists, that is, to those who are intellectually committed to the idea of a state. I ask them to imagine, per impossibile, that a form of anarchism exists, one laden with institutions and values that together provide the following:
- Pareto superior provision of all currently state-supplied public goods
- Higher living standards for all
- Social inequalities that, to the extent they exist, are more justified than our own
- Greater stability against internal and external threats
I submit that if such an ordered anarchy existed, then every respectable argument for the state would stand refuted. We wouldn’t even have to ask whether taxation was theft, because this system would be preferable on statists’ own terms. They would get everything that they profess to want and more.
If it existed: Tom W. Bell showed great insight when he flagged the word “if” for making basically the same enormous leap in my lead essay. It’s time to address that leap more directly.
Libertopia does not exist, and I submit that we do not yet know how to build it. We would do well to be much more frank about this fact, which brings me to my second challenge: Libertarians, I want you to become tinkerers. I want you build libertopia carefully, bit by bit, from within the confines of the not-entirely-terrible state-endowed mixed-economy system that we now enjoy. I think that that system, while not ideal, is still good enough to allow for improvement while protecting bystanders from harm in the event that your experiments go awry. The mixed economy mainstream isn’t so bad a fallback position.
Mainstream political theory has written off the ideal of the stateless society, but I am not sure that the mainstream’s reasons have been sufficiently strong. Even if a stateless society can’t be instantiated overnight, it may still be a useful guide in designing new institutions piecemeal. If we are still more pessimistic, we may grant that statelessness is completely impossible—and yet there’s still maybe a lot of good to be had by imagining state retreat, because the state is still usually terrible, and it may often be possible to do better with less of it.
Libertarians, you will know that you’re succeeding at my challenge when you see people of all ideological backgrounds, and of none, lining up to use your new institutions and practices—not because they’re trying to prove a libertarian point, but because this new thing you’ve built really works. Build enough new things, gain enough outside support, and you will have built the libertarian ideal, only without the risks that social engineering usually entails.
On this point, Alex Tabarrok is right to mention limited liability and fee simple property as good past examples of the sorts of innovation that we should emulate, even if, I’d caution, they both originated with the state. Edward Peter Stringham suggests some fully private examples as well; these are a more direct template, if anything, for future imitation. Even communists use clever, market-based all the time—not because they are convinced by these institutions’ goodness, but because they are incentivized by these institutions’ usefulness. That’s a good pattern to try to follow.
Note, however, that I am not calling communists who use clever private property institutions hypocrites here—tu quoque is not my game—rather I am saying that when you build something that works quite well, people are going to use it, and ideology becomes an afterthought when people start voting with their feet.
Admittedly, we libertarians must build this world while under some severe constraints. Tom W. Bell despairs of this and suggests that not only must we change the software of government—the particular laws and binding private agreements that we live by—but also the hardware of government—the constitutional and enforcement mechanisms that make our agreements binding in the first place.
This is not so clear to me. If, for example, we developed social institutions that provided for nearly all of the public goods now supplied by government, but that relied only on the state’s contract and private property enforcement mechanisms to do so, we might build strong pressure for realizing the idealized night watchman state, even from within the present system. The added public goods provisions of that system would tend to be experienced as a nuisance, not a benefit, and democratic support for these features would vanish.
One constraint to libertarian social engineering has so far gone unmentioned, namely the problem of crowd-out. Other things being equal, it’s difficult to build a replacement institution that does better than the state when the state can use taxation to fund its efforts, and when we can’t. If the competition offers the good for free, then you’d better be able to say why your good, priced at $0.05, is a better deal. And even then you should expect that some people will prefer to take the free version.
Of course, sometimes the goods in question are not perfect substitutes: Cryptocurrency has many attributes that fiat money lacks, and vice versa; each also has attributes that it does not share with private commodity money. One’s choice of currency will therefore depend on how one values these various attributes in the context of a particular transaction. This is liable to change from one transaction to the next, and in ways that it would take far too much space to describe in full.
What all of this says is that the landscape is complex, and crowd-out may or may notbe a significant problem in various cases. A priori, crowd-out is neither a reason for us to despair nor for statists to exult: Although the state has the ability to compel purchase, its services also have certain inherent drawbacks that private agents never face. A particularly salient challenge for libertarian social engineers is therefore to find ways to amplify the values and advantages of privateness. If we can make private action more attractive, we will see more of it and less of state action.
There are good reasons to believe that we have not yet had all of the ideas that we might think up in this area of research. If we apply the same intellectual modesty to our opponents as we ask of ourselves, we will have to conclude that they are asking us to start small and go slowly, not to surrender forever to the One True God of the central state. That ought to be okay by us.
Libertarians who see things my way face three choices: We can retreat to a utopia that will likely fail for many reasons. We can scold everyone insufferably. Or we can attempt a piecemeal—and distinctly anti-statist—type of social engineering. This last course is the one I recommend. We should build the pieces of a freer society even as we live in the world of today. The risks are low, and the rewards are potentially quite high.
Letters to the Editor
Reframing the Libertarian Movement
The editors are pleased to publish the following letter from libertarian activist Max Borders.
If technological change makes a law hard to enforce, the best solution is sometimes to stop enforcing it. - David D. Friedman
We are approaching a tipping point for human liberation along a number of dimensions. In other words, the world’s about to get a lot freer. And there will be little government officials can do about it.
If you believe such prognostications, they should be welcome. But what if I told you this tipping point isn’t likely to start among politicos, wonks, or policymakers?
Such might seem heretical in this space. But please bear with me. If this new freedom is to come, it will require we adopt a new reference frame.
Let’s call our current way of thinking the Moral-Political Frame. It involves principles, policy, and politics, which is necessary as The Moral-Political Frame animates our movement around a set of ideas concerning the way society ought to be arranged. It is also how most libertarians are used to operating. As Jason Kuznicki writes in “Two Kinds of Activism” for Cato Unbound:
We know it by what it aims to produce: The intended product is more libertarians. Eventually we’ll persuade everyone, or at least enough of everyone, and then we’ll change the world.
But we must embrace a new frame. Call it the Innovative Frame.
The Innovative Frame involves the generation of culture, innovation, and entrepreneurship. Though we’re all familiar with these areas, we tend to think of them as the fruits of freer institutions, not a means to them.
In other words, our Moral-Political Frame can bias us, telling us that if we work through the political process to change policies around our principles, the world will be a better place. Robust culture, innovation, and entrepreneurship will follow. And this isn’t wrong. It’s just severely limiting.
So it’s time to reframe our thinking. It’s time to treat culture, innovation and entrepreneurship as a primary means of catalyzing social change. It’s time for libertarians to embrace the Innovative Frame.
Embrace the Innovative Frame
Like it or not, rapid technological change is giving rise to new outlooks—including a new breed of libertarian. Why? Because technology creates new incentives. New incentives create new behaviors. New behaviors create new cultures. And the cycle restarts as new culture influences innovators.
It can all be rather dizzying. But it is a brute fact of contemporary life. And the process is accelerating. We can try to run from this fact or we can embrace it as a catalyst. We can engage in what Kuznicki wryly refers to as “libertarian social engineering.”
The first wave of innovations includes sharing economy services like Uber and Airbnb. More profoundly though, cryptocurrencies like Bitcoin and Ethereum are ascending. These latter technologies promise to disintermediate people, decentralize authority, and in some cases, dissolve power.
“I’ve heard about this stuff,” you might be thinking. But the first wave is only a ripple. Bigger waves are coming.
Futurist Peter Diamandis refers “exponential technologies” that tend to double in power (or processing speed or market penetration) every year, while their costs go down. Some leap forward by orders of magnitude. But rapid adoption of exponential technologies cannot occur without corresponding changes to our everyday lives.
And therein lies opportunity.
Opportunity: Subversive Innovation
Exponential tech has the potential to transform our institutions, our incentives, and our behaviors en masse. It all happens without anyone’s permission, as a thousand coders code, a million users adopt, and eventually whole populations wake up in very different circumstances—a “social singularity.”
Politics becomes a lagging indicator. Policy wonks become chroniclers. And politicians all become toothless, mutant conservatives—standing athwart progress yelling “Stop!”
Recall that Mancur Olson described the phenomenon of “concentrated benefits, diffuse costs.” The special interest state, Olson thought, was tough to reform because general-interest voters had neither the sufficient incentive nor the knowledge required to fight the various ways in which favor-seekers take advantage of the tax and regulatory regime.
But Olson did not live to see the first subversive innovators, who developed exponential technologies that flipped the logic of collective action on its head. For example, if you could create a technology a lot of people really wanted (like Uber in San Francisco) or desperately needed (like Bitcoin in Argentina), the benefits would be dispersed and the costs of maintaining the status quo would become concentrated on officials.
Today we see old-guard cartels fighting against a massive hive of new contenders. And there are fights to be sure. But there are also changes where none seemed possible before. Who ever thought taxi cartels would face competition, even obsolescence? Who ever thought at least some in Venezuela would have a way to escape their inflated currencies and form commercial relationships in the cloud above Maduro’s goons?
Subversive innovators look for ways to exploit the weak joints or leverage points of the current system. In some ways they’re innovators like any other. The key difference, though, is they are willing to take their ambition and ingenuity into the headwinds of the regulatory state. When everyone else thinks linearly, they think laterally—or even non-linearly.
And they’re just getting started.
Making Subversive Innovators
Though our movement leaders admire innovators from the sidelines, we haven’t really bothered to bring them into the fold. We also have to begin to build real culture and community around the novel ways they are changing industries and institutions. It’s a different way of thinking from the Moral-Political Frame, particularly as the Moral-Political Frame is primarily backward-looking. The Innovative Frame is forward-looking.
Building a culture of techno-liberation allows us to normalize technological, cultural, and political decentralization among the laity. This new ethos provides a kind of filter through which innovators begin to regard the world—they too will look for ways to think within, and produce within, the Innovative Frame. As more and more innovators start to think this way, the proverbial genie is out of the bottle.
Nick Szabo, creator of bitgold (a predecessor to bitcoin) begins in this critical overlap. In 2007 he writes:
Although it discards totalitarian political structure and legal procedure, our proposed form of government is based on historically proven legal mechanisms. With the clarity of legal procedure it avoids the vague nonsense that often passes for political philosophy. Much of the political structure of Juristopia [Szabo’s ideal uncorrupted law] is based on highly evolved common law mechanisms such as property and contract, but these are used in the same basic manner as in the common law, rather than as misleading analogies or mere labels.
Think now of bitcoin, which includes smart contracts, ownership, and hard-coded scarcity—hallmarks of Szabo’s Juristopia.
A Virtuous Circle
What I’ve been arguing here is a difficult case to make to those who have long been steeped in the Moral-Political Frame. It’s no wonder. The Moral-Political Frame lights the mind and sets fires in the heart. And it is an indispensable aspect of our movement. But it can no longer operate effectively without the Innovative Frame.
At the risk of oversimplifying, social change operates as two complementary forces: innovation and culture. Each reinforces the other, raising the prospect of a virtuous circle. We’ll need an optimistic outlook as older institutions decline—for example, as the academy rots from within, the banks starts to show their cracks, and the people seek comfort in something other than the state.
That is why we have to make sure we’re building a community of techno-libertarians and providing them with a cultural and intellectual home. That home should be connected to, but also separate from, the Moral-Political Frame.
The virtuous circle stands to build a culture of trust in surprising ways. Prior to 2013, few would ever have entertained the idea of getting into a car with a stranger. With ridesharing apps, few can imagine not doing it. “Uber” is now a verb.
Likewise, culture can hasten the pace of innovation. Steve Jobs was a cultural icon, and thousands of CEOs became aspiring clones. In 2013 my friend Jeffrey Tucker and I published a piece called “Fifty Ways To Leave Leviathan.” The piece became a cultural touchpoint for the Innovative Frame. Scores of people wrote us to say that one article changed their lives. Many started new businesses. Educators started new schools. Software developers undertook new projects.
We had tapped into something important, something missing from our movement.
People steeped in a culture of subversive innovation ask: “What if we tried something outside of the institutional status quo? What if we could build something better than the welfare state? What if we experimented with new institutional forms, such as:
- Special economic zones?
- Distributed crypto-health insurance?
- Micronations at sea—or in the cloud?”
These are just the sorts of seditious questions we should be prepared to ask.
The very act of asking such questions means we resist the crude binaries of partisan politics. In fact, we tend to think democracy—that golden calf—has outlived its usefulness. As politics becomes more acrimonious and hierarchies lash out, throngs divide into their respective tribes. The tribes clash, often violently. We can see why. There is a lot at stake in this enormous tug-of-war. But the hierarchies are breaking down. And the tribes will scatter and scurry to new systems.
I believe this in my bones. So much so that I’ve started a non-profit org called Social Evolution. We’re devoted to building culture and ethos around the Innovative Frame. Young people get it intuitively. Older libertarians, however, don’t always grok. Supporters seem preoccupied with how to get people to vote libertarian.
Our job at Social Evolution—and as a wider movement—is both to expose the destructive charade of electoral politics and to propose something better. But to do so, we must steep a generation in the ethos of subversive innovation. We have to re-orient our movement.
Though most people simply can’t think outside the ballot box, a few can. And we hope they will become members of our community—our readers, our contributors, and our supporters. Because every moment we spend outside the negative-sum game of politics is an opportunity to spend a moment innovating around power.
Max Borders is Executive Director of Social Evolution, a non-profit media organization devoted to creating a cultural and intellectual home for subversive innovators. Connect with him at firstname.lastname@example.org.