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The Coasean Republic

posted by Adam Levitin

At times I've joked to my classes about the possibility of a Coasean Republic, a state I call "Coase-istan" (or perhaps Kosistan), in which the entire world operates via private ordering.  In Coase-istan, government does, well, nothing except put service provision out for private bids.  Mail would be delivered only by private express companies like Fed-Ex.  Prisons would be privately operated. Executions would be contracted out to the highest bidder. Food and drug safety would be policed solely by private litigation, which would, of course, all go to arbitration. Deposits would be privately insured, if at all. Taxes would be collected by tax farmers. The borders of the Coasean Republic would be protected by an army of mercenaries. Health care or transportation? Pay your own way. Want to buy a baby or enter a lifetime personal service contract? Go right ahead. 

The constitution of the Coasean Republic would, of course, enshrine self-evident truths such as revealed preferences and the absence of transaction costs or resource constraints.  Once one dismisses the rest of all possible worlds, one finds that this is the best of all possible worlds.   

Now, it turns out that the joke's on me. Sandy Springs, Georgia is well on its way to becoming the Coasean Republic. Well, let's hope that Tiebout competition works. 

Comments

It is incorrect to refer to the absence of transaction costs as Coasean. Coase himself was always careful to point out that transaction costs are generally not null, and the correct solution of a problem in the presence of transaction costs might be very different from its solution in the absence of transaction costs. His contribution was to focus attention on the importance of analyzing transaction costs. It is his poorly educated students who think that there are none.

You've just described the late period western Roman Empire.  Whether the fact that Rome was sacked for the first time in almost 800 hundred years by a disgruntled Roman mercenary in 410 is a statement about the efficacy of a Coase-istan state is an open question.

This was known as the Lakewood Plan in California.

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