Governmental Innovation and The Wisdom of Crowds

I've been reading James Surowiecki's The Wisdom of Crowds, and I think it must be really good, because I've already encountered a section supporting my political ideas :). Discussing the early automobile industry, he writes:

In the first decade of the twentieth century, there were literally hundreds of companies trying to make automobiles. And because there was no firm definition of what a car should look like, or what kind of engine it should have, those companies offered a bewildering variety of vehicles, including the aforementioned steamers and battery-powered cars...At one point, a third of all cars on the road in the US were electric-powered. Similarly, steam-powered engines were seen by many as the most logical way to propel a vehicle, since steam obviously worked so well in propelling trains and boats...As the decade wore on, though, the contenders began to fade...By the time of WWI, there were still more than a hundred automakers in America. But more than four hundred car companies had gone out of business or been acquired.

He also explains how the best innovations from this wide variety were eventually taken up by the winners, and goes on to generalize:

The story of the early days of the US auto industry is not an unusual one. In fact, if you look at the histories of most new industries in America, from the railroads to television to personal computers to, most recently, the Internet, you'll see a similar pattern. In all these cases, the early days of the business are characterized by a profusion of alternatives, many of them dramatically different from each other in design and technology. As time passes, the market winnows out the winners and losers, effectively choosing which technologies will flourish and which will disappear. Most of the companies fail, going bankrupt or getting acquired by other firms. At the end of the day, a few players are left standing and control most of the market.

Why do things this way? Isn't it inefficient to have so much failure? Surowiecki explains that this process is a response to a situation when you not only have to choose between many possibilities, but you don't even know what the possibilities are! Now you can't just choose, you have to first explore to determine your choices, which requires diversity and experimentation. He says:

One key to this approach is a system that encourages, and funds, speculative ideas even though they have only slim possibilities of success. Even more important, though, is diversity, not in a sociological sense, but rather in a conceptual and cognitive sense. You want diversity among the entrepreneurs who are coming up with the ideas, so you end up with meaningful differences among those ideas rather than minor variations on the same concept.

Because of the high barrier to entry in the governing industry, such an explosion of innovative and diverse firms has passed us by. Without experimentation, how can we find more effective means of organizing and governing societies? And because the cost of switching countries is so high, the current large firms don't even do much innovation to compete with each other. (And what competition there is is to attract businesses, not people, since businesses are more mobile). As a result, the field is moribund, slow-moving, and inefficient, with business models ("Monarchy", "Democracy") lasting for hundreds of years - the diametric opposite of a thriving industry. This is especially bad because government is currently the largest industry. Furthermore, one of its most important aspects, generating laws, is a knowledge industry of the type which has been revolutionized by modern communications - at least, in the private sector - so there is reason to think the technology could be improved.

Dynamic geography and market anarchy both offer the potential to dynamize the industry by knocking the entry barrier down to size. Dynamic geography is what you get in places like the ocean where you can build a new country one floating house at a time. Market anarchy is a system where each function of government is performed by many competitive, private firms. In these systems, a new competitor doesn't have to win an election, a revolution, or a war to enter the market, just have a new and appealing product - just like the industries Surowiecki describes.

It is important to note that these new and appealing products should not be restricted merely to libertarian systems. A competitive market can serve many niches - including ones that you never would have predicted in advance. Which is a good thing - we want to see the product of diverse viewpoints about what makes a good, just society and how to get it. The lack of governmental innovation doesn't just hurt libertarians - it hurts everyone.

Now, its not clear that either of these systems will ever become reality - they are clearly speculative ideas. But slim though the possibilities are, the potential payoff is gigantic. If either of them comes into being, government will finally have its Cambrian explosion, a dot-gov boom of experimentation and exploration, and the world will be a different and better place. Seems worth shooting for - which is why I'm back to trying to finish my seasteading book.

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