One of the root problems with modern American democracy may be its sheer scale. Today the average congressional district has a population about 680,000. A century ago, that number was about 200,000. (Right Craig?) But it’s far from intuitive that doubling or trebling the size of the House of Representatives would lead to less rent seeking.

Fred Foldvary’s 2002 Review of Austrian Economics paper, which he presented at Ben Powell’s colloquium this week here at SJSU, may present a better solution.

Fred has done a lot of work looking at small-scale efficient provision of public goods outside the usual parameters of centralized, or top-down federalized, government. In this paper, he sketches a bottom-up, "cellular" democratic government that has a flexible institutional structure designed: 1) to better take advantage of local, tacit knowledge, thus improving on standard preference aggregation problems in conventional democratic mechanisms; and 2) reduce inefficient rent seeking.

Start with very low population cells (less than 1,000) of “small neighborhood districts, each electing its own council… [T]he borders of the districts should be flexible, so that at the option of the members, the jurisdiction may be adjusted…” These so-called level-1 neighborhood councils group into bigger regions of level-2 governance, with about the same number of neighborhoods per region as council members per level-1. In turn, level-2 councils group into bigger regions, and elect level-3 councils with about the same number of representatives as in each of the level-2 councils. “The process is repeated until it reaches the highest level council, designated … as ‘level h.” Any level council may secede from the next higher level and join an alternative, with the exception of level h. Finally, all council members have elected alternates and can be recalled by petition & vote of the lower level councils (or in the case of level-1 recall, the level zero households). “Thus, each council, other than h and h-1, has an exit as well as a voice option.”

There is much more detail to the proposal, and if anything it provides for interesting reading and different thinking about standard problems. In the paper, Fred discusses the epistemic advantages—including a lesser need for campaign finance because every voter knows council members personally—and some implications for public finance. To me the biggest advantage is affording local groups the flexibility to experiment and converge to the optimal club size, a la Buchanan. Efficiency, come on down.

At the seminar this week, Fred generated a lot of discussion although he drew many skeptical questions about the tax base being subject to free riding. (I can think of lots of worse problems with our current tax system.)

Co-blogger Larry White is next on our colloquium schedule, presenting "Can economics rank slavery against freel labor in terms of efficiency." Very much looking forward to that.