 I'd like to welcome all of you to the Cato Institute for a special live episode of Libertarianism.org's Free Thoughts podcast. I'm Aaron Powell. I'm director of Cato's Libertarianism.org project. And I'm Trevor Burris. I'm a research fellow at the Cato Institute Center for Constitutional Studies. This is the first time we've done it here, live streaming. We've done a couple of live episodes before and Free Thoughts was started about 4th October of 2013 when Aaron and I decided that we needed to have a podcast that got more in depth into libertarian issues and actually asked the difficult questions that people really want to ask libertarians. So rather than putting someone like Michael Cannon, who's the director of health policy at Cato, into the chair and saying, tell us about section 209G of some law that's coming up, we wanted to ask Michael, what about people dying in the streets? Because that's the kind of questions that people want to ask libertarians and to get in depth to the ideas. So we're excited you're here today to see a live taping of a Free Thoughts podcast. And we're pleased to have Tom Bell as our guest today. He is a professor at Chapman University's Fowler School of Law. And he's here to discuss his new book, Your Next Government, from the nation state to stateless nations. Welcome, Tom. Thank you. Thank you for having me. So this is a book about the evolving nature of governments, about how governments need to evolve and to compete to better serve us. But that raises a question and it's one that doesn't actually get asked a lot when we're talking about policy, when we're talking about government systems, about how these things should be set up, how they should operate. And that's what's the purpose of these things in the first place? Like when we say they should better serve us, they should do a better job, what is that job? The job of governments. Yes. Let me first say thank you all for coming in to hear about my new book, Your Next Government. And I think Friends of Liberty will find it especially interesting because it describes this revolution currently sweeping through the world of government from the bottom up and the inside out all over the world. And it shocked me when I did the research for the book. I didn't know about this until I went and gathered the facts. And as far as special jurisdictions go, their job is to help governments do their job. Now what governments are for, you'll get different accounts, but I would say generally to refer to the Constitution, it's to promote the general welfare, secure the blessings of liberty, that's the Declaration of Independence. I read them together, they taught me this at Cato where I used to work as integral documents. And special jurisdictions help governments do that by setting aside small areas where you can try out special rules. When I was at Cato, I discovered, well, this is the way we did business, we were always aiming at reform sort of an inch deep nationwide, which is worthwhile. But when you do that, it gets everybody in the country kind of alarmed. And the beauty of special jurisdictions is it allows you to go narrow and deep. So in a little area, you change the rules a lot. If it doesn't work, it allows the government to try somewhere else. So it allows governments to give us more options in choosing the form of government we want. That's good for us and a long run it's good for government. It makes them more adaptable. They can serve we the consumers of government services better. Do you make a distinction between government and governance? Some people do, I don't know if you do. I don't have a hard and fast rule, but I do prefer to talk about governance because really what we should be thinking of is the governing services industry. You think about the postal service, right? They deliver mail. Well, so does FedEx, UPS. They deliver things too. We should look at government the same way. There's the federal government, state and local governments. They provide governing services, but you can get the same services in a private community frequently. Not everything. You're not going to get an ICBM from your HOA. But as far as like securing your property, allowing you to move freely in public areas, all the good things that we like from our local governments, you can get that from an HOA. At the start of the book, you make a point that we think about the question of what makes a particular nation rich. A lot of us point to natural resources. We point to maybe innovation or technology, but you think that that's wrong, that it's in fact the rule of law. I would have said what you're saying, Aaron, again, before I did the research for the book. If you had asked me, you could ask yourself now, what's the major source of wealth in the world? I think most of us probably think initially kind of silly, but we go to diamonds and gold. No, probably not. Real estate, maybe. Corporations, shares of corporations, maybe. No, it was the World Bank. The World Bank that convinced me otherwise because they did a big study, a whole book, about the sources of wealth. Very curious. I put together a chart in the book. The book has several charts which I can't share with everybody here now by the book. But the World Bank gives this information in the book and they never put it on one page. Scholars will note I had to cite two sources to put it together. Here's the short of it. The biggest source of wealth in the world, according to the World Bank, is the rule of law. 44% of the wealth in the world, the single largest source of wealth in the world, is the rule of law. And even I, who work in the law, didn't understand that at first. So here's a thought experiment to illustrate why that is a very plausible. You might have heard about the neutron bomb back in the day, the Reagan administration. The idea is if the Soviets invaded Eastern Europe we would explode these neutron bombs above them and it would kill the people with radiation but their clean bombs, relatively speaking, it would leave the buildings and the roads and everything else. I mean it's still killing people but it's better than leaving a burning radioactive wasteland. Well imagine we could create a law bomb and you explode this over a city and it doesn't kill anybody, it doesn't destroy any property, it's completely erased. So imagine you did this over New York City. New York City, big source of wealth. Some terrorist explodes a law bomb and people wake up the next morning. What would that be like? It would be very bad. Most of the wealth in New York would be gone just like that. Oh yes, there'd be buildings and cars and diamonds. That's not the real source of wealth in New York City. People would wake up and they'd go what am I going to do today? I don't have a binding contract to go to the office. Maybe I'll stay home. But wait, I got all this stuff here and I don't have any protection on my property rights. I better get out of here. Oh wait, I better stay here and lock the door. It would be a mess. It would be utter chaos. People would flee New York City and if the effects of this law bomb continued it would be a vacant wasteland. We can't live without law. I have to stress this for my libertarian friends. Actually humans love rules. We are rule following animals. What libertarians should stress and I think most of them are good at this, especially Cato is not, let's not have any rules, but rather let's choose our rules. And that's really what this is all about. Making government a service industry so we have more freedom of choice so government can get better. Does this book represent, because you work to Cato, you work to the policy world, you've done things to try and make government better, but are you kind of giving up in terms of working through government say do a better job trying to get out of the system? And I guess a secondary question that is if that's so, why aren't governments getting better? I think governments are getting better actually. I'm kind of, you know, I'm a congenital optimist maybe. So you can discount this as Tom's just a happy guy, lives in Southern California, gets a lot of sunlight, whatever. But I really do think governments indeed, if I want to push the point, the world generally is getting better. But I've not given up on traditional approaches. In fact I'm going to the hill after this meeting to talk to some legislators I guess who are interested in some reforms. That's not really what I do though. We need a diversity of approaches to reforming government. Keep sending in your money to Cato. I just sent them my yearly donation end of December and it's important to try to get reform an inch deep and a mile wide. Sometimes it works, sometimes it does. I helped to get rid of the ICC back in 96, it happens. But that's not where I think my services are best applied. I think we also need people like me in these small areas with deep reforms and I think governments are very receptive to this. Again it shocked me. I started researching this book. There's over 200 foreign trade zones in the United States where the federal government has said hey in these little areas no customs and duties. And it's not like people said to the federal government we have to have this. They did this and it was after the Smoot-Hawley Act because they realized oh no we just choked ourselves off from international commerce said the federal government more or less. Better actually institutes some liberalization in small areas. It's the same thing with other. Think about I've been working in Honduras and French Polynesia. These are all places where the governments have said we want to bring in foreign investment. We want to offer our population better forms of government. We don't want to reform. We can't reform the whole government. Let's try a small area at once. So yeah we need governments. Governments are actually very receptive to this. In fact I'll say to my libertarian friends you should look at this area of reform. Sure keep trying that inch deep mile wide stuff it might work but check out this new strategy. It might get you places that the old strategy won't. So one of the things I found really interesting about this book was you start with examples of this in action with special economic zones and these other real world we're doing these things here's competing governments or smaller governments with different rules but then you take a step back and you show how these examples and the value that these efforts have is based on a really interesting and I think powerful theoretical framework for understanding what they're doing. It's not just that we're doing something willy nilly but there's some meaning and ideas behind that. And so I wanted to ask a bit about that and I wanted to start with the idea if you tell us a bit about monocentric versus polycentric law and how that plays into the examples given in the book. Sure, so these are the kinds of things academics talk about. The question is sort of what's the big theory behind this? This is not the kind of thing lawmakers think about much and I think we should all be relieved about that. But we academics and those of us here we can think about this. Monocentric law is just a term used in the book. I didn't make it up but it's the idea is we have one source of government. This is traditional defense of goes back to Hobbes of the nation's status. We have to have one authority to iron out conflicts between people otherwise everyone will be at loggerheads. They'll settle their disputes with feuds. So it's nice to have a single sovereign over everyone who specifies a law and says we're going to use a metric system and we're going to have property rights and you're going to bring all your complaints to our courts. That's one approach to government and an extreme just one sovereign. And then at the other extreme polycentric law is basically many competing sources of authority often overlapping all of which together combine in any individual's life to govern their behavior. And I would argue we tend to think that we live in a monocentric government. It's very simple. That's the way the media presents the law to us. You know federal government they talk about the president running the country. It's absurd but it's simple. That's the way we often think about government but if you really look at the way you live your life especially in America there's many sources of law that govern your behavior. Of course you have local state governments also regulating your behavior but that's not the end of it. If you really take the law broadly as I do you think about it as really it's the process of governing human behavior through rules and that includes things like churches. Do churches govern behavior? Are they a source of law? I would say yes in a very real way. It could control what you eat at lunch today in a few hours. That's basically governing your behavior. So we have or you're in the Cato building and they say there's a sign here don't bring food into this auditorium. Kind of like a local law for Cato. So there are many rules from many sources that every day really govern our behavior and the idea with polycentric law is let's notice that let's celebrate that find good things in it if there are there's some bad things to it you know sometimes too many rules they conflict it creates chaos we need to find a happy medium. So the idea is let's look at these extremes monocentric and polycentric law and in the book I advocate of our third category of what I call autocentric law I think really at the end of the day that's what we should want not you shouldn't say I'm king we should have lots and lots of different rulers I honestly don't know the reason there's a question mark at the end of the title is I'm not I'm not certain your next government I don't know it's for you to choose that's what I see happening we're getting more and more choice in government it's a beautiful wonderful thing it's going to make us all better off but it also means we can't be certain what kind of government will end up with isn't it the case though that the kind of governing institutions like Cato umbrella thing above it because you could I mean I think most people would think that real polycentric law would be sounds kind of like anarchy would be like Mad Max you'd have the village with the bus that is the gate and you have the village with the gyrocopter and all that stuff and those are governed by different things but there's no overarching thing that would actually rationalize disputes between them and that's why we need the monocentric model well again that is you know that's kind of the story we're often told in graduate school actually it's a little sad but this is not the way it works I'll give you an example from the open ocean so there's no governing authority regulates the high seas and they are actually very rule bound areas for example if you're sailing a flagged ship and there's a ship into stress and it sends out a call for help under international law you've got to go render aid there's no sovereign standing in the background tapping its baton on its palm saying you better do this so why do ships when they're on the open seas they're bound by international law and international companies that provide shipping insurance and those international companies have said hey you want insurance from us you're going to have to follow these rules oh yeah who's going to force it to you in no we will you want to sail with insurance these are our rules now it's true I mean if you look at their insurance clause there's probably a choice of law and a choice of foreign provisions so there's a conflict with the ID but you know you could do that in private arbitration you could do it in Venezuela not Venezuela actually sorry I was just thinking about Venezuela lately let's choose a working country Germany so yeah it's sort of arbitrary and not necessary there's a lot of governance that happens without governments that's the one reason I prefer governance then how does the notion of consent fit into this because consent plays a role in your book and to a certain extent your book is almost like a call for more consent in governance how does this notion of having like one sovereign or lots of sovereigns relate to consent and why is consent so important when we're thinking about governments in the first place you're a daring man Aaron to ask me about consent because I have a background in philosophy and I risk running on a bit I try to keep it short in the book but I want to say I think consent is very important in fact I think after having debated this with many libertarians you can make a pretty strong case that consent is and should be at the core of libertarian theory and more generally the theory of government generally because it's sort of to me an ultimate moral value it's what you will agree to freely what you will consent to so that is kind of a a lodestar touchstone for governments governance yeah we should emphasize consent and we should try to make governments more consent rich one thing I take pains to emphasize in the book is that too many people think of consent as an on off switch they think of it as a binary relation you either consent you say yes or you don't consent and you say no when you work in the law for years as I have you realize there's lots of gradations of consent for example this is an actual case doctors come across a man lying unconscious in the street he fell off a street and they say you should pay us because we rendered aid was there a contract no the guy was unconscious did they get paid yes they did because there's this intermediary form of consent the guy did not wake up and say render aid but we say impliedly or hypothetically he did or would have consented probably here we'd say he would have consented the point I want to make is as I describe in the book so nice graphic for it consent comes in different shades those are some my cranky libertarian friends I say you got to loosen up a little too many of them say I never signed the constitution so it's not binding at all look I'm sympathetic to that line of argument but I just don't think it's realistic and it locks you in this position where you have nothing to say about improving government I didn't sign on the line not consensual not for me governments come in different flavors with different degrees of consent and the goal is to kind of climb this ladder of consent recognize the imperfections of our government I'm the first guy to do that but don't give up on it we can make government better if we keep trying to make it more consensual and special jurisdictions special jurisdictions can help us do that because when you move to a special jurisdiction you're choosing to move there when you're just born in the United States as I was I didn't really choose these laws they just kind of I stepped into them so consent is a matter of degree and more freedom more freedom in choice among governing systems can help us increase the amount of consent in our lives and that is a really good thing is there a relationship then between the size of government maybe in terms of its its scope and powers but also in terms of geography and consent because you said so we have more consent if there's a special economic zone and we can choose to move into it but for a nation as large geographically as the United States I mean you mentioned I think Hume's criticisms of the like love it or leave it notion of consent that it's awfully hard to move out of the United States you're giving up your career you're giving up your family you're giving up the culture that you know so is it does there come a point where basically governments become too big for meaningful consent to really function within them? That's a good question I would say there's a correlation but it's a loose one if I had a blackboard I would stand up and start charting this out but I think there's a trade off between size of government and how much government does for example I think most people could have agreed to a world government if it only did one thing and it prevented evil people from hurting innocent people and maybe we narrow that in a little bit more you know you could say something like no shooting of children how's that if that's all the government did we'd feel okay about it whereas if it's a very small local government suppose you live in a commune they tell you what to wear what to eat when to pray not for me could be for you that's okay it could be oppressive to me but you chose that you move to that commune that's fine so it seems to me each type of government could be equally valid but generally the larger governments because governments tend to metastasize and grow too big they tend towards doing too much but it's not a problem with bigness per se it's a problem with bigness combined with how much they try to do we did this though with the American experiment I mean we could say before that we had very non-consensual governments and since that we've had many non-consensual governments but well we did in America we wrote a constitution and then sent it out to the people to be debated by popular ratifying conventions some of which had larger rules of suffrage than even voting at the time and that was about as good as you could ask for in a realistic procedure to get consent so why would we use the American model as sort of a model of consent in that fashion I'm a big fan of the American model and I think as you said you said it so well Trevor that was state of the art in its day I mean more than we realize it's just amazing shocking you go back and you realize what the founders had as their precedence and there was a little bit they looked at the Swiss model of government they actually looked at the Koi and the Indian nations governed themselves they looked at how the Covenanters these religious groups would get together and agree to their particular religious communities rules but really the founders did some radical stuff yay but we can do better now and so my libertarian friends who have this this kind of hero worship of the founders I get it but you know I feel like they're kind of stuck in that era you should take the spirit of the founders really to me they said let's do as much as we can to make this government as consensual as possible and wow they did a great job but we could do better we could learn from their precedent and we now have technologies that they didn't have I don't know what they would do today but I think if they were here they would probably be very proud probably also appalled at what we've done with their experiment but they I think would say you know let's keep pushing forward let's make an even more consensual form of government I think that's possible and it would be a good thing when you're talking about this spectrum of consents you gave the example of you're injured on the side of the road you're unconscious and aid is rendered to you and so you didn't in any explicit way consent to it because you couldn't but in that case we give say called like hypothetical consent like had you been able to you would have and so we can assume you did how does that when we're talking about consensual levels of government so you've rejected the kind of hardcore libertarian view of I didn't consent to this therefore no it seems like hypothetical consent does a lot of work when we're justifying governments but what role does explicit non-consent then play because governments don't say so in the case of the rendered aid had you been able to say no I absolutely don't want you to help me out the people would have to respect that but if I say to the federal government no I absolutely don't want you to give me social security or no I absolutely don't want you to lock my neighbors up for smoking marijuana they still do it and so it's hard to then hook that on to something like hypothetical consent because I've been pretty clear right right wow there's a lot to say there I will say in the book I also talk about negative consent the spectrum of consent goes to the positive hypothetical consent is very weak we say well you would have agreed to this but I didn't but you would have but and it gets stronger to express consent I agree to that and negatively you can say too you would never have agreed to that would you you might say well I did and you can have you know hypothetical you can have non-consent expressed so all this is on the spectrum and I would say with regard to the conflict between hypothetical consent you should like this government you would have agreed to it and express non-consent I don't like it I think the express non-consent generally should win out I'm gonna say generally here because I'm a lawyer I like caveats if someone says you know the rule I don't like your government is I don't get to steal stuff and hurt people I don't agree to that you'd say well you better scram because we don't want your type around us civilized people so there's limits to this but I would say what we should try to do since you're right you're right Aaron that most of the time people use hypothetical consent to justify the jurisdiction of the United States they just say well you know you would have agreed or maybe implied consent love it or leave it I think there should be room for people to say I want to opt out of that so security thing not for me I expressly don't consent and our government would be more justified this would make our government better philosophically not just practically but we would feel prouder and better about our government people could say that's not for me I want to opt out and we should do that as much as possible I don't know how far we can take this I think so security certainly that wouldn't be that hard to say to you know have people opt out in many other areas people should be allowed to opt out so let's keep pushing that so people can express non-consent and have that really be effective if we did that it would make the remaining government more justified we'd be more comfortable in saying yeah, so security is a good idea because the people that are in it are here by choice they didn't opt out that's not what we have now I wish we did you make an interesting claim when you discuss the constitution which seems to apply to pretty much every government on the planet that you can treat those constitutions like quote a legal document that most resembles a standard form agreement offered by a large, powerful person to its many relatively powerless individual subjects now having been to law school and Aaron also went to law school this sort of contractual difference of force and size of the parties which creates a problem in many contractual situations it seems that when you talk about things like HOA is what you bring up as a possibility of a form of government so you bring up Highlands Ranch, Colorado which is right next to where where I grew up in Parker, Colorado which is in Highlands Ranch which is a massive growing blob of tract housing and you kind of cite that as a private community but I can guarantee that if you went up against the Highlands Ranch HOA they would beat you into a pulp like most HOAs would so with that same That's not literal I mean not literally beat you into a pulp but you would not have pink flamingos on your yard you would not be able to paint your house the color you want isn't the way to interpret an HOA contract very similar to what you say here a very large group of thing against an individual and we have this huge negotiating power differential so we should invalidate those contracts too Well, yeah you're asking a contract again, you too Trevor likes to take risks he's asking a contract professor about adhesive agreements I'd say it's a question if you agree it is true the HOA has more bargaining power I guess than a homeowner although apparently there's a nice neighborhood right next door to Highland, Colorado you don't like it Highlands Ranch Yeah, you can just stay one mile away so you know how much power do they have but once you agree to those rules as I understand it I've lived in HOAs they're pretty strict about it you don't have the same choice though with regard to the federal government you can't move one mile away no labor code for me thanks I'm just going to move over to Maryland where you don't have it just doesn't work that way so it's a question of degree but you're certainly right and I'm glad you told our listeners and our audience about my approach to constitution basically I think we should look at it in a way very much akin to the way courts already look at standard form agreements if you sign a rental car agreement you know for something and there's some fine print in there you have a dispute with them courts look at it very skeptically they don't have as much skepticism it seems with that's right their employer the federal government federal courts don't seem to be quite as skeptical and by the way I bring that up because here's the thing let's go back to the rental car agreement so this is a question of degree some of these standard form agreements are more oppressive than others it depends on a number of circumstances suppose you sign this rental car agreement with Hertz say not to pick on Hertz but just Hertz rental car and they had a clause they said if you have any disputes with us it's going to go to private arbitration okay it's pretty standard oh and the case will be decided by the CEO CFO and COO of Hertz no government court would uphold that provision any government court would say that is facially unfair there is no way you have to go to that arbitration case closed bang first amendment case you're suing the government oh yeah I'll hear that this is the same judge when they she looks at her W-2 it says U.S. federal government and she is now going to hear the case against the federal government I know what you're thinking you're thinking probably the same thing Hobbs thought we have to have an independent party to resolve these disputes someone who's objective agreed but it doesn't have to be the government so here's my proposal made in the book I call these citizen courts any time you me anybody against the federal government or state government any government you should go to arbitration private arbitration shouldn't be in government courts no government court would let the private sector do that but they got a special rule for themselves and if you're wondering how you do this it's actually pretty simple suppose I have a fight with Aaron he chooses an arbitrator I choose an arbitrator those two arbitrators choose a third arbitrator that panel of three judges is pretty objective it's balanced I don't know why we don't do this for cases against governments I like to think it's because no one suggested it before problem solved all right so I hope you guys will hop on that I'm an academic but some of you make things happen please fix that problem because that's one reason the American experiment is kind of gone in the ditch courts have driven it there over many years because time and again you got government employees deciding cases against the government and what do they do time and again talk to some people here in the building and it's not getting better and it won't get better as long as you have that non disinterested judging the judicial power of the United States shall extend to cases and controversies arising under the constitution of the United States and its treaties and statutes so that's why we do it oh that says the courts can decide the cases there's nothing in there I looked at that that says only those courts can decide those cases and indeed federal courts often use arbitration it's quite common in some civil disputes in fact many government systems say please go take your right oh you didn't mediate alright go arbitrate they keep pushing off much litigation oh but if it's a first amendment case it comes straight to the government court I don't see why that's necessary it's not in the constitution it's not good policy it needs to be changed so before we turn from theory to practice I hope you can indulge me with one last theory question namely you see you've advanced this what you call your contractarian theory of constitutional law and constitutional thing at Cato we talk about it a lot it's a big thing among libertarians and so to get it what that contractarian theory looks like I was hoping could you maybe tell us a bit about how it's different from two of the other big schools that you discuss in the book with originalism and living constitution oh thank you Aaron this is an issue on which I'm almost all alone most libertarians and constitutional theory think the way we should interpret the constitution when the language isn't plain and it isn't always is to go back and try to figure out what the people who ratified the constitution thought it meant at that time that is originalism very popular among libertarians it's a mistake my friends I'm here to set you straight let's set out the other school of thought libertarians have done this because they've only seen it's either originalism is a total train wreck because what does that say? it says what does the constitution mean? let's hand that over to some experts who wear robes on the supreme court we're going to let these nine justices kind of look at their own institutional navel their own precedence and we're going to trust them to figure out this language and somehow they're going to be in touch with what the people in the streets what the people in the streets need and want and should have and we're going to trust these justices to interpret the constitution things like Gonzales vs. Rage which said it's the federal government has the power to regulate you growing and smoking your own dope in the privacy of your own home that's interstate commerce that is not consistent with the plain language of the constitution but there was wicked a supreme court precedent that led the court to say well you know we have our precedent we're the experts we're going to be bound by that so living constitutionalism not so good for liberty now what's my complaint there I will admit originalism is probably better than living constitutionalism on many issues because the founders were much more libertarian than the supreme court justices however it gets you in some very awkward positions Justice Scalia may rest in peace when he was still living he was a foremost originalist he admitted in public there's a clause the cruel and unusual punishment clause fourth amendment that no cruel unusual punishment shall be inflicted now Scalia hey Scalia you're originalist what does that mean well it means what the founders thought it meant so back then they thought it was okay to lash people that was routine criminal punishment you put them on a post and you whip them is that cruel and unusual so Scalia had to come out honest man bless his heart he saw where his theory went he said yes that would be constitutional under my theory we're not sure what cruel and unusual people now maybe some of you think that's okay today I think most people in America today would say that is sick there's no way we're gonna do that originalism Scalia said yep that's constitutional it's stupid he was quick to add I'm not advocating that as a matter of public policy but it's in the constitution so that's a problem with originalism the founders didn't agree with us on many things contractarianism is the third better way if you're a friend of freedom and it says let's read the contract offered by an all-powerful immortal institution the most powerful institution arguably history has ever known and it's gonna be you and me as individuals against the federal government that is not a fair fight we know how we would read that contract offered by Hertz-Renekar a court would read it very skeptically we should do that with regard to the constitution and when we come across a phrase they're well-educated they're very rich these days they're held up like you know stars they live in a different world from you and me I don't trust someone who lives in Georgetown to tell me what cruel unusual means I don't think it's gonna jibe with what common people think and we don't go back to the founders great men in their day long past we gotta do things our way we should ask what cruel and unusual means to people who have to live under that rule and it's better if you want to figure out what the founders thought you gotta go do historical research and guess what historians don't agree I'm sure there's probably a historian there saying well they didn't brand much it really wasn't that common are we really gonna have to have that fight let's not do that we can do it very simply under contractarianism you can do a poll you say hey all these people have to live under the constitution what do they think it means here's a test I like to apply actually imagine you're an immigrant moving to the United States you can read good English and you pick up the constitution and read it and you see cruel and unusual you should be able to say I know what that means you shouldn't have to go read a bunch of Supreme Court opinions you shouldn't have to do a bunch of historical research you should be able to trust your gut we should cut every we should give you the benefit of the doubt cut the slack in your direction so that is the third approach to constitutional law again haven't heard people say they'll learn originalist is old school this is a new better way we should adopt definitely old school as an originalist I feel that I have to defend it but I'm actually going to move the conversation to more of the actual I just want to say I'm not if anyone's mad that I'm like letting all that lie we're going to move to the special economic zones and Honduras being a gracious host is still an originalist you'll learn so let's talk about some of the things that are happening so we've talked about problems with government about reading government agreements that exist about what happens in government about the lack of choice and consent what sort of things are occurring you mentioned fair trade free trade zones foreign trade zones foreign trade zones so first of all where like where is one I mean would I just find myself in Salina, Kansas and just be like wow it's a foreign trade zone all right so this is another of those things I didn't know about has a number of what we could call special jurisdictions there's over 200 active ones and they're called foreign trade zones these are very common at all major ports and also in very obscure places every state including landlock ones and Puerto Rico has a foreign trade zone because you can put them at airports too what does a foreign trade zone do basically goods coming into a foreign trade zone are not yet in the United States for purposes of customs and duties trade zones are actually behind chain link fences locked doors they're kind of watched over by customs to make sure stuff doesn't go in and out without approval but basically I'll take an example there's probably one in D.C. but I live in Southern California there's two of them in the LA area the Port of San Pedro and the Port of Los Angeles so you bring in a big shipment of bicycles from China on a big a big ship ship and those even though they are offloaded at the Port of San Pedro are not in the United States so you don't have to pay any customs and duties so you might put them on smaller ships and send them down to maybe Peru and send another ship over to Canada and you don't have to pay anything you're able to bring those bikes into the country maybe process them add brakes and things and ship them out again that's great for purposes of trade there's over 200 of these in the United States and that's just an example there's other types of zones in other countries but that one's close to home zones are everywhere you just don't see them they're not talked about much and that's what the books about what's the benefit to the United States government for setting those up or allowing those well I think you could argue on net and some scholars have that it's on net actually not good but the argument made for foreign trade zones is and again this was in the wake of the the acts at the beginning of the 1900s that clamped down on foreign trade more freely basically it's encourages you know trade about 600 billion in exports goes through these FTZ's every year about 6% of all exports in the United States go through FTZ's and the argument is oh look we created this exemption for customs and duties and there's all this surprise surprise lower price all this economic activity and the longshoreman who works at the support of San Pedro goes back to Corona where he lives and he takes his paycheck and he spends it and the whole that is the argument now the economist among you and policy wonks will see some holes in the argument but that is a facially good argument for foreign trade zones and they're very popular no one really is criticizing them nobody even talks about them now what about in Honduras you've done work in Honduras and there was one iteration of something even a little bit more quote unquote extreme than a foreign trade zone to free up law and enterprise and just making better zones for humans in Honduras which is not a terribly efficient country right now they have their problems I'm glad you bring it up Trevor there's a whole chapter in the book called stories of the sort ordinarily recounted over drinks because a cool thing about this area of law is it's gotten me from behind my computer and out of my office and into the field so I've been to Honduras I've been to French Polynesia I've worked with countries and parties all over the world and it's been so exciting and interesting Honduras has written into law a provision for special jurisdictions that is among the most advanced it's probably the most advanced in the world they're just now starting to implement it they were very close to implementing it when they had the recent troubles in their most recent election which right now is being resolved in the streets with riots it's Honduras it's a complicated place but their country subject to oversight and never escaping the requirements of the human rights protections Honduras on paper allows its citizens the Honduran constitution continues to apply in these zones however these private parties in the zones can have their own civil law system their own educational system social security system basically they can do their own government except for things like national defense you still have to fly the Honduran flag the Honduran criminal code will continue to apply in these zones but it will be enforced locally with oversight there can be a penitentiary system privately run and operated in these zones with oversight Honduras are not going to let you create a slave camp but they're going to trust these foreigners with oversight to run these zones basically the governments will be able to be built from the bottom up almost to the very top they haven't implemented it yet but when and if that happens that's going to allow a lot of experiments in government and it will hopefully reveal to the Hondurans in the world better ways of doing it why wouldn't Honduras let you create a slave a slave camp? because I mean a lot of governments do let people create essentially slave camps so why are you so confident in a government that is currently in riots as you said it's going to be really good and making sure that no one creates a slave camp well you know I've been Honduras and met a lot of Hondurans creating slave camps and they can do a lot of bad things for sure I'm not calling them angels but you know every different culture has its own kind of you know downsides the way it can go wrong they could do terrible things but the reason to take your particular first of all I just don't think culturally that's going to happen there but they could do things wrong and the reason it won't happen is for a number of reasons one is the whole world is watching two the Hondurans say on paper and I believe them they say you know you're going to have to obey the Honduran constitution for human rights and if people in your Zedes they're called in these private communities they allege violations of human rights you're not going to go to a Honduran court you're not going to go to a local private court you're going to go to an international court for human rights and there's other mechanisms in place this is a very well thought through system I will credit Octavio Sanchez he's a Honduran he grew up there he's got some he's just a brilliant man and I've met him and he won't take credit but I'm going to give him credit there's also I'll give you another there's a body called camp that's from the Spanish acronym but it's a committee for adoption of best practices it's a body of 21 mostly foreigners appointed by the president of Honduras to actually act like a board of trustees for these communities so there's many layers of oversight and double checking does it mean it'll work I don't know they haven't done it yet it's an experiment worth trying they in good faith have tried to set up a system where rights will be respected and people can face and generate prosperity and I think it's worth a try I won't pretend they have it all figured out but their way ahead everybody else so let me ask I guess a variant of my my prior question so what you're describing in Honduras there are similar things in other parts of the world where government has carved out spaces and said you can use different economic rules here different fiscal rules here what's the incentive for governments to do this and allow this in the first place because say if this Honduras experiment works really well if the enthusiasm that you have for these kinds of things ends up being warranted then isn't that just going to show the people of Honduras that their government wasn't really that great like they're just going to want to turn the whole country into one of these things which seems like that's a loss for the government so why would government for the people in the government right so governments and especially governments that don't run terribly well to begin with want to allow these kinds of things good question well let's use a couple examples foreign trade zone why did the United States decide initially they said we love customs and duties we get money from that why would the federal government back off of that because they see other gains they see that oh well we'll actually come out ahead and tax revenues maybe because we'll tax the income of that longshoreman when he goes back home in Corona $70 million you can bring out those kind of numbers that's possible and Honduras there the problem is getting foreign investment and Honduras you know you got to be realistic working in Honduran government they had conversations a bit like this boy I wish we had foreign investment me too why aren't we getting it have you looked at our say our murder rate lately Everybody, you can't trust the courts. They'll throw the case to whoever pays them the most money. That's why people won't invest here. This is happening in a government office. They're having a conversation. Well, how do we get that foreign investment? We're going to have to let them do something different. It's not like governments are eager to give up power, but it's really, if you set it upright, a way that the governments themselves see they can come out ahead. We'll have more tax revenue. Ultimately, the end of the day we'll have more power by setting aside these small areas where we actually ease up a little bit. Now, you might and you should ask, well, what happens if that's a big success and it takes over? Some people in government say, that's actually what I want to have happen. I've been trying to reform this government from the inside forever. There's lots of good people in government want to make it better and they can't. It's just hard to change government an inch deep a mile wide. But when you have an experiment that works, we'll use the Chinese example, Shenzhen. You know, they're literally dying by the millions, tens of millions under mouth. People are eating grass, they're eating each other. Communism doesn't work. They look over the fence at Hong Kong and they go, they have among the highest per capita incomes in the world and they're just as Chinese as us. Same language, same people, same climate. That is China with what? Better rules. So in Shenzhen, right across the river, they implemented this zone and it worked and then it spread throughout the country. Now, maybe someone who was a Maoist in China would regret that, but I bet if you talk to people in government in China today, they would say that was an awesome thing that happened. We actually now have more power. We're able to, we have tax revenues, we can buy big military, they can do all kinds of stuff. And the Chinese people came out ahead. They were lifted out of abject poverty from famine to become basically a lower middle class country and they're on the way up. And I think we can credit special jurisdictions for that. I'd like to see that happen in America. That's a place where we can learn from the Chinese. If we could have special jurisdictions like the Chinese had them, ones that were big, had populations, special rules, we could learn from that. And people in government should welcome that because it'll bring them revenue and we should welcome it because it'll bring us freedom. You also discussed seasteading in your book which is not even just using the land that already exists but making floating islands now. I've seen Waterworld, so I have an idea of what it's like when people live on and I've seen Pirates of the Caribbean too, which is similar. Why wouldn't that be what seasteading is? I mean, so first of all, pirates are a problem in the world's oceans and I mean, we really get to build islands and live on them. First of all, does anyone want to live on an island that's like a water bed all the time? I don't even like water beds, so. Maybe that's the biggest problem but tell us a little bit about seasteading and then whether or not people will actually live there. Oh man, Trevor, okay. Pirates and a Waterworld and a Waterbed. Well, what do I want to say about that? I wish the seasteaders had problems with pirates. Right now, we're just trying to get one or two platforms floating in a lagoon in French Polynesia and we don't need to worry about pirates there. And you also, I'm not gonna need to worry about the Waterbed effect. We got our engineers working on these platforms, they're big, they're like a size of football fields and it's gonna be in a lagoon. A nice lagoon, I've actually gone scuba diving there. It's got coral and everything, it's really nice. Yeah, so I wouldn't worry about that. Seasteading, I'd say right now, we're taking baby steps towards the ultimate goal, which is being on the open oceans, flying our own flags and being really free. That's not gonna happen tomorrow. Maybe then there'll be pirates, but look, I mean, what's gonna happen if you're on the open ocean and this is your home, you're gonna have some pretty big caliber machine guns if you're worried about pirates. You're gonna- Waterworld, yeah. Waterworld. They didn't do it very effectively in Waterworld, did they? I mean, I'm guessing from what I saw at Universal Studios, they have like a Waterworld show there. They look very violent and explosive. And that's about as credible, frankly, as Waterworld is a source. Anyhow, I don't worry much about that, but if you worry about that, I'll say let's revisit this in 15 years. If you're worried about pirates and Waterworld, we're so far from that. Please, let's just try to have a few floating platforms in a lagoon in French Polynesia and a special jurisdiction and see if we can get some of the technology ironed out and a little bit of the governance and baby steps. We'll get to that bigger, the bigger issues that come with more freedom later. I hope we do. Right now, it's nothing to worry about. So the examples that we've discussed so far of smaller governments or competing governments or startup governments have all been geographical in nature. We're gonna have, we're gonna build an island or we're gonna carve out some port or some special zone. But is there space to realize the vision that you articulate in this book in non-geographical ways? Like I'm thinking just technology enable us to maybe have competing governments or overlapping governments or pick and choose our governments without having to be tied to a particular geographical area. Oh yes, definitely. I think we can look at blockchain technology, Bitcoin, Ethereum, other cryptocurrencies as an example of people non-geographically opting out of government monetary systems. That's a very concrete example. There's other examples people are trying to make real, for example, using blockchain technology to keep track of title to property. That hasn't been implemented as fully yet as cryptocurrencies, but it's definitely foreseeable. So I'll just say, yes, I don't talk much about that in the book. I got my hands full with geographic jurisdictions, but I think there's a lot of room for growth and freedom in non-geographic special jurisdictions too. You discussed something called Ulex in the book, which I think you've drawn a very interesting parallel between open-source coding and open-source law. And you compare the US code, which is about as impenetrable as maybe Apple's unattainable back-end coding for iOS or something, but the US code, the administrative law code, all those things, that's proprietary law. And what we need is open-source law. What do you mean by that more specifically? I guess the best way to explain this is using analogy with computer science and its history really quickly. So because coding is coding, right? Computer programmers write rules and it tells computers what to do and legislators write rules and it directs what people do. I know people aren't digital chips, but it's an analogy. If you look at the history of computing, they used to write an operating system uniquely for every mainframe they built because every computer was the first one of its type. So they would write an OS for it and then they build another new computer and they write a new OS. These are very simple machines. And then at Bell Labs in 1970, they came up with a very clever idea. Why don't we write an operating system that you can use across computers? And governments are just now getting there. Governments are mostly back in the battle days of computing. We've got the United States, we write here an OS for the United States. Well, here we're in Canada and we write an OS for Canada and every nation state has its own OS. Most of it. Places like Dubai, Hong Kong, kind of imported software from somewhere else. In Dubai, they said the common law of England and Wales will dictate our financial transactions in the Dubai International Financial Center. That's why you've seen all those skyscrapers go up in the Middle East there. So what Ulex does is it takes that evolution one more step. Computers went from operating systems that operate across computers to open source software. You got proprietary software, Microsoft Windows, Apple's OS, but open source software kind of lays open the code and says here it is. Anybody can read it, anyone can use it and download it, manipulate it. And that's what I've tried to do with Ulex. Collect a bunch of legal rules, lay them out. I'll give you an example. You wanna have contract law in your special jurisdiction? You can use the restatement second of contracts. This is put out by the American Law Institute, a private body, not a government body. And it basically sums up the common law of contracts in this really neat little package. And I just took that off the shelf and plugged it into my legal code for contracts. When I needed torts, I used the restatement of torts. When I needed corporate law, I used the Model Commercial Business Association Act, which is the majority rule in the United States. So basically Ulex tries to do for governments what open source software like Linux, which by the way is the most popular OS in the world because it's on your Android phones, Linux has done for computers and smartphones. Do you think that we should eventually take that analogy even further? Because it's not just that open source software projects are here's the source code you can look at it and do with what you want, but that the community can then contribute back into the source code. So do you think that we should have legal systems where there's mechanisms for people to change them? Should we turn our constitution into a wiki? Absolutely, absolutely. We should have something if you know about GitHub. People play around with software on GitHub and it allows you to have a piece of software and then people do little branching things. And well, I don't like this part, I'm gonna change this. And then people do variations on that. And it's all documented very carefully so you always know what version you're using. And yeah, I would like to see that. So the idea is I've already got up to version 1.1 of Ulex. So the modifications have already started happening and I'd love to put it out there and let maybe CSTED or say, well we're gonna run Ulex here but we need a little bit of maritime laws. We're gonna do version 1.2 for CSTEDs. And someone over here will say, well we wanna set up in a civil law country, a Ulex and we need to have special provisions because we're used to the civil law versus the common law. We're gonna do Ulex 1.4. And they can do that on their own and I'd love that and they can adapt it just like Linux is adapted for different platforms. Yes, that's exactly how it should go. So we look over, you want government to be updated, you want rules to get better, you want to be evolutionary, you wanna have open source law, you want people to be able to try new things out, have right of exit. And I think a lot of skeptics will look at this and say, who's gonna be doing this? They're gonna be corporations and powerful organizations, they're gonna be setting up, especially economic zones in Honduras or what you call United States, especially economic zones, possibly throughout the United States, sort of a version of the Honduran one throughout the United States. And a lot of people would say, what's gonna happen there is basically company towns of 1885. We're gonna have, that's polycentric law, we're gonna have, you're gonna go in, you're gonna be ruled by the company town, the company rules, only shop at the company store. And it will be oppressive because the people will not be adequately represented because they don't only have adequate options in the way that to get exit and all those problems still exist. So what would you say to this idea that you're advocating will ultimately be a more oppressive system? I'd say it's a valid concern. I'm not one of these libertarians that say, well, it's private, it'll be fine. No, I actually have examples in the book. I discussed Fordlandia, it was a project by the Ford Motor Company to create this huge development in the Amazon Rainforest, a huge private city, utter disaster. Just because private people are running, they're people, they're the same as public servants, they can get things wrong. So valid concern, what should we do about it? First notice it and then read the book. The whole third section is about practice and I've worried about this myself. And so I advocate a number of mechanisms to avoid those problems. For example, citizen courts. We gotta set these organizations up so even if a corporation is running the town, when you have a fight against the corporation, you don't go to their courts. You have an independent adjudicative body. Freedom of exit. Again, I will say these are situations the governments have invited these projects. I'm not saying get rid of governments. I'm saying work with governments, so as in Honduras. They're gonna be looking over the fence at your Z-A saying, what's going on here? If there's a human rights violation, you're gonna go to this other court. We're gonna have this camp acting as a board of trustees to oversee what you do. You can't have your own criminal code. You can't throw people in jail because they have the wrong religious views. That's not in the Honduran criminal code. It's not a quick answer because it's a hard, complex problem. But I think people of good will who are informed can foresee these problems and safeguard against them. And because there'll be lots of experiments going on, if one of them blows up like Fortlandia, we go, whoa, let's not do that again. Let's look at the successes and replicate those. So we talked a lot of theory today. We've talked a lot about examples of some of this theory in practice, but maybe to close, could you tell us, looking forward the next 10 or 20 years, what most excites you in this area? Are there particular projects that you think will turn out really awesome or lead the way? Are there particular changes in what governments are doing? Like what just fires you up about the notion of our next governments? Oh, wow, I could go on and on about that. I will say keep your eyes open for the Institute for Competitive Governance. Institute for Competitive Governance. It's a new organization. I've started up with some fellow travelers, which aims from an academic point of view to study these phenomena, encourage white papers. Maybe we can work with Cato to do some things. So that's exciting to me as an academic. This is a whole new growth area. Like I said, when I started researching this, it was new to me. It's very exciting. I want other academics, people who disagree with me, please to get into this and reveal things to me and debate. I think that'd be great. More concretely, what do I foresee happening? I hope the Hondurans that days will happen. Right now we're in a tough spot in Honduras. There's a lot of turmoil there. It's not unknown to Honduras, which is why they want these zones. People in Honduras can see the way the rest of the world is run and they are in anguish about the way their government is run and they want to do it better. They want a chance to do it better. So hopefully that'll kick in and places like Honduras will be like China. The people in Honduras are really suffering under their government now. Like the people in China once did. If we could do for Honduras and other countries who follow their example, what happened in China? Wow, that would be great. That's very exciting. Seasteading, very exciting. There's a number of reasons I like seasteading. It's kind of cool. It's kind of sci-fi. I like the ocean. People love it. They just, they get so wrapped up in these images of floating cities. And I would like for their dreams to be realized. I think sometimes they're wildly unrealistic, but I'm sure you can say that about a lot of my work. So that's fine. I'm also interested in some interesting financing models that fellow travelers, I can't say a lot about this yet because we haven't gone public, but fellow travelers and I've been working on allowing for the use of, I guess I could say, ICO type funding mechanisms for private governance projects. So to give you an example, the idea would be something like, suppose you find Puerto Rico. It's a place I've been looking at lately and you say, oh, they really need some help. If they had something like a special economic zone in Puerto Rico, it could really help them out a lot. It's going to take money to do that. Maybe we could raise that money publicly through an ICO process. And if we had a big pool of money, guess what? Things happen when you have money that don't happen when you don't. If you could go to the governments of Puerto Rico and the federal government and say, look at all these people who have money they're willing to put into a special jurisdiction of Puerto Rico. You're interested now, that would make things happen. That wasn't available to us in the past. These new models of raising funds can let us tap a lot of people all over the world who would like this for both financial and ideological reasons to happen and money makes things happen. So I want to see that happen too. Free Thoughts is produced by Test Terrible. If you enjoyed today's show, please rate and review us on iTunes. And if you'd like to learn more about libertarianism, find us on the web at www.libertarianism.org.