“Who Will Guard the Guardians?”: Restraining Sovereign Power Using Entrepreneurial Communities

Economist Barry Weingast writes, “the fundamental political dilemma of an economic system is this: A government strong enough to protect property rights and enforce contracts is also strong enough to confiscate the wealth of its citizens.”

How then do we restrain the predatory powers of government to an appropriate scope? How do we keep powerful interests from capturing government institutions to use against others? In other words, “Who will guard the guardians?”

Weingast has an easy answer:

The answer concerns the design of political institutions that credibly commit the state to preserving markets, that is, to limits on the future political discretion with respect to the economy that are in the interests of political officials to observe.

The romance surrounding America’s founding and the drafting of the Constitution is the story of this struggle. Unfortunately, actually ‘designing’ these institutions is exceedingly hard. And even if we were able, people disagree over the ideal size of government.

Disagreement over the ideal size and scope of government means any given ‘transgression’ that expands State power by exploiting the populace is not necessarily opposed by enough people to stop the expansion.

Weingast shows rigorously, using history and game theory, that sovereigns can ‘divide and conquer’ their subjects using disagreement over government’s limits:

…if citizen beliefs about the appropriate limits on the state differ considerably, it is difficult for them to react in concert to state actions. Indeed, this diversity allows the sovereign to form a coalition with one group of citizens against another, allowing the sovereign to transgress boundaries considered fundamental by other citizens.

Obviously, most Nation-States, including the US, contain severe disagreement over government’s proper scope. Unfortunately for us, the sovereign can later transgress against the same group that they used earlier for the winning coalition to transgress against another groups. The sovereign wins regardless.

Without an “automatic mechanism” (Weingast’s term) to produce a consensus on the limits of State power, we face the worst possible outcome: where sovereign power steadily balloons using a divide-and-conquer strategy against all groups, in theory indefinitely.

So what can we do?

We need to find a way to unify preferences about government’s limits. With a unified ideology, a transgression is opposed by a broad base of people and becomes politically untenable. Divide and conquer fails.

But actually convincing 300,000,000 of your fellow citizens that your idea of government’s limits is the correct one is an almost impossible task. As anyone who has tried to rally people behind a cause will attest, political activism is difficult and the results are often disappointing.

Moreover, as I have argued here previously, the expansion of government itself changes people’s perception of acceptable government limits and sovereign power expansion may even create the psychological environment that reinforces the legitimacy of future transgressions.

So we must search for Weingast’s ‘automatic mechanism’ so that our convergent preferences for limits to government bring a resilient political order by stopping attempted transgressions in their tracks.

Imagine a world in which people are opting into a wide variety of different institutional structures. People personally contract into competitive legal systems and different mixtures of ‘public goods’ and social programs provided by sovereign, small jurisdictions or private developers.

This is a world of entrepreneurial communities and competitive governance. In the act of contracting and immigrating, we find people revealing their preferences for a rule set and, by extension, a pre-defined scope for government activity.

People vote with their feet and their pen for an explicitly stated limit on ‘government power’, as expressed by contracting into an entrepreneurial community. This means that competitive governance is an automatic mechanism for bringing together people with convergent ideologies and expectations about an authority’s limits.

If Weingast’s analysis is correct, this means that not only will people enjoy the benefits of living beneath institutions more closely tailored to their preferences, but the attractiveness of a competing polity to a citizen will work to restrain unjust expansion in an authority’s power.

This is because those attracted to a particular rule system will have similar ideas about the limits of that rule system, creating a robust check against the ‘divide and conquer’ strategy of a sovereign.

Those that hope for ‘limited government’ should reconsider their acceptance of the Nation-State system for achieving their goals. Nation-State machinery is too easily used by political elites and economic special-interests against the large, dispersed mass of people with heterogeneous ideas about government’s limit. Those frustrated with the political process in countries like America must realize that ‘divide and conquer’ is endemic to the system.

To limit government, we need to bring together people’s preferences for government’s limits. Since that’s nearly impossible, we need to bring the people with convergent preferences together. With competitive governance attracting citizens by innovating rules and political institutions, we build a robust check against predatory government expansion. In short, limiting government power needs entrepreneurial communities.