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Contracting Sovereignty

- July 24, 2009

Renowned macroeconomist Paul Romer (perhaps the economist most responsible for getting the literature on endogenous growth up and running) has resigned from Berkeley to help start up a “new institute”:http://chartercities.org/blog/ dedicated to changing how we think about sovereignty, so as to make it easier both for countries to borrow rule-sets from each other, and perhaps to allow other countries to actively administer parts of their own territory. “Romer notes”:http://blog.longnow.org/2009/05/20/paul-romer-a-theory-of-history-with-an-application/

bq. that business keeps evolving as new companies introduce new rule sets. The good ideas are copied, and workers migrate from failing companies to the new and old ones where the new rules are working well. The same goes for countries. Starting about 1970, China took some of the effective rules of Hong Kong (which was managed from afar by England) and set up four special economic zones along the coast operating as imitation Hong Kongs. They worked so well that China rolled out the scheme for the whole country, and its Gross Domestic Product took off. “Hong Kong was the most successful economic development program in history.”

bq. Romer suggests that we rethink sovereignty (respect borders, but maybe create new systems of administrative control); rethink citizenship (allowing perhaps for voice without residency as well as residency without voice); and rethink scale (instead of focusing on nations, focus on new cities.) If nations are willing to experiment along these lines, they can create new places, places that can give more people access to the kind of rules that they would like to live and work under, and places that can sustain the historical process of entry and innovation in national systems of rules.

This is not only not as strange as it sounds, but actually has some considerable empirical precedent, as Alex Cooley and Hendrik Spruyt discuss in their new book, _Contracting States_ (Amazon). State sovereignty is much more frequently abrogated than we think, and many states effectively control bits and pieces of other states’ territories. Sovereignty is not the single unitary phenomenon that it is often taken for, but instead a “a bundle of rights and obligations that are dynamically exchanged and transferred between states.” Cooley and Spruyt pay particular attention to the politics of military bases, which are (if you think about it at all) an obvious example of incomplete contracting that modifies territorial sovereignty in very interesting ways, which (one might think) strike at the heart of what it is to be a sovereign state. In comparison, autonomous territories of the kind that Romer is interested in may not be nearly as big a stretch as one might think.