Polycentricity and the Theory of Order
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POLYCENTRICITY AND THE THEORY OF ORDER by Ion Sterpan A Dissertation Submitted to the Graduate Faculty of George Mason University in Partial Fulfillment of The Requirements for the Degree of Doctor of Philosophy Economics Committee: ___________________________________________ Committee Chair ___________________________________________ ___________________________________________ ___________________________________________ Department Chairperson ___________________________________________ Program Director ___________________________________________ Dean, College of Humanities and Social Sciences Date: ____________________________________ Summer Semester 2017 George Mason University Fairfax, VA Polycentricity and the Theory of Order A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy at George Mason University By Ion Sterpan Dissertation Chair: Peter J. Boettke, Professor Department of Economics Summer Session 2017 George Mason University Fairfax, VA Dedication To S.T. ii Acknowledgements As it is usually the case with doctoral research, this too reached its end due to other people’s inspiration, free giving and stable support. The trails I followed, and the way I did, were shown to me by Mihail Radu Solcan, Dragos Paul Aligica, Peter Boettke, Richard Wagner, Raluca Alecu, Dragos Bigu, Alexander Cartwright, Jim Caton, Christopher Coyne, Erwin Dekker, Mircea Flonta, Zhilong Ge, Tudor Glodeanu, Laurentiu Gheorghe, Cameron Harwick, Adrian Paul Iliescu, Mary Jackson, Cathleen Johnson, Roger Koppl, Peter Leeson, Jayme Lemke, Lotta Moberg, Mike Munger, Olga Nicoara, Jim Otteson, Marian Panait, Irina Papuc, Milosz Pawlowski, David Schmidtz, Emanuel Socaciu, Monica Somandroiu, Gheorghe Stefanov, Ilie Sterpan, Ioana Sterpan, Monica Sterpan, Virgil Storr, Rev. David Subu, Vlad Tarko, Radu Uszkai, Horia Terpe, Constantin Vica. Many others helped during and around the time of my fellowship with the F. A. Hayek Program for Advanced Study in Philosophy, Politics and Economics at George Mason University. I started early, when my sister Monica formulated a long term option for me with the help of a newspaper and four textbooks for older kids. iii Table of Contents Page List of Figures ................................................................................................................................................vi Abstract ........................................................................................................................................................ vii Chapter 1 ....................................................................................................................................................... 1 Transitions to Open Access Orders and Polycentricity .................................................................................. 1 Introduction ........................................................................................................................................ 2 The mainstream approach to social order .......................................................................................... 3 Weaknesses in the mainstream model of transitions to open access orders ..................................... 7 A polycentric model of transitions to open access orders ................................................................ 17 Directions for future research ........................................................................................................... 27 Acknowledgements ........................................................................................................................... 31 References......................................................................................................................................... 32 Chapter 2 ..................................................................................................................................................... 39 The Autonomy of The Political within Political Economy ............................................................................ 39 Introduction ...................................................................................................................................... 40 The Political Relegated to the Background of Political Economy ...................................................... 45 The Political Brought to the Foreground of Political Economy ......................................................... 50 The Source of the Political ................................................................................................................ 58 iv Closing remarks ................................................................................................................................. 72 Acknowledgements ........................................................................................................................... 75 References......................................................................................................................................... 76 Chapter 3 ..................................................................................................................................................... 81 The Use of Knowledge in Governance Systems .......................................................................................... 81 Introduction ...................................................................................................................................... 83 All governance systems are decentralized ........................................................................................ 89 Systems should be described in terms of connections between individuals.................................... 97 The fabric of competitive governance systems .............................................................................. 103 Closing Remarks .............................................................................................................................. 120 Acknowledgements ......................................................................................................................... 121 References....................................................................................................................................... 122 v List of Figures Figure Page Figure 1: Compact between Elites. Source: Wallis (2011, 46). ........................................................ 6 Figure 2. Criss-Cross Biddings for Lower Order Actors. ............................................................... 21 vi Abstract POLYCENTRICITY AND THE THEORY OF ORDER Ion Sterpan, PhD George Mason University, 2017 Thesis Director: Dr. Peter J. Boettke This work explains social order as the outcome of governance systems' capacity to use dispersed knowledge. The first chapter examines mainstream institutionalism as exemplified by D. C. North in his work with Wallis and Weingast on the elite compact theory of social order and of the West’s transitions to impersonal rights, and proposes instead an Austrian process-oriented perspective. We argue that mainstream institutionalism may account for peace but does not fully account for why the West’s impersonal rules are also efficient. Their efficiency can be better explained by a market for rules, which aggregates knowledge about which performs better. But a market for rules requires a stable plurality of power centers, with each center being able to enforce the rules it provides, even while facing opposition from the other. The implication of stable plural power centers contradicts the idea of that a doorstep condition to successful transitions is a consolidation of the organized means for violence at the center. vii The second chapter examines the political element within political economy. The usual reduction of the political to ethics (social preference functions) or economics (trade, as in a Tiebout model) is enabled by the presumption of closed choice data or given utility and cost functions. We argue that subjective choice data is indeterminate, and that the way in which individuals respond to that indeterminacy projects them into systems of leaders and followers. Such systems have causal efficacy on individuals' cost and preference functions. Situations of indeterminacy is most dramatic in situations of exception to constitutional law, which makes politics an answer to the "challenge of the exception". Much of our inspiration for this argument traces to the work of Friedrich Wieser, Carl Schmitt and Vincent Ostrom. The third chapter renders Vincent Ostrom's and Michael Polanyi's theory of polycentric order consistent with the Austrian idea that what matters for order is a systematic use of dispersed knowledge. We use two Austrian research keys to revise Ostrom’s concept of polycentricity. The first is that central planning is impossible. If central planning cannot exist anyway, then the only question left to investigate, and the only way left to use the term polycentricity, is in opposition not to monocentricity but to other kinds of decentralized systems. Not all decentralized systems are polycentric. Polycentric systems are decentralized systems where decision centers achieve functional interdependence by acting according to a certain unique set of rules. The second research key is methodological individualism. To reformulate polycentricity theory in strict observance viii to methodological individualism we discharge it of concepts like collective unit and quasi-market,