Non-Territorial Decentralisation

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Jason Potts et al.:

"One of the main contentions of non-territorial decentralisation is that it corresponds to a political-jurisdictional order in which the alignment of citizens and policies is optimally efficient (MacDonald 2015). That is to say there is allocative efficiency in the provision of political goods; no citizen would be better off by moving between jurisdictions and no groups of citizens would seek to form new jurisdictions with new policies. This in turn means that non-territorial decentralisation reduces, or in the limit entirely eliminates, ‘fiscal exploitation.’ Individuals or groups pay the average cost of political good provision so there is no scope for fiscal redistribution (i.e., no transfers), and the bundles of political goods match the preference-cost valuations of all citizens (i.e., no forced consumption of non-preferred political goods).

Conversely, when there is fiscal exploitation some subset of the population of citizens is either:

(1) paying above average cost for their preferred bundle of political goods with the resulting fiscal surplus being transferred to others; or

(2) forced to consumer a non-preferred bundle of political goods (or elements within that bundle) at a non-exploitative tax price; or

(3) getting some combination of exploitative tax prices and non-preferred policy bundle elements.

Thus if a political-jurisdictional order is not yet allocatively efficient—and some subset of citizens is being fiscally exploited—the process of non-territorial decentralisation should see taxes converge on average costs of provision, fiscal surpluses disappear, and transfers cease. Moreover, non-territorial decentralisation is a process of jurisdictional proliferation. For instance, a unitary, exploitative state would be decentralised along functional and personal dimensions to form overlapping constellations of citizens in which political preferences were homogenous and political goods were non-discriminately financed and provided. So non-territorial decentralisation is characterised by both resistance to fiscal exploitation and jurisdictional reorganisation—where the purpose of the latter is to underwrite the former." (


  • Article: Cryptosecession and the limits of taxation: Towards a theory of non-territorial internal exit. By Trent J. MacDonald & Jason Potts. PUBLIC CHOICE SOCIETY CONFERENCE, March 2016