Rick Weber

Over at A Thousand Nations, they proposed an idea I hadn’t thought about before: for-profit countries. It’s a wonderful idea, because it turns a political relationship into a market relationship based on property rights and mutual gains from trade rather than some mystical concept of citizenship. I certainly think it’s worth a try. The real beauty of the idea is that it would incentivize efficiency. Rather than gaining by having a monstrous tax agency (Jobs!), they would be losing. They would have incentive to reduce costs and they would be rewarded for doing so.

So how large would a private, for-profit country be? This would be decided in the same way as the size of a firm. Countries that provide a lot of services will depend on finding people who want that specific mix of goods and services and would probably be smaller than other countries. Countries that provide the bare minimum of services but instead allow a market to provide what people want, will be able to find more people. In both cases, there will be certain economies and diseconomies of scale pushing them to the optimal size.

A for profit country would be as big as is economically beneficial. If these countries were federal, they could get larger than otherwise, but would still be constrained by profit. Another wonderful feature of such countries, is that war wouldn’t be a matter of politics, but would have to be attractive to shareholders, and so it would be highly unlikely that these would be aggressive nations, thus lowering their cost (defense is cheaper than offense).

We should heed Hayek’s advice: “If we do not know the rationale of a particular rule, as is often the case, we must try to understand what its general function or purpose is to be if we are to improve upon it by deliberate legislation.” Let’s not privatize all the nations in the world tomorrow, but let’s experiment with the idea and see if it works as well in the real world as it does in theory.

Related posts:

1. What if all the countries undertook protectionist measures?
2. For-profit colleges: Do they shortchange students? – CSMonitor.com
3. Secession is the right thing to do!

Tagged Competition, Governance, secession week