Governance Marketplaces
Recall that inefficiencies build like cancers within systems as they grow and age. In nature, this hazard is solved by allowing for older individuals to die and be replaced with their children. Something similar happens in governance marketplaces.
It is easy to see how a system like this works for corporate governments competing in a free market: As one organization becomes weighed down by its cancerous growths, it is outcompeted by other, younger and more nimble players who ultimately attract the old organization’s customers. Companies in free markets have a much shorter lifespan than most people think. The average lifespan of a company on the S&P 500 is only 18 years (note that this number has gone down from 61 years in 1958).[[29]](#_ftn29)
How could a similar medium be created for the types of governances that manage states?
Seasteaders present an interesting example, envisioning large, floating cities in which every individual house or business acts as an independent module capable of breaking off (e.g. sailing away to another floating city). Each of these cities would have different governance models, allowing for a truly free market of residency in which people move to the most effective governance structures and away from the least effective ones.
Were this concept to be implemented in practice, we doubt its long-term viability given the presumably low cost of leaving one of these cities. To keep citizens from floating away, cities would likely optimize around generally low taxes and generally nice amenities. Unfortunately, these optimized cities would be vulnerable to specialist “raider” cities that put a massive proportion of their resources into their offensive capabilities and use this to take resources from the fat, wealthy cities. Eventually, the wealthy cities would likely pay taxes to raiders to prevent them from attacking.
As this system becomes formalized over generations, little empires would form under the control of the former raiders, which would have a vested interest in preventing wealth-generating citizens from easily moving away. Essentially, the Seasteading world would go through a process very similar to that experienced by the earliest human city states as they became not-so-free-and-efficient empires.